Skip to main content

On top of the world - Part 1

Published by
World Pipelines,

Oilfield Technology Correspondent Gordon Cope examines the state of the oil and gas industry in the highly challenging Arctic region.

Arctic E&P activity recently made international front page headlines when a group from Greenpeace boarded a Russian drilling platform; authorities arrested and charged several people with piracy after the environmentalists attempted to scale the Prirazlomnaya offshore platform.

Although the incursion had more to do with gimmickry than brigandage, it underscored how much is at stake in the race to uncrack the Arctic from its icy tomb. The vast region north of the 66° Parallel contains 40 billion bbls of proven oil reserves, 1136 trillion ft3 of natural gas, and 8 billion bbls of natural gas liquids. The United States Geological Survey (USGS) estimates that about 30% of the world’s undiscovered gas (1670 trillion ft3) and 13% of the world’s undiscovered oil (90 billion bbls), could be found there.

Access to the treasure is also becoming easier as ice levels retreat. From an annual summer minimum of 9 million km2 in the 1990s, sea ice has shrunk to less than 6 million km2 in the last several years, opening up two major shipping lanes, the Northwest Passage (NWP) over Canada and the Northern Sea Route (NSR) over Siberia. Exploration companies can conduct more extensive seismic surveys, drillers can penetrate further during the extended summer offshore drilling season and producers can ship more oil and gas to consumers.


In Canada, several major oil companies have staked out positions in the Beaufort Sea. Imperial Oil, BP and ExxonMobil have formed a joint venture that intends to drill in the deep offshore water by the end of the decade. Over US$ 1.6 billion in exploration work has been committed to licenses located approximately 125 km north of Tuktoyaktuk in between 60 - 1500 m water depth. Seismic has already identified a number of highly prospective targets.

But several hurdles remain prior to drilling. The National Energy Board (NEB), for instance, requires a single-season relief well equivalency in case of a blowout or other leakage. Imperial says a relief well would take too long to drill, and therefore some equivalent capture process (such as a physical capping device, say) would have to be devised. Wells in deeper waters would also require drilling ships with reinforced hulls and propulsion systems capable of maintaining position in icy conditions, vessels that currently do not exist.

ConocoPhillips recently announced that it is seriously considering development of the Amauligak field, discovered in shallow waters in the Beaufort Sea in the 1980s. The field is about 50 km offshore, in 30 m of water. The field is estimated to hold up to 360 million bbls of recoverable oil, and 2.3 trillion ft3 of gas. The company is currently examining technological options as well as environmental safety and its licence to operate prior to finalising intentions by the end of 2014. “As a company, we believe that Arctic exploration and development must be conducted at a measured pace and that pace must match the technology available,” said Sheila Reader, ConocoPhillips’ Vice President for the Arctic. “Our processes and related tools and requirements focus on diversity, water and climate change and stakeholder engagement and social issues.”

United States

The US has officially tabled an ‘all-of-the-above’ policy that calls for the extensive exploration and production of Arctic hydrocarbons, all the while protecting fragile environments and respecting Aboriginal traditions. Much is already being done. In the Chukchi Sea, Shell has been pursuing a multi-year exploration and drilling programme in an effort to unlock the estimated 30 billion bbls of oil in the basin. It spent US$ 300 million retrofitting two specially-designed drilling vessels, the Kulluk and Noble Discoverer and, after clearing various environmental hurdles and First Nations impact evaluations, completed top-hole drilling of two wells in 2012. Since the Kulluk ran aground during a violent storm while being towed to winter port, however, the drilling programme has been placed in hiatus while both vessels undergo inspections and repairs in Asian shipyards. ConocoPhillips, which also owns over US$ 500 million in leases in the Chukchi, has also put drilling plans on hold due to uncertainty around federal regulations and permit standards; it was unsure whether it would even be ready to proceed by 2015.

In the meantime, 13 groups bid on 122 parcels in the Beaufort Sea and Alaska’s North Slope, paying US$ 11.5 million. A plan to ship Prudhoe Bay’s stranded gas to market via pipeline also made significant advances when proponents ExxonMobil, BP, ConocoPhillips and TransCanada announced preliminary details for the project. An 800 mile, 42 in. line capable of carrying up to 3 billion ft3/d would deliver stranded gas from Prudhoe Bay to a port on the Kenai Peninsula where ConocoPhillips formerly ran an LNG facility. There, liquefaction trains would convert the gas into 15 - 18 million tpa of LNG. Total cost of the project is estimated at up to US$ 65 billion.


Since the recent discoveries of two new fields, Skrugard and Havis, interest in Norway’s Arctic waters has increased significantly. Havis is estimated to hold up to 200 million boe, and Skrugard the same; the region is estimated to contain about 1.9 billion boe. In early 2013, the government awarded 20 licenses in the western parts of the Barents Sea. It has now invited bids from oil companies to drill in the eastern portion of the Barents Sea, and is expected to award the first licenses to drill in this region by the second quarter of 2015. In the longer-term, Norway has invited oil companies to examine hydrocarbon potential around the Arctic Jan Mayen Island. So far, 15 companies have bought government seismic surveys in the region, including BP and ConocoPhillips.


Gazprom plans to start operating the Prirazlomnaya field at the end of 2013. Russia’s first Arctic offshore platform is expected to reach full production of 120 000 bpd by 2019. Attention is now focusing on the Russian-held region in the Barents Sea where Statoil made several significant discoveries (see above). Late in 2012, Gazprom also made history when it chartered the Ob River LNG carrier to make the first LNG supply run via the Northern Sea Route. The ship left Norway on 7th November, passing through the Barents Sea and Kara Sea before successfully delivering its cargo to the port of Tobata, Japan in early December. The voyage followed earlier deliveries of liquid hydrocarbons via the NSR in 2010 and 2011.

Russia is also working to refine its gas export policy, which has given a state monopoly on shipping gas overseas to Gazprom since 2006. Novatek, in conjunction with Total and CNPC, is building a 16.5. million tpa LNG project on the Arctic Yamal Peninsula. The US$ 20 billion facility is expected to enter production by 2017.

ExxonMobil and partner Rosneft are pleased with seismic results from their joint Arctic Kara Sea oil exploration project, and expect drilling to commence in 2014 - 2015. The companies anticipate produced oil would be piped to a shore terminal then shipped to market by reinforced tankers.

Part 2 of this article can be reached here.

Adapted by David Bizley

Read the article online at:

You might also like


Embed article link: (copy the HTML code below):