Some like it cold… Arctic

Kåre Storvik
Thursday, June 13, 2013

Interest in the North is strong and growing among international actors— Kåre Storvik gives his views on business in the area.

Oil companies, supply companies, and service providers to the oil industry are either in place or on their way to the North— to Arctic Europe-to the new, worldscale, oil province.

During the next 40 years, we will gradually see that a majority of Norway’s oil and gas will come from fields in the Norwegian Sea and the Norwegian sector of the Barents Sea. Resource estimates for northern Norway are getting closer and closer to match the total of all petroleum produced during forty years on the Norwegian shelf.

At the same time, we see resource estimates many times this at our nearby Russian neighbours, offshore and onshore.

Business challenges

But to develop this knowledge base often takes more time and resources than a contractor may have. Physically, there is no mystery to calculate what effort is needed to work in Russia. But who can run the risk of getting stuck in an unfamiliar bureaucracy with expensive equipment and manpower?

This is when expertise and delivery capability of places and ports such Hammerfest and Kirkenes comes into its own. Here we find that capability outweighs the extra distance.

Even Rosneft decided to listen to its suppliers last summer and chose Kirkenes as a base port for its seismic activities in the Kara Sea.

The local expertise and capacity in Norwegian ports have been built up through base and maintenance services to the Russian fleet for 25 years. The main attraction is that the necessary experts, materials, and equipment can be shipped in overnight, taken on board, and used immediately. Also, vessels with advanced instrumentation, which the Russian military may not allow, can be used. When operators encounter technical problems, the details can be addressed immediately, locally— or by overnight assistance from anywhere in the world. It is also beneficial that Norwegian businesses, communities, and infrastructure are aligned with industry standards for health, safety, and environment. What has been described above in just a few lines makes a world of difference between success and failure.

And that is why development is exploding in Kirkenes. It offers a deep, sheltered harbor, calm climate, and a good airport. Moreover, Kirkenes is on the Russian border, within the forward-thinking, visafree zone when it comes to Norwegian- Russian cooperation.

To meet new requirements, nearly 1200 acres of new industrial and port areas are being developed for base operations, port activities and trans-shipment, as well as temporary storage of petroleum products, other cargo, and pipes and modules for installation in the east. For instance, hard rock aggregates from Tschudi Aggregates are exported to Russia for use both on land and offshore—all the way east to Yamal.

Seek locals’ advice

Interest in the North is strong and growing among international actors. Northern area ports and businesses find it important to build relationships with international oil companies, suppliers, and service providers in order to see and be seen, to hear and be heard, and to take part in the development. It is no longer enough to deal with Statoil.

Therefore Northerners gather together and make annual pilgrimages to the Offshore Technology Conference (OTC) in Houston, Moscow International Oil & Gas Exhibition (MIOGE), Offshore Northern Seas (ONS) conference in Stavanger, and Offshore Europe conference in Aberdeen. We will meet you there for further talks—look for Arctic Europe.

Logistics

Last year’s traffic on the Northern Sea Route (NSR—a shipping lane between the Atlantic and Pacific Oceans above the Russian mainland) increased to 46 ships carrying almost 1.3 million tons of cargo. Obviously, this is only a beginning. High interest ensures that this route will develop quickly—and the development will be an adventure in itself— both for the world’s sea routes and the petroleum industry. We have seen petroleum cargo moving in both directions in the past year.

In the future, we will see yearround operation of the NSR. This will be made possible by a fleet of ice-class cargo ships that will be able to plough through winter ice at an acceptable speed without assistance from icebreakers.

These ships will deliver between trans-shipment hubs in ice-free waters in the Barents Sea and past the Bering Strait in the Northern Pacific Ocean. Normal feeder ships will then deliver cargo from the transtransshipment hubs to final destinations.

Annual oil transport from Russia and along the Norwegian coast for petroleum resources greatly exceeds ten million tonnes. The vessels in use are relatively new and have double-hull design.

Trans-shipment hubs in the west include, Kirkenes, or if rail is involved, Narvik. A rail connection between Kirkenes and Finland is also a possibility. OE

Kåre Storvik 
After a long career in engineering, design, fabrication, and project management, including holding senior roles at Kvaerner, Storvik now provides business development services and project implementation services in Norway and Russia.
Categories: Russia Activity Arctic

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