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Proceedings of the 23rd International Conference on POAC’15 Port and Ocean Engineering under Arctic Conditions June 14-18, 2015 Trondheim, Norway Trondheim, Norway SHIPPING OIL FROM THE RUSSIAN ARCTIC: PAST EXPERIENCES AND FUTURE PROSPECTS Alexei Bambulyak1,2, Are Kristoffer Sydnes3, Aleksandar-Saša Milakovic2, Bjørn Frantzen4 1Akvaplan-niva, Tromsø, Norway 2Norwegian University of Science and Technology, Trondheim, Norway 3UiT the Arctic University of Norway, Tromsø, Norway 4Bioforsk Soil and Environment Svanhovd, Svanvik, Norway ABSTRACT Transport of oil from Russian Arctic ports to Western markets was insignificant prior to 2002. In 2002, there was a major surge, with 5 million tonnes delivered westwards through the Barents Sea. By 2004, this had increased to 12 million tonnes. Since then, annual volumes have been on levels between 9 and 15 million tonnes. In the near future, the flow of oil cargo in the Arctic may rise significantly, as a result of the development of oil and gas fields and port capacities in the North. Oil offloading terminals in the Russian Arctic have been developed and overall shipping capacity has been enlarged, though each terminal has its history of ups and downs. Various logistic schemes have been developed for shipping oil and gas produced in the Northern regions and bringing petroleum cargo to the Arctic coast over long distances using pipelines, railways and river ships. In this paper, we present an overview of experiences with transport schemes at onshore and offshore terminals along the Russian Arctic coast and indicate the prospects for future oil and gas shipping in the North. We examine logistic solutions that reflect Arctic shipping challenges, and pay attention to oil pollution prevention and response systems. We find that logistics solutions are more varied, flexible and complex than often assumed, and that estimates of potential cargo and terminal capacity will need to reflect oil and gas production beyond the Arctic regions. Finally, we note the trend towards greater centralisation of terminal and oil-spill response capacity during the last 15 years. INTRODUCTION The steady growth of global demand in energy resources and the depletion of hydrocarbon reserved in traditional oil-and-gas production regions have been key driving forces in moving petroleum industry to the Arctic (BP 2014a; ERI RAS and ACRF 2014). According to Gautier et al. (2009), as much as 84% of undiscovered oil and gas resources in the Arctic may occur offshore. As yet, the only Russian Arctic oil production platform operating offshore is Prirazlomnaya in the south-eastern part of the Barents Sea, or the Pechora Sea. The platform began commercial production in December 2013 and loaded four tankers with about 70 000 tons of Arctic crude each during 2014 (Gazprom Neft 2015). Prior to this, Russian Arctic ports and terminals had been sending up to 15 million tons of oil and products for export via the Barents Sea annually (Frantzen and Bambulyak 2003; Bambulyak and Frantzen 2011). Petroleum cargo flow grew from 5 million tonnes in 2002 to 12 million in 2004. Crude oil produced in the northern petroleum regions and shipped via terminals in the Kara and Pechora Seas represented less than 1 out of those 12 million tonnes in 2004; most petroleum was transported by pipelines and railways to ports in the White and Barents Seas and then offloaded to seagoing tankers (Bambulyak and Frantzen 2005a). At the time, several small and medium-sized oil offloading terminals were in operation along the Russian Arctic coastline, and there were plans for infrastructure developments, including a trunk oil pipeline from Western Siberia to Murmansk. That gave rise to expectations that annual export volumes of Russian oil shipped via the Barents Sea would increase to 150 million tonnes by 2015 (Frantzen and Bambulyak 2003; Bambulyak and Frantzen 2005b). The planned oil pipeline project, with a capacity of 100 million tonnes, was proposed by the five largest Russian oil companies in 2002. The project was granted to oil trunk pipeline monopolist Transneft; it was reduced to a 50-million-tonne Surgut-Indiga pipeline project in 2004, further to a 12-million-tonne Kharyaga-Indiga pipeline project in 2005 (Bambulyak and Frantzen 2007), and was finally struck from the state company's project list (Transneft 2015). Bambulyak and Frantzen (2011) estimated that, even without a trunk pipeline to the Barents Sea coast, overall capacity of terminals shipping petroleum for export along the Russian Arctic could reach 100 million tonnes, with half of this related to railway–port transportation possibilities, stating it was a capacity evaluation not a cargo flow forecast. Whereas offshore terminals, pipelines, and liquefied natural gas (LNG) plants in the North are linked to and dependent on oil or gas projects in the region, the railway grid connected to ports in the Russian Euro-Arctic can be used as much for petroleum as for other cargo transport (Rautio and Bambulyak 2012). Therefore, forecasts for petroleum shipping from the North should be based on oil and gas production plans for related projects (Bogoyavlensky 2013; Grigoriev 2009, 2014) and the available railway–port capacity, which can provide added volumes. These flexible volumes can be significant and are important for oil-spill risk assessments and response planning (Bambulyak 2011). The oil-spill response system in the Russian Arctic has undergone many changes over the past 15 years, in terms of structural reformation and capacity building (Ivanova 2011; Bambulyak et al. 2014). We can expect more attention to be paid to oil pollution prevention in the Arctic in line with new rules and regulations adopted at the national and international levels (Arctic Council 2013; IMO 2014; Bambulyak et al. forthcoming). In the following sections, we give a brief description of existing and planned terminals and logistic schemes, as well as trends and prospects for shipping oil and gas from the Russian Arctic. We also consider changes related to oil-spill response to handle these developments. RUSSIAN OIL AND GAS: UPSTREAM AND DOWNSTREAM Russian is among the world’s the largest producers and exporters of oil and gas (BP 2014b). Annual natural gas production has been between 570 and 670 billion cubic metres during the last 20 years, with about one third of this exported westward via the Gazprom pipeline grid. In 2009, Russia opened its first LNG plant on Sakhalin in the Okhotsk Sea; since 2010 it has produced and exported between 20 and 26 million cubic metres of LNG, equal to some 12 to 16 billion cubic metres of dry natural gas, to the Asia-Pacific region (BP 2014b). Since 2000, Russian oil production has grown steadily: in 2010, it exceeded 500 million tonnes per year and by 2014 had reached almost 527 million tonnes. Between 140 and 260 million tonnes per year, or about half of the oil produced in Russia, has been exported as crude since 2000; in addition, the country exported between 62 and 152 million tonnes of refined products. Since 2005, annual export of liquid hydrocarbons from Russia has exceeded 350 million tonnes (see Figure 1). More than 90% of the oil and gas produced in Russia is transported by trunk pipelines of the state-owned Transneft and Gazprom. The largest gas producer, Gazprom, has a monopoly on dry natural gas export and delivers gas through the Unified Gas Supply System to domestic and foreign customers. Transneft pipes crude oil and products for export using onshore grid and seaport terminals at the Baltic, Black, Azov and Okhotsk Seas, with the largest terminal being Primorsk at the Baltic Sea (Bambulyak and Frantzen 2011; Transneft 2015). Russian Baltic port terminals tranship more than 100 million tonnes of oil and products annually (133 million tonnes in 2014), receiving cargo by both trunk pipelines and railways (ASCP 2015). 600 500 400 300 200 100 0 million tonnesmillion 100 200 300 400 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Oil production Crude oil export Oil products export Figure 1. Annual oil and products export from Russia (Source: Rosstat, Russian Customs). ARCTIC SHIPPING OF RUSSIAN PETROLEUM: TERMINALS AND ROUTES Russian oil shipping for export along the Arctic coast had insignificant volumes before the beginning of 2000s. In 2002, there was a sharp increase in petroleum cargo flow, with over 5 million tons going to Western Europe via the Barents Sea. In 2003, those volumes increased to 8 million, and to 12 million tonnes in 2004. Each year after 2004, sea-going tankers have delivered between 9 and 15 million tonnes of Russian crude oil, products and gas condensate for export from terminals in the Kara, White, Pechora and Barents Seas (see Figure 2). Most of this cargo went westwards to major European harbours (Bambulyak and Frantzen 2011; Kystverket 2014). From 2010, petroleum cargo has also been exported eastwards through the Northern Sea Route (NSR). In 2013, 650 thousand tonnes of liquid gas products, including 67 thousand tonnes of LNG from Statoil's Melkøya in the Norwegian Barents Sea, were delivered to Asian markets through the NSR (NSR IO 2014). 16 12 8 million million tonnes 4 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Figure 2. Arctic shipping of Russian petroleum cargoes for export. Over the past 15 years, terminals in the Russian Arctic for offloading crude oil, gas condensate and refined products for export have been developed and overall shipping capacity has been enlarged. There have been some relative decreases in shipping volumes, but these have been due to various external factors, e.g. changes in export taxes and railway rates, construction of new trunk pipelines and ports in the Baltic and Far East, bankruptcy of key actors, rather than lack of capacity or logistics problems in utilising the potentials of Arctic terminals (Bambulyak and Frantzen 2011).