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Russia Discovers Massive Arctic Oil Field Which May Be Larger Than Gulf Of Mexico

In a dramatic stroke of luck for the Kremlin, this morning there is hardly a person in the world who is happier than Russian president Vladimir Putin because overnight state-run run OAO Rosneft announced it has discovered what may be a treasure trove of black oil, one which could boost Russia’s coffers by hundreds of billions if not more, when a vast pool of crude was discovered in the Kara Sea region of the Arctic Ocean, showing the region has the potential to become one of the world’s most important crude-producing areas, arguably bigger than the Gulf Of Mexico. The announcement was made by Igor Sechin, Rosneft’s chief executive officer, who spent two days sailing on a Russian research ship to the drilling rig where the find was unveiled today.

Well, one person who may have been as happy as Putin is the CEO of Exxon Mobil, since the well was discovered with the help of America’s biggest energy company (and second largest by market cap after AAPL). Then again, maybe not: as Bloomberg explains the well was drilled before the Oct. 10 deadline Exxon was granted by the U.S. government under sanctions barring American companies from working in Russia’s Arctic offshore. Rosneft and Exxon won’t be able to do more drilling, putting the exploration and development of the area on hold despite the find announced today.”

Which means instead of generating billions in E&P revenue, XOM could end up with, well, nothing. And that would be quite a shock to the US company because the unveiled Arctic field may hold about 1 billion barrels of oil and similar geology nearby means the surrounding area may hold more than the U.S. part of the Gulf or Mexico, he said.

For a sense of how big the spoils are we go to another piece by Bloomberg, which tells us that “Universitetskaya, the geological structure being drilled, is the size of the city of Moscow and large enough to contain more than 9 billion barrels, a trove worth more than $900 billion at today’s prices.

The only way to reach the prospect is a four-day voyage from Murmansk, the largest city north of the Arctic circle. Everything will have to shipped in — workers, supplies, equipment — for a few months of drilling, then evacuated before winter renders the sea icebound. Even in the short Arctic summer, a flotilla is needed to keep drifting ice from the rig.

Sadly, said bonanza may be non-recourse to Exxon after Obama made it quite clear that all western companies will have to wind down operations in Russia or else feel the wrath of the DOJ against sanctions breakers. Which leaves XOM two options: ignore Obama’s orders (something which many have been doing of late), or throw in the towel on what may be the largest oil discovery in years.

And while the Exxon C-suite contemplates its choices, here is some more on today’s finding from Bloomberg:

“It exceeded our expectations,” Sechin said in an interview. This discovery is of “exceptional significance in showing the presence of hydrocarbons in the Arctic.”

The development of Arctic oil reserves, an undertaking that will cost hundreds of billions of dollars and take decades, is one of Putin’s grandest ambitions. As Russia’s existing fields in Siberia run dry, the country needs to develop new reserves as it vies with the U.S. to be the world’s largest oil and gas producer.

Output from the Kara Sea field could begin within five to seven years, Sechin said, adding the field discovered today would be named “Victory.”

Duh.

The Kara Sea well — the most expensive in Russian history — targeted a subsea structure named Universitetskaya and its success has been seen as pivotal to that strategy. The start of drilling, which reached a depth of more than 2,000 meters (6,500 feet), was marked with a ceremony involving Putin and Sechin.

The importance of Arctic drilling was one reason that offshore oil exploration was included in the most recent round of U.S. sanctions. Exxon and Rosneft have a venture to explore millions of acres of the Arctic Ocean.

But what’s worse for Exxon is that now that the hard work is done, Rosneft may not need its Western partner much longer:

“Once the well is plugged, there will be a lot of work to do in interpreting the results and this is probably something that Rosneft can do,” Julian Lee, an oil strategist at Bloomberg First Word in London, said before today’s announcement. “Both parties are probably hoping that by the time they are ready to start the next well the sanctions will have been lifted.”

And here is why there is nothing Exxon would like more than to put all the western sanctions against Moscow in the rearview mirror: “The stakes are high for Exxon, whose $408 billion market valuation makes it the world’s largest energy producer. Russia represents the second-biggest exploration prospect worldwide. The Irving, Texas-based company holds drilling rights across 11.4 million acres in Russia, only eclipsed by its 15.1 million U.S. acres.”

Proving just how major this finding is, and how it may have tipped the balance of power that much more in Russia’s favor is the emergence of paid experts, desperate to talk down the relevance of the Russian discovery:

More drilling and geological analysis will be needed before a reliable estimate can be tallied for the size of the oil resources in the Universitetskaya area and the Russian Arctic as a whole, said Frances Hudson, a global thematic strategist who helps manage $305 billion at Standard Life Investments Ltd. in Edinburgh. Sanctions forbidding U.S. and European cooperation with Russian entities mean that country’s nascent Arctic exploration will be stillborn because Rosneft and its state-controlled sister companies don’t know how to drill in cold offshore conditions alone, she said.

“Extrapolating from a small data sample is perhaps not going to give you the best information,” Hudson said in a telephone interview. “And because of sanctions, it looks like there’s going to be less exploration rather than more.” In addition, the expense and difficulty of operating in such a remote part of the world, where hazards include icebergs and sub-zero temperatures, mean that the developing discoveries may not be economic at today’s oil prices.

Maybe. Then again perhaps the experts’ time is better suited to estimating just how much longer the US shale miracle has left before the US is once again at the mercy of offshore sellers of crude.

In any event one country is sure to have a big smile on its face: China, since today’s finding simply means that as Russia has to ultimately sell the final product to someone, that someone will almost certainly be the Middle Kingdom, which if the “Holy Gas Grail” deal is any indication, will be done at whatever terms Beijing chooses.

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Statoil stepping up in the Arctic

Statoil is stepping up its Arctic activities and will drill nine wells during a non-stop 2013 Norwegian Barents exploration campaign. The company plans to meet development challenges here by tripling its Arctic technology research budget.

 

Statoil’s exploration experience in the Barents is already extensive. Of the 94 exploration wells drilled in the Norwegian Barents Sea so far, Statoil has been involved in 89. Nine more Statoil-operated wells are on their way here next year.

“After our Skrugard and Havis discoveries we still see attractive opportunities here,” says Statoil Exploration executive vice president Tim Dodson.

“This is a less challenging area, as the Norwegian Barents is one of the only Arctic areas with a year-round ice-free zone. We also see the possibility of utilising knowledge gained here for Arctic prospects elsewhere later on – just like we’ve already done with Snøhvit.”

Statoil will start drilling in Nunatak in the Skrugard area in December, and will drill and complete four wells in this area over a six-month period.

“These wells are time critical, as any additional resources will make the Skrugard development even more robust,” says Dodson.

The campaign will then continue with the drilling of two-three wells in the Hoop frontier exploration area further north in the Barents in the summer of 2013. These will be the northernmost wells ever drilled in Norway.

The 2013 Barents drilling campaign finishes in the most mature province of the Barents: the Hammerfest basin. Statoil will carry out growth exploration close to the existing Snøhvit and Goliat discoveries here.

Arctic drilling unit

In addition to increasing its drilling activities, Statoil has created a technology road map to prepare for activities in even harsher Arctic areas.
This includes:

  • A tripling of the current Arctic research budget – from NOK 80 million (in 2012) to NOK 250 million (in 2013)
  • A research cruise to north east Greenland in September
  • The maturing of an Arctic drill unit concept

Some of the technology highlights include work to allow for cost-effective 3D seismic for exploration prospect evaluation in ice, and the continuing development of a tailor-made, Arctic drill unit.

The work on the future drilling unit is based on Statoil’s experience with developing specialised category rigs for the Norwegian continental shelf (NCS).

The unit will be one that can operate in a wide range of water depths across the Arctic, and will involve integrated operations in drifting ice.

Functions here are to include a management system to reduce ice impact, an optimised drilling package for faster drilling and increased rig availability, and solutions to ensure that the rig maintains its position. At present no robust solution for dynamic positioning dedicated for ice operation exists.

“When we see a technology need, we try to fill the gap ourselves. We have now directed our strategic focus towards developing technology for exploration and production in ice. A new dedicated unit has been established to solve these challenges,” says Statoil Technology, Projects and Drilling executive vice president Margareth Øvrum.

Capacity is key

“We’ve secured a five-year contract for Seadrill‘s West Hercules drilling rig. The rig is currently being prepared for Arctic conditions, and can be used to drill consecutively in the region for years to come,” Dodson says.

Broad exploration experience in the Barents Sea and available rig capacity make Statoil well prepared for the 22nd licence round on the NCS. Applications are due in early December, while the awarding of new licences will take place in spring 2013. Seventy-two blocks in the Barents will be on offer.

“The Skrugard discovery has reignited interest in the Barents. A number of major companies that had left the area will be looking to make their way back in. The competition will be fierce, but we’ve built up a strong track record here, and our application will reflect this,” Dodson says.

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Arctic: The Final Frontier

By Tim Dodoson, Executive vice president, Exploration, Statoil ONS201

Visiongain: Spending on Subsea Production Systems to Reach USD 8.89 Bln in 2012

The world has finite hydrocarbon resources and conventional oil reserves are particularly in short supply. Furthermore, conventional oil resources from the Middle East are very much under threat of disruption as embargoes on Iranian oil exports come into full effect at the end of June 2012.

However, new reservoirs of oil are increasingly being discovered in deep waters and ultra deep waters across the world. These new discoveries are providing a respite to declining production from conventional sources of oil and gas, and reducing risks in upstream oil production from the Middle East. Visiongain calculated that capital expenditure in the subsea production & processing systems infrastructure will total $8.89bn in 2012.

Exploration and production companies are investing heavily in offshore development projects. Most offshore projects in water depths beyond 200-300 metres benefit from subsea production and processing systems to lift hydrocarbons to the surface. As a greater share of oil and gas is supplied from deeper water depths, investment in subsea production and processing systems will inevitably grow larger over the next ten years.

Subsea systems not only enable operating companies to optimize production from offshore fields, they also increase the total amount of recoverable hydrocarbons over the life of the well. For example, with pressure boosting systems, total oil recovery rates are significantly increased. Some deepwater oil and gas reservoirs would not have been fully exploited without the aid of subsea systems.

By the early 1970s the world had few commercial oil and gas facilities producing from deepwater reservoirs because challenges such as high temperature and high pressure were too restrictive. Over the years, however, more advanced multiphase pumps, subsea oil/gas/water/sand separation units and wellhead systems have evolved to overcome the difficulties, enabling companies to produce hydrocarbons from the most challenging environments.

Subsea production and processing systems are advancing further to enable companies to produce from very sensitive and harsh environments such as the Arctic and high temperature, high pressure (HTHP) reservoirs. Subsea systems will not be affected by surface ice formations unlike floating platforms and can provide more controlled production from HTHP wells. Therefore, subsea systems minimize environmental risks associated with production from the Arctic region and in deepwater offshore areas.

The Subsea Production & Processing Systems Market 2012-2022 report provides valuable insight into the future developments of this growing market and will benefit those already in the subsea production & processing market as well as those looking to enter this market.

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Obama’s LOST Legacy: A New World Order

By Peter C Glover
Posted on Jun. 11, 2012

So who cares if Obama wants, as part of his legacy, to do what Ronald Reagan refused to do and sign up the United States to LOST, the UN’s Law of the Sea Treaty? Well if you are a small government, liberty-loving American, or citizen anywhere in the free world, you should. Here’s why.

US ratification of this Treaty would effectively grant governance of the bulk of the world’s surface area, its navigable waterways and access to what lies beneath – i.e. the world’s deepwater energy riches, not only fishing rights – to an unelected, anti-US, rabidly anti-Jewish, anti-free market, anti-capitalist body; where those in the democratic West can easily be outvoted.

Sound good to you?

For many Lost is a far-flung fictional fantasy about people facing a dangerous new world that poses unique threats. LOST also offers a new world of unique threats – but is an only too real, clear and present danger. It just so happens, when it comes to ambitions for an expanded Law of the Sea Treaty, that what is in the best interests of the United States is also in the best interest of the free world. No matter that the much of the rest of the world may have already attempted to sign away some of their sovereign rights under LOST. Quite simply, without US ratification (and its naval power), LOST remains a largely meaningless document. It is essential that it stays that way.

The problem with transnational governance of any kind is that on an administrative level it ties up sovereign claims in bureaucratic red tape for years. Meanwhile the world’s ‘less’ democratic leaders, like Russia’s Vladimir Putin, will do as they always have, ignore them altogether. Russia has effectively already annexed around 60 percent of the Arctic. We’ve all seen the International Criminal Court of Justice in action. Those hauled up before it are far more likely to die of old age than receive justice. Imagine an international tribunal, with all manner of agendas, demanding governments and successful companies stump up billions of dollars in fines, compensations and ‘reparations’ to be ‘redistributed’ at the whim and collusion of some of the world’s leading dictators.

A little harsh? Then consider the UN’s track record.

LOST, the story so far

With bemusing short-sightedness, the key supporters of LOST or, to give it its alternative title, the UN Convention on the Law of the Sea (UNCLOS), are pushing ratification both as a “tool to expand and confirm American sovereignty” and as a “peace tool for the US”. The treaty has been on the books since 1982 garnering wide Western support until Ronald Reagan grounded it perceiving it to be a threat to US sovereign interests. But President Obama, it seems, sees adoption as part of his legacy. In mid-May the Pew Charitable Trusts and the Atlantic Council held a forum at which US politicians, businesses and even national security leaders gave their support to the Treaty. Currently, Senator John Kerry is operating as the administration’s point man. Kerry is holding a series of public hearings to garner further support for the US to ratify LOST. Secretary of Defense Leon Panetta, Chairman of the Joint Chiefs of Staff Martin Dempsey (amazingly the US Navy thinks it’s a good idea) and Secretary of State Hillary Clinton – all avid proponents of adopting the Treaty – have all been called to give evidence.

The thinking runs that the US needs to secure its rights to the vast mineral resources on its extended continental shelf, not least in the Arctic Ocean and the Gulf of Mexico. The fact is, however, under existing international law and US policy, America already has access to these areas. And it’s hard to see anyone arguing the fact given US naval clout; which brings us full circle to what’s really going on here. And for those who love liberty and freedom, it turns out to be far more than controlling just US wealth and sovereign rights, as the rush for the Arctic’s subsea energy riches exemplifies.

The USGS estimates that the Arctic has around 22 percent of the world’s undiscovered energy resources, with 84 percent of that figure in deepwater. It is clearly a whole new energy frontier. While various claims to Arctic regions, as well as other energy-rich areas of the world, have been lodged with the UNCLOS, tensions between the Arctic’s littoral states, Russia, Canada, Norway Denmark (Greenland), the US and Iceland have been ratcheting up. with the larger states, particularly Russia, militarizing their claimed regions. The argument from the American left is that as the US has not ratified UNCLOS/LOST it does not have a seat at, what they view, as the UN’s prospective arbitration table. Indeed, the US has notably not submitted any claims to UNCLOS. And without US co-operation any decisions currently made by UNCLOS won’t count for much.

In 2010 I attended the inaugural meeting of The Arctic: Territory of Dialogue which has translated into an annual forum on all matters Arctic hosted by the Russian Geographical Society, sponsored by Putin himself. Those attending included members of another key international forum, the Arctic Council, made up of representatives of all the littoral Arctic states. Bottom line: international ‘jaw-jaw’ forum to deal with everything ‘Arctic’ already exist. So why is a new UN convention with global reach necessary? And who, precisely, thinks it’s a good idea? Let’s take the second issue first.

Usual suspects

Washington Times’ Frank Gaffney describes those pushing for the US to sign up to LOST as “usual suspects – the environmentalists, the one-worlder trans-nationalists, the Obama administration” and other “short-sighted special interests”. Yep, leftwing social engineers all. And US ratification of LOST would give the world’s greatest naval power no more than a single vote at a table chaired by the UN. De-superpowered at a bureaucratic stroke and giving the world’s leading talking shop to rake in a huge ‘tax and penalty’ bonanza from the vast deepwater energy resources on continental shelves.

America signing up to LOST would effectively require it to pay tax royalties to the UN’s International Seabed Authority. It would also become subject to UN powers of arbitration over disputed waters. At whim, the UN bureaucracy could level economic penalties for all sorts of alleged infractions. The UN would, at last, have found a potentially bottomless pit of independent income, mostly at US expense. Greenpeace and other lobbies would salivate at the prospect of suing the US and other countries to force them to sign up to that which has thus far eluded them: a legally-binding climate deal. All in all, ratification of LOST would provide the UN – the same organisation that has elected Iran to the Commission on Women’s Rights and recently invited Zimbabwean despot Robert Mugabe to become a UN Ambassador – with what the Washington Times’ Ed Fuelner rightly describes as “an economic wrecking ball”.

President Obama may or may not be out of office come November but he wants a lasting, globally-impacting, legacy. And ‘internationalist’ legacies don’t come much bigger than being instrumental in handing governance of seventy percent of the earth’s surface to an unelected Star Chamber, supported and dominated by one world nutjobs, enviro-freaks, international despots and self-aggrandizing bureaucrats.

That’s quite a legacy.

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