Recent Developments in Russian Arctic Oil & Gas Ben Seligman Society of Naval Architects & Marine Engineers (SNAME) Arctic Section Westin Hotel th 16 October 2019 1 Overview • Focus of this presentation is on the emergence of Russian Arctic oil and gas projects, over the past decade or so, that move hydrocarbons to market by sea (e.g. taking advantage of the Northern Sea Route) versus more traditional pipelines • Won’t spend much time looking at Russian Arctic projects that are connected to the ‘South’ by pipeline • Geographically, we’ll spend most time on the West Siberian Arctic, which has been Russia’s gas industry powerhouse for half a century • Oil production in the Russian Arctic started more recently (~25 yrs ago) • Also spend some time looking at what’s happening in Russia’s European Arctic and East Siberia, as well as a few other Russian Arctic locations • A few slides on ‘Arctic-like’ Sakhalin • We’ll look at two LNG projects in depth, particularly one that received a positive final investment decision (FID) a month ago • The importance of the Northern Sea Route (N.E.Passage) to these new Russian Arctic oil and gas projects will become very apparent • Along the way, we’ll identify some of the main reasons why the Russian Arctic oil and gas industry is booming, in spite of depressed oil prices 2 Russian Arctic / sub-Arctic regions we’ll focus on today Chukotka Kola Peninsula West Siberian Arctic East Siberian Arctic Kamchatka (Yamal, Gydan) (Evenkiyskiy, Taymyr) Pechora Sea Sakhalin 3 Northward trend from traditional West Siberian Arctic Heartland In the past 10– 15 years: - Less reliance on new pipelines, especially in West Siberia - Emergence of oil and LNG export via Northern Sea Route 4 Russian Arctic Marine Oil/LNG/Condensate Loading Facilities (Non-Arctic) Map source: Google 5 Pechora Sea (Russian European Arctic) Pechora Sea 6 Varandey Oil Export Facility • Location: Pechora Sea, 22.5 km offshore, 17 m water depth • Operator: Lukoil • Start-up: 2008 • Fixed Offshore Ice-Resistant Offloading Terminal (FOIROT), SPM • Substructure designed for 3m thick rafting ice • Linked to onshore tank farm and pipeline to oil fields in Russia’s European Arctic • Includes accommodation module and helipad • Loads up to 88 million bbls per year • Served by icebreaking support vessels and three dedicated icebreaking shuttle tankers • Shuttle tankers move oil year-round to storage at Murmansk, then conventional oil tankers to Europe Sources: PortNews.ru, • First cargo in 2008 delivered to Come Barents by Chance refinery, Nfld Observer 7 Varandey Oil Export Facility • First delivery to Asia (China) via the Source: MarineTraffic.com Northern Sea Route (NSR) of oil produced in the Russian Arctic took place last month, using Sovcomflot’s LNG-powered tanker, the ‘Korolev Propsect’ • The oil was Varandey blend, taken to Murmansk using one of the dedicated Varandey shuttle tankers, then loaded on to the ‘Korolev Prospect’ for the journey to China • Favourable ice conditions on the NSR and firmer prices of the key Russian blend ESPO (similar to Varandey blend), preferred by Chinese independent buyers, made the arbitrage via the Arctic route work • Expect more Russian Arctic oil deliveries to Asia via the NSR next year 8 Prirazlomnaya Oil Production / Storage Platform • Location: Pechora Sea, 60 km offshore, ~20 m water depth • Operator: Gazprom-Neft • Start-up: 2013 • Bottom founded GBS, with drilling, production, storage, offloading capabilities • Sits atop the Prirazlomnoye oil field • Platform has two loading arms • Loads ~40 million bbls per year • Two dedicated icebreaking support vessels serve the platform • Two dedicated ice-capable shuttle tankers, operated by Sovcomflot Pt. Thomson Central Pad • Shuttle tankers move oil year-round to storage at Murmansk, then conventional oil tankers to Europe 9 Sources: Barents Observer, Gazprom West Siberian Arctic West Siberian Arctic (Yamal, Gydan) 10 Arctic Gates Oil Export Facility • Location: East coast Yamal Peninsula, 3.5 km offshore in Ob Bay, ~12 m water depth • Operator: Gazprom-Neft • Start-up: 2016 • Single Point Mooring Facility (SPM) • Substructure designed for 2m thick ice • Linked to onshore tank farm and 100 km pipeline to Novoportovskoye field • Loads ~40 million bbls per year (62 mm bbls peak) Pt. Thomson Central Pad • Served by two icebreaking support vessels and eventually six dedicated Sovcomflot Arc 7 icebreaking shuttle tankers (4 in service) • Shuttle tankers move oil year- round to storage at Murmansk, then conventional Sources: Gazprom-Neft oil tankers to Europe 11 Yamal LNG / Sabetta Port Pt. Thomson Central Pad Source: Alten / Anotech 12 Yamal LNG / Sabetta Port Sources: Barents Observer, TechnipFMC • Location: Northeast coast of Yamal Peninsula • Operator: Yamal LNG JV (Novatek, Total, CNPC, Silk Road Fund) • Start-up: December 2017 • Resource base: S.Tambey • Three trains of 5.5 mtpa each • Train 4 (using Russian-made equipment only): 0.9 mtpa, start up in next few months • Served by Sabetta Port • Port and approaches required extensive dredging: Pt. Thomson Central Pad • 2015: 1.6 million m3 • 2016: 17.5 million m3 • 2017: 7.2 million m3 • Dredging contractors: DEME and Jan de Nul • Port used to load in construction materials and VLMs • Now used to export LNG13 and condensate Yamal LNG Modular Construction Approach Module fabrication in China Source: CGTN Source: Total Asian yards to Yamal Pt. Thomson Central Pad • ~150 modules fabricated off-site in Asia, many of them in Chinese yards. Up to 8000 tons each. • Heavy-lift ship delivery via eastern Northern Sea Route in summer (or via Suez and Kola Peninsula in winter) to Yamal site • Audax and Pugnax Arc 7 icebreaking module carriers made deliveries in winter 14 Yamal LNG Modular Construction Approach • Modules offloaded via MOF (Module / Material Offloading Facility) using 1718 axle lines of SPMTs • Taglu and Parsons Lake (Mackenzie Gas Project) would have used this approach, on a smaller scale Source: Total From Asian yards to Yamal Pt. Thomson Central Pad Module offloading at Sabetta site 15 Source: Mammoet Yamal LNG Dedicated ice-breaking LNG carrier fleet Christophe de Margerie Arc 7 LNG carrier (Sovcomflot) • 15 Arc 7 ice-breaking LNG carriers dedicated to Yamal LNG, of which 13 are in service (each can carry 172,000 m3 of LNG) • Two more to be in service by year end • Also one Arc 7 condensate carrier in service (another one coming) (43,000 tons condensate capacity) • All carriers are double-acting (proceed stern first in heavy ice (1.5-2m thick), bow first in moderate ice) • ~75% of LNG cargoes are currently westbound, and all condensate (year- round) Pt. Thomson Central Pad • ~25% of LNG cargoes are eastbound (7- 8 months/yr) • Share of eastbound cargoes to increase in future • Most LNG cargoes trans-shipped (ship- to-ship), e.g. near Murmansk, to conventional LNG carriers Boris Sokolov Arc 7 condensate carrier (Dynacom) 16 Sources: Aker Arctic and DSME Yamal LNG Dedicated ice-breaking LNG carrier fleet Year-round 15 eastbound shipments in Q3 2019 Pt. Thomson Central Pad 17 Source: Maritime Executive Yamal LNG Dedicated ice-breaking LNG carrier fleet • Four of the LNG carriers (and a further two due in service shortly) operated by Teekay LNG may be impacted by US sanctions on COSCO Shipping affiliates Pt. Thomson Central Pad Source: Reuters Both now in operation Source: Novatek 18 Arctic LNG 2 Project Source: Novatek Arctic LNG 2 Project • Location: Russian Arctic, Yamal Nenets Autonomous District (first development on the outer Gydan Peninsula) • Resource base - Utrenneye field: • ~70 TCF gas reserves • 770 MM bbls liquids / condensate • Planned Production: • Up to 2.9 BCF gas/day (~1 TCF per year) • 19.8 million tonnes LNG/year (6.6 MT/yr from three trains) • Up to 1.5 million tonnes condensate/year • First production: late 2023 (all three trains on stream by 2026) • Partnership: Novatek (60%), Total (10%), CNPC (10%), CNOOC (10%), Mitsui/JOGMEC JV (10%) • EPC contractors: TechnipFMC, Saipem, NIPIgaz • Final Investment Decision (FID) taken 5th Sept 2019 • Total project cost estimate: US$21 billion • Significant pre-investment in early works: • Construction of Belokamenka fabrication site • Utrenneye site prep 20 Arctic LNG 2 Project Arctic LNG 2 Concept: • Three concrete gravity base structures (CGBS), each of which will serve as the foundation for a single LNG train • CGBS dimensions: 300 m x 150 m x 30 m • CGBS weight: 480,000 tonnes (each CGBS will require 420,000 tonnes of concrete and 55,000 tonnes of reinforcement) • Each CGBS will include 213,000 m3 of LNG storage capacity and 75,000 m3 of condensate storage capacity • Topsides / LNG train on top of CGBS: • LNG train weight: 120,000 tonnes • Each train will consist of ~15 modules, each one weighing between 5000 and 12,500 tonnes • Total weight ofPt. each Thomson LNG ‘platform’: Central Pad 600,000 tonnes • Topsides fabrication: • Train 1 topsides to be built in China and transported to the Belokamenka fabrication site, where they will be integrated with the CGBS • Topside modules for subsequent trains will built primarily in Russia, including at Belokamenka • LNG platforms then transported to Utrenneye field • First completed LNG platform to be delivered to Utrenneye in 2022 21 Arctic LNG 2 Project : Google : Source Locations www.total.com Source: Source: Arctic LNG 2 Project Site / Utrenneye Belokamenka fabrication site Murmansk / Belokamenka to Utrenneye: ~1500 km 22 Source: Google Arctic LNG 2 Project Belokamenka Fabrication Site: • Located close to Murmansk, Kola Peninsula (Russian European Arctic) • Under construction since 2017 • Will serve as site for fabrication of ‘large-tonnage marine structures’ for Arctic LNG 2 • Two dry docks, each 415 m x 175 m x 20 m, for construction of Concrete Gravity Base Structures (CGBS) • First dry dock to be completed by Fall 2019 • Second dry dock to completed in 2020 • Concrete batching plant • Pipe spool fabrication • Topsides fabrication yard • Topsides / CGBS integration • Six mooring berths, for delivery of freight and workers • Camp for 15,000 workers, most of whom will work on a rotation 23 Arctic LNG 2 Project Belokamenka Fabrication Site – Artist’s Impression Pt.