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"Arctic Princess", built 2006 at Mitsubishi, 147,200 cbm, is owned and managed by Höegh LNG. The NIS flagged vessel is on long-term contract to Statoil to transport LNG from the Snøhvit field, principally to the US market.

Arctic offshore – an unprecedented challenge
Exploration for oil and gas offshore in the Arctic region in Europe and subsequent production and transport, pose huge technological, environmental and possibly also political challenges.

So far only Russia and Norway have seriously explored the resources in the region, but they encounter similar problems to those facing both Canada and the United States.

Norwegian and Russian challenge
However, in the following we will deal with developments in the Barents Sea area, the challenges facing Norway and Russia and how they could cooperate.
The Norwegians have developed natural gas reserves in the southern reaches of the Barents Sea at Snøhvit, while the Russians are carefully assessing the huge natural gas deposits, better known as the Shtokman field.

Seasoned campaigners
As we have noted on several previous occasions, the Russians are seasoned campaigners in the Arctic and other countries, like Norway, have a lot to learn. Both the Russians and the Norwegians acknowledge that cooperation is the way forward. But while most of Russia’s oil production comes from onshore fields, Norway’s entire output derives from offshore developments. The average depletion rate onshore in Russia is close to 50 per cent, but there is the continental shelf, the largest in the world at 6.2 million square kilometres of which 4.0 million square kilometres has oil- and gas-bearing potential.

Gazprom’s approach to Shtokman
If Russia has adopted a methodical approach to the development of Shtokman, it is not because they are without experience in offshore developments. The Sakhalin-1 and Sakhalin-2 in the Far East are well known and some of the experience gained from there will surely be put to good use in the Barents Sea.
However, it is interesting to note Gazprom’s approach to the development of the huge Shtokman gas field. It is now clear that the composition of the consortium to develop the field will not be known until August.

The following foreign oil companies are short-listed: Total SA, Chevron Corp, ConocoPhillips. Staoil ASA and Hydro ASA. Out of this lot Gazprom is looking for three companies, one of which will be the operator.

There are rumours that the Russian Government tries to put pressure on the US for accession to the World Trade Organisation. The US will need more gas from Russia and they want an expanded energy co-operation.


The Snøhvit natural gas field, includes Albatross and Askeladd. The illustration shows the main templates, pipelines to Melkøya and return lines to the field. Illustration: Statoil

A sensible way forward
A more likely explanation for the postponement is that Gazprom wants time to assess the proposals submitted by the potential participants and also explore some avenues of its own, like the transport of the gas to foreign markets. It has always been assumed that the gas would be piped 560 kilometres to shore at Teriberka near Murmansk.

However, the seabed is very uneven and it may well be that Gazprom, advised by Bergesen WorldWide Gas (BW Gas), decides on some sort of offshore loading, either by using a purpose-built floating production unit or even a platform that liquefies the gas, ready for sea transportation. Gazprom picked BW Gas because the Bergesen WorldWide Group also operates floating production, storage and offloading (FPSO) processing liquefied petroleum gas (LPG).

Big thinking
Admittedly liquefied natural gas (LNG) is somewhat more difficult to handle, but it ought to be possible.

The Russians are used to thinking big. In that sense the Shtokman development is not a frightening prospect, just an added challenge. So far Gazprom has not come up against the environmentalists, who have harassed developments in the Norwegian share of the Barents Sea. Meanwhile, the Shtokman development is a giant one at a cost of between USD 10 and 20 billion.

Not for the first time, the gas reserve estimate has been upgraded from 3.2 to 3.5 trillion cubic metres, with another 30 to 35 million tonnes of condensate. The design output has been configured to satisfy an annual production of 100 billion cubic metres of gas, but from the start it will process around 30 billion, of which 22 to 24 billion cubic metres will be liquefied to produce up to 15 million tonnes of LNG for the US market.

The development of these huge reserves will come in three or four phases and could include up to four TLP and spar-type platforms. The field, which covers an area of 1,400 square kilometres, is around 560 kilometres offshore from Murmansk. Hardware will be subject to icebergs of up to one million tonnes drifting at up to 0.25 metres per second and 1,2 metres drift ice moving at up to one metre per second.

The Norwegian opened up the Barents Sea for exploration in the middle of the 1980’s. Since then several discoveries have been made, the latest commercial one is Goliath.

However, all attention is on the so-called Snøhvit development. The discovery comprises the field Snøhvit, Albatross and Askeladd and the field is located 140 kilometres northwest of Hammerfest in Northern Norway.

The three fields together accumulate close to 200 billion cubic metres natural gas and around 115 million barrels of condensate. The development of this field has been dogged by technical challenges and big cost over-runs.

However, all problems are overcome, albeit at a price, and production should commence early next year at a total price of close to NOK 60 billion excluding LNG transport.

Discovered in the eighties
At full capacity the field should manage an annual export of between 5.5 and 6.0 billion cubic metres of LNG, a little over 750,000 tonnes of condensate and 250,000 tonnes of LPG. The LNG exports alone requires 70 cargoes per year. The Snøhvit deposits were discovered as early as in 1984.

A development plan was proposed in 1991, but it turned out to be uneconomical because of the gas price and prevailing technology. Statoil, as an operator of the Snøhvit project, submitted a new plan in September 2001 and it was approved in March the following year.

Five LNG carriers of around 140,000 cubic metres each will be deployed to shuttle gas from the Melkøya terminal to markets in the US (through El Paso) and in Europe (through Gaz de France and Total).

Statoil will be part owner in three vessels, one with Leif Höegh and Mitsui (the Arctic Princess) and two with Kawasaki Kisen Kaisa and Lino Kaiun Kaisa, both of Japan.

Total and Gaz de France, both participants the Snøhvit development, will run one LNG carrier each to lift their share of the gas.

//Petter Arentz

Latest update 18-10-2006 8:49

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