Commentary: Prirazlomnoye – legends and myths of the Arctic shelf

Publish date: October 6, 2005

Written by: Maria Saplinova

Expectations of industrial development of Prirazlomnoye oilfield is as stirring as the expectation of Christmas Eve for a five-years-old child. But while the child is waiting for the goodies, oil workers, analysts and ecologists are eager to know at least the approximate date for the beginning of the development of the Arctic shelf field.

On September 20th, the web site reported that Russian oil giant Gazprom brass believe development of the Prirazlomnoye field, south west of Novaya Zemlya island, will begin by 2006.

The forecast looks far too optimistic. There are a host of technical problems that may delay beginning of development, not the least of which being a lack of qualified workers to construct the platform. At the same time, Russia’s Ministry of Natural Resources supposes the year 2008 to be the most realistic launch of development efforts in Prirazlomnoye to be 2008.

Sergey Savushkin, the editor-in-chief of the magazine “Oil and capital” agrees with analysts at the ministry. However, he adds, “If they don’t start to tow the platform to the oilfield within the next few days, it will delay the start date for at least six months.”

A detailed analysis of the situation shows that 2008 is also on the optimistic side for the beginning of development. According to the deputy editor of “Expert Severo-Zapad” magazine, there are several tankers under construction at the Admiralty dockyard in St Petersburg that were ordered Russia’s Sovkomflot tanker company. If they are not needed at Prirazlomnoye when they are ready, the successful oil-transporting company will, no doubt, find another purpose to apply them to.

For Prirazlomnoye development, much money is needed. Even the state-owned Gazprom, with its billions, could not launch the project in 2003 as was initially planned. Gazprom found no way to drive the project forward until Rosneft threw its weight in. But even now, it seems not even the joint heft of Gazprom and Rosneft’s banks accounts hold the money required for the project.

“First of all, Russian companies need partners with the necessary required technologies rather than investors. They need Norwegian experience of oil production in similar climates and Japanese experience of tanker construction,” Anatoly Khodorovsky, director of the analytical and informational department of analysis and information for the Region Investment Group, told Bellona Web.

“I think Norwegian technologies will work at Prirazlomnoye field. It will not only allow propectors to use adopted technologies, but also reduce political tension.”

The project “Development of Prirazlomnoye Field” requires huge financial investment. Realising this, Rosneft and Gazprom will have to invite foreign partners to the table.
However―though there are many suitors―no one yet knows which company will take part in development of the Barents shelf. However, it seems that all ideas about when to begin are a rubbish until the question of finding a foreign partner is solved.

Environmentalists’ anxiety
It is doubtful that foreign partners will bring any changes to technical assessment of the project. The results of public hearings that took place last year did not satisfy Bellona ecologists.

It is also worth mentioning that Gazprom press service could not reply to Bellona Web about the launch date of the oilfield’s development, and excused themselves by sayin that they need a specialist’s consultation on such a complicated question.

Ecologists have serious doubts about the development of Prirazlomnoye oilfield. First, there are no technical and ecological standards in Russia to guarantee the safety of working in such conditions.

Secodly, the mining platform for Prirazlomnoye will be constructed from the remainder of the Hutton platform, installed by Conoco in 1984 in the UK sector North Sea. In 1994 operatorship passed to Oryx Energy Co., which itself was taken over by Kerr-McGee in the end of 1998. In 2002 the exhausted Hutton field was decommissioned, and the platform was sold for US$29 million to Monitor TLP Ltd, registered at the tax haven of the Cayman Islands, which right away sold the platform to Russia for US$67. It is still a question why Russian Sevmorneftegaz – made up by Rosneft and Gazprom subsidiaries – bought just this platform and for such an overcharge.

It then came to light that the purchased platform was dangerously contaminated with numerous radioactive elements, and the Western companies responsible for the sale even began murmuring about the possibility that they would pay to clean it up. Suspiciously however, the Russians suddenly decided that radioactive contamination on the rig wasn’t so bad after all—and silenced the issue. The Sevmorneftegaz company is now having the rig reconstructed at the Sevmash shipyard in the Archangelsk region.

But it turned that Sevmash is severely lacking in qualified workers that could complete the work in time, which has already delayed the terms of the reconstruction. This fact causes serious doubts about th the safety of the equipment that will be launched in the Privozlomnoye field, and the Russian Arctic shelf as a whole.

Aside from that, it is evident that for safe oil transportation, the company will need several Arctic-class tankers of the EC-10 and EC-15 type. Russia has no such tankers yet and they are much more expensive than the ships in use presently.

The ships of the most similar technical parameters are 1A-Super class tankers, of which Russia operates six. Three of those belong to Sovkomflot, the other three to Primorsk shipping company If Sevmorneftegaz manages to negotiate the use of these ships, safe oil transportation can be considered more or less solved. Otherwise, if the company decides to play it cheap―as it did with the platform―the ecological consequences for the Arctic region could be catastrophic.