OGPSS - Future Russian production from the Arctic

In the past few weeks I have been looking at the potential for sustainability in oil and gas production in Russia, now producing at a predicted recent peak of 10.36 mbd, when condensate is included. But the question increasingly becomes whether or not Russia can sustain these levels through this decade, as has been assumed by those suggesting that there will be no supply problems in the near future. In order to sustain this level of production, against falling volumes from the current major sources in Western Siberia (estimated as 300 kbd in 2010 ), Russia is so far relying on bringing new fields into production in Eastern Siberia and Timan-Pechora (as well as some increase in condensate as natural gas production continues to increase). However these developing fields, as a broad generalization, are at a size of about 500 mbd each, with an anticipated maximum individual production level of around 150 kbd. (Prirazlomnoye for example, which is coming on line has 526 million barrels in reserves, and will be producing at 132 kbd).

Prirazlomnoye drilling rig representation (Gazprom).

Since the high flow rates will likely not be sustained for long intervals, and declining production in Western Siberia will continue, so Russia will need to continue major programs of development to find further fields to bring on line later in the decade and beyond. In addition the declining production in other fields (which might increase overall decline in existing production to 5% or more, i.e. above 500 kbd) will add further pressure to sustain current levels, particularly given the criticality of oil and gas income to the Russian Government.

With much of the land already surveyed, the potential for large fields lies mainly offshore, and particularly in the various national continental shelves and the disputed underwater territory between them in the Arctic. It is a region where there are multi-national concerns and involvement, with the USGS having previously estimated that it is home to about one-fifth of the world’s undiscovered, but yet recoverable oil and natural gas resources, an estimate, at the time, of 44 billion barrels of oil and 1,670 Tcf of natural gas.

Map of the Arctic showing relative location of some development sites (Google Earth)

From the US perspective the US Bureau of Safety and Environmental Enforcement ((BSEE) seems finally willing to let Shell begin exploratory drilling in the shallow waters of the Chukchi Sea, although there has been a challenge to the recently awarded air Permit from the EPA. At the same time that the USGS is set to issue a new report that projects that shales on the North Slope may hold as much as 80 Tcf of natural gas and 2 billion barrels of oil, with initial drilling to prove the reserves anticipated to start this year. But those developments are on the other end of Russia, to the majority of current developments.

The recent discoveries by Statoil off the Norwegian coast and in the Barents Seas(at Skrugard-Havis, and Aldous Major South, show the potential that still remains in the North. Roughly a third of the world’s largest gas fields lie north of the Arctic Circle with Russia having significant reserves among them.

World’s largest gas fields (can you name the others?) (Shtokman )


Russia is therefore moving toward a planned program of development of the resources off its own continental shelf, where it is expected to be able to produce up to between 0.8 and 1.6 mbd of oil production and 18 to 20 bcf/day of natural gas. Part of the problem, however, is going to be cost. The new program is expected to cost some $216 billion, at a time when the investments in developing the current projects in Yamal and Eastern Siberia are also demanding large investment, if those goals are to be met.

Definitions of regions offshore (pertinent in future debates over who owns what in the Arctic) (Extended Continental Shelf Project)

TNK-BP are spending $12 billion to develop the Russkoe, Suzunskoe, Tagulskoe, Russko-Rechenskoe, and Messoyakhskoe fields in the Yamal region, with the hope that these can contribute at the end of this decade, and into the next, at a total level of around 300 kbd. Suzunskoye is targeted to begin production in 2016, running at around 100 kbd once on line. Russkoye is projected to start in 2017, and produce 150 kbd of a heavier oil. Tagulskoye and Russko-Rechenskoe will come on line in 2019. Messoyakhskoe is a joint project with Gazprom and (at $17.3 billion cost) will not come on stream until 2024, at 320 kbd. These fields will, however, feed into the pipelines that head East, to China, Japan and Korea.

Closer to Murmansk Exxon Mobil and Rosneft are exploring blocks in the Kara Sea anticipating that it may ultimately cost $500 billion to develop reservoirs in the difficult conditions with moving icebergs but for now expect that initial exploration and development will cost in the $10’s of billions.

Perhaps, of these fields it is the Shtokman natural gas field, which lies under the Barents Sea, 550 km north of the Kola Peninsula which has drawn most attention. Currently expected to start production in 2016, costs may well run over $15 billion.

Location of the Shtokman field (Shtokman Project)

Shtokman was discovered in 1988 (the name comes from Professor Shtokman who gave his name to the research vessel that found the field and contains an estimated 85 Tcf of natural gas, as well as around 400 million barrels of concentrate. It lies under 1,000 ft of water, with the interesting occasional problem of visiting icebergs that can weigh up to 4 million tons apiece. Planned to come on line in with an average production of 2.3 bcf/day, the supply (as the above map shows) half the supply is anticipated to feed into the Nord Stream pipeline for shipment to Western Europe, while the rest is converted to LNG and will be shipped out by tanker. Gazprom has recently increased the area of its license rights for the field, with a new date for commitment set for this month.

The current intent is to use a series of buoyed risers to connect from the wells to the surface, so that, should an extra-large iceberg appear the Floating Production Unit (FPU) can detach and move out of the way – should tugs not be able to divert it.

Artist’s concept of the layout for development of the Shtokman field (Shtokman Project)

The pipeline shipments are planned to begin in 2016, but the LNG shipments (some 7.5 million tonnes a year) will not start until 2017. The project is a joint venture between OAO Gazprom, Total S.A., and Statoil A.S.A.

The USGS has noted that there are considerable regions in the Arctic that have, as yet, been poorly explored. In 2005 they produced this map of the then state-of-knowledge:

Status of oil and natural gas evaluations around the Arctic (USGS)

From this they produced two maps showing the location of possible undiscovered deposits. The potential undiscovered oil deposits are shown below:

Potential oil discoveries and size remaining in the Arctic. (USGS)

The point however, is not that there is going to be no more oil, it is just, as the production schedules above illustrate, that it is going to be slow and expensive to develop that which remains. Over the next decade Russia will have to bring three or four new fields on line each year at around 100 – 150 kbd each, if it is to sustain production at current levels. It is somewhat difficult to see them being able to hold to that schedule, even for a year or two.

Progress of the Russian tanker towards Nome

Since the Russian tanker bringing fuel to Nome, and the accompanying ice breaker started out on Tuesday having sailed 53 miles on Monday, it seemed, with only 100 miles to go, that this drama was over. However it managed to move forward only 50 ft on Tuesday, due to the ice conditions. The ice breaker spent much of the time trying to break the tanker free from an ice ridge. I am therefore putting up the map again, and showing the relative position of the tanker and the ice breaker the Healy so that I can more easily add updates to the story.

Position of the ships (the icebreaker is the Healy) relative to Nome at 5 pm Tuesday (Central time)

And I know that Nome is really on the coast, but the name is more to identify the target. And for those who missed the earlier post which lies two stories down, Nome in Alaska is running out of fuel, and a tanker, supposed to deliver that fuel on the 7th January is having difficulty getting to the harbor. Due to storms earlier in the winter the normal fuel barge could not make delivery, and so the tanker and the sole remaining American active duty ice breaker were called into service. (The second ice breaker is out of service being overhauled). But the ice is thick and under considerable pressure - hence the ridges - and the pressure can also close the passage that the Healy makes before the Renda can move down it.

UPDATE: Here is the latest position of the Ice breaker (and thus I presume the tanker) at 11 am on the 11th. (Central time) It seems a little further away, but could be trying to find a better way through the ice for the tanker.



And here is a picture from the Healy Aloft camera of the Renda, date stamped 20120111-0101. (I think that the last 4 digits are GMT, since the pictures are going up every hour and the latest one - still dark, and the icebreaker starting to move (it has headlights on and is no longer pointing at the tanker) - is stamped 6 hours ahead of Central US time, which is GMT).



UPDATE 2 (4:30 pm 11th) It is now possible to see both the Icebreaker (the Healy) and the Russian tanker on the plot.

24-hours after the top map location, the tanker does not appear to be making much progress.

The Coast Guard has stopped predicting when the vessels may arrive in Nome, and even when they do there may be more problems. The icebreaker has too deep a keel to get into the harbor, and there is a 25-ft deep ice ridge that has been discovered across the mouth of the harbor. This means that the Renda will have to park off-shore and pump the fuel through a hose to the tanks. It has enough hose on board to be able to do this.

UPDATE 3: The Renda made a good run and is now 50 miles from Nome. There have been numerous ice ridges giving problems.

Position of the vessels at 10:15 pm GMT 12th Jan.

FINAL UPDATE Friday 7 pm GMT: The tanker and breaker have made good progress and are about 8 miles from the city (you can see some of the city lights in shots from the Healy aloft camera that were taken overnight.

Energy Summit - the third part (end of day 1)

This is the fourth part of coverage of the Missouri Energy Summit, with the earlier posts listed at the end of this one. This post covers the final session of the first day.

The first speaker was Karen Harbert of the U.S. Chamber of Commerce Institute for the 21st Century., and she spoke of Energy and Climate Change realities. For her Energy Security means affordable, reliable supply and the reality is that to get that we need to establish our position, at a time when the world is growing and with it demands for energy. She pointed out that at present 1.6 billion people do not have access to electricity, and that will change. As it changes, and 70% of the demand for power will come from developing nations where most of these folk live, so it will become harder to both get energy supplies and to also get the credit to pay for them.

New production, and new sources of power will need time, the right policies and lots of money if they are to be realized. But even then “we cannot mandate what technology cannot deliver.”

Singing a song after the hearts of the academics in her audience, she noted that we need new talent to develop these new sources, yet we are graduating a lower number of engineers. That must be switched around, and while the optimal product might be an Engineeer with a Masters in finance, there is not yet enough incentive in the path to get many students to follow it, and without them the path will stretch longer before we have the supplies that we need.

(Ed. Note: To reply to a comment the top left section of the graph (though in another version) has been expanded and added to the bottom of the post. This is so that I can try and give a better explanation of what I am talking about).
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She was followed by Himadri Pakrasi, of Washington University in St Louis. Washington U has recently got a significant infusion of money for bioenergy production, with a total commitment of some $55 million. This has created the Center that Dr. Pakrasi runs and which is dedicated to bioenergy production. He spoke of the availability of tall grasses in the mid-West and of algae, and the recent consortium that had created the Clean Coal Consortium on campus.

Bob Dixon followed with a talk entitled “The Perfect Storm meets the Global Tsunami.” Lest there be any doubt as to his position on global warming, his first remark was a question to the audience on whether they believed the world was warming, and when a lone dissenter raised a hand at the front, his response was that “he was not willing to take the risk.” (I will comment in a later post about the risks that he is quite happy to incur to avoid that of global warming). To show that the world was warming he contrasted winter pictures of the Arctic ice cap in 1990 and 1999 with the summer ice cap in 2007.

And since ex-Vice-President Gore mentioned the same thing in his testimony before the House Committee today, let me just put up the graph of Arctic ice cap size, so that you can judge their remarks against the truth. And it is also here because porsena referred to earlier plots, that only go up to 2005.


Source IARC – JAXA

You will note that the current size of the Arctic Ice field is larger than it has been at this time in any other year of this century. It is actually (as of yesterday) within the range of variability of the average field size over the past 28 years, and if the current trend continues, will exceed it by the middle of May.

Bob Dixon, having made his points about the Arctic ice, went on to talk about the need to conserve energy through better building design. He noted that 40% of energy expended goes into buildings and homes. And while we have standards for the performance of many things, and tests for their efficiency, we do not have any for buildings. Yet we are approaching a time where utilities will increasingly be able to turn off our air conditioners, for 10-minute periods, in order to conserve their energy outputs, when loads approach brownout conditions.

We are now at a time that there is a program to weatherize, where homeowners are encouraged to improve building efficiency, but the question is, who verifies that what is done is right, and that the costs will be recovered as promised?

Yet he gave an example of a program that works. The Australian Government rents office space, but will only do so if the building is energy efficient. By creating that demand, and then competition for its business, the Government has ensured that private owners are motivated to move forward and change, overall, the design and efficiency of business construction.

Michael Chesser of Great Plains Energy came back to talk about the punitive effects of cap and trade legislation. He noted that, on average, it will raise electricity rates 40% and there should be a wide ranging debate before such a step is undertaken. He expects that “the next ten years will see more change than has occurred since Edison invented the electric light.” But this requires that the partnership of players be expanded, and both utilities and customers must be willing to step up and be partners.

Te stability of energy prices over the past years has been an asset to the economy and American business. This has required that the utilities provide enough capacity to meet the maximum demand, but bear in mind that the average load is only 50% of capacity and it goes above 75% of capacity about 10% of the time. Thus the utilities have a large investment that rarely is fully paid for, and really does not address the efficiency of supply and demand. He again drew attention to the EPRI PRISM site (3.5 meg pdf).

And while bearing this in mind, remember also that there are now parts of California where there is sufficient wind energy available that the price of electricity goes negative in the evening. In that circumstance it would be nice to have a number of plug-in hybrids sitting ready to download the excess. Yet there are safety issues for such types of systems, and a central control of them.

The final speaker of the evening was Bob Kruze of GM. He noted that the study of physics saves lives. (It keeps the idiots out of Medical school). He looked into the future and sees some 900 million vehicles which are currently owned by only 13.5% of the global population, but by 2020 this will rise to where 15% of the populace will own a car. That rise in demand will consume a lot of transportation fuel. But we cannot pump enough oil to meet it. (He was one of very few who bent a nod in the direction of Peak Oil). We can, however displace some of the demand with efficiency and diversity. From the point of emission control cellulosic ethanol would be a winner, since it would lower carbon demand by 85% on a well-to-wheel basic comparison. He expects that ethanol will replace 40% of gasoline demand by 2030., and GM is partnering with two efforts, one thermo-chemical and one biological, to produce ethanol, with Coskata and Mascoma, the latter looking at prairie grasses. He anticipates there is enough off-peak capacity to power 30% of commuter demand. He claimed that GM did not kill the electric car, but talked about the Volt, the Extended Range Electric Vehicle (EREV).

He also spoke up for hydrogen, and that there is plenty being made today, that could provide a fuel. (Neglecting that it is used to help refine hydrogen deficient crude in refineries at a considerable cost). He felt (neglecting that) that hydrogen could be competitive at around $2 - $3 a gallon (untaxed). Hydrogen would be generated from Natural Gas. And just recently one of their card did a 300-mile trip to Terrytown NY.

Earlier posts in this series covered the program; the keynote address by T. Boone Pickens; and the first invited speakers.

Current Ice coverage in the Arctic - April 2009 Detail showing recent changes in slope

Energy Summit - the second part (until 3 pm)

This is the second post on the contents of the Energy Summit held at the University of Missouri this week. The first post covered the keynote address by T. Boone Pickens, and that can now be seen, together with Chancellor Carney’s opening remarks, and those of Senators Bond and McCaskill as a video. (Warning it is a 1 hr 30 min video and some 219 MB). Mr. Pickens remarks were also picked up by the local Missourian. (The school of journalism was also holding briefings and interviews that ran concurrent with the summit). After the keynote, the Summit got underway with a brief review, by the chief research officers of the four campuses of the University of Missouri system, of the energy related research that each was carrying out. This was a fairly top level skim through a project range that covered fuel cells, hydrogen, a new way of storing gas on carbon bricks, and studies on a wide range of pathways to generate transportation fuels, and also prefaced a number of the papers, poster presentations and displays, the latter two of which were going on outside the main auditorium.

The first invited Speakers then came to the podium with Dale Klein, Chairman of the U.S. Nuclear Regulatory Commission leading off the presentations.

Mr Kein noted that his agency is a regulator, not an advocate, and that he is currently looking at 17 applications for 26 new nuclear plants, with another 3 applications for 5 plants being anticipated. (However this is likely to include the AmerenUE application for a second plant at their Fulton site. The company indefinitely suspended that request this morning, just after getting word that a bill that would allow it to charge for construction before it was finished was not going to happen).

Mr Klein walked us through the process of getting a permit, noting that it would take 30 months to review the application, 12 months to get public comment, and then it might take some 44 months to get the plant built. The current costs are in the range of $5 - $7 billion per plant, and they are licensed for 40 years initially, with a possible 20-year extension. (For comparison he noted that the USS Enterprise, the first nuclear powered aircraft carrier, was commissioned in 1960, and is coming to the end of its service life –within 3 – 5 years. He felt that the public needs more education on the benefits of nuclear power, and what not to be afraid of.

Coming next to the podium, Dr. Joan Woodard ( executive vice president at Sandia National Labs) mentioned her last visit to town, some 35 years ago as she drove out to Sandia to take up her first job there. She talked of nations climbing the energy ladder which takes nations from no power, through burning dung, and then to carbon fuels and to higher levels of consumption as society advances. However she noted that the US curve was flattening as is that of the European Union, and it is other nations, from Korea and Australia to China and India that are growing and seeing increased levels of energy demand as that growth continues. This is, in time, bound to strain the system, due to the demographics of a growing world population combined with growing standards of living, and thus individual energy demands.

She felt that Secretary Chu does a “wonderful job” in explaining the coming mandate that is Climate Change, and she noted the ever-shrinking condition of the Arctic ice cap. (Obviously she has not seen the latest ice data from the Arctic, which shows that the coverage is returning to the seasonal normal for the past 28 years, since she commented that the rate of shrinkage of the ice cap was accelerating, when, if you look at the plot, it obviously isn’t.) Nevertheless, in light of the mandate she felt that the energy enterprise must change to encompass not only the desire for economic prosperity (the ladder) and the regional environment, but also national security issues. In this she felt that while Global Trade can be good, it also creates tensions over such concerns as Russia, and now China buying up large quantities of the world reserves of a number of commodities. And in that regard we must consider that Chinese companies that are doing the purchasing are an extension of the state.

Droughts in Africa will drive migrations, leading to further conflict. Further the US is vulnerable to national disasters. Both of which threaten our security, although she then went on to mention more conventional threats. These include attacks by hackers into the control systems for our energy networks and the threats posed by global proliferation of nuclear knowledge. To protect against these threats we need a system that will, if it does fail, does so “gracefully” but which has high reliability and resilience against attack.

Daniel Cole senior vice president of Ameren then talked about his early job as a “pirate” down at Branson, MO. Here as part of the “tourist” entertainment he would regularly be pelted with bags filled with rock, but simulating gold. That job was excellent training for his current one with the utility. The company has 2.4 million electric customers, and a million natural gas customers. They produce some 16,600 MW which is nominally 61% coal, 30% natural gas fired. However because coal provides baseload and natural gas is for peaking demand supply, it turns out that 85% of actual production is coal-fired. It is also cheaper. But in the process last year, for example, it produced 70 million tons of carbon dioxide.

The nation produced some 6 billion tons. Now if the system goes to a cap and trade system and one might project growth to 6.2 billion tons generated in a couple of years, the cap might instead mandate total production is held to 5.5 billion tons. This amount would then be parceled out as a series of allocations. Each allocation would either be designated to a company at a price or subject to auction. The company could also offset some of its production with some alternate activity (such as paying for no-till farming for example).

They priced the cost that the company would face after the Lieberman Warner bill was proposed. It set a price of $50/allowance (1 ton of carbon) in 2015, rising to $100 by 2030. With the production of the company being 70 million tons, this will give an additional bill of $3.5 billion in 2015. This will mean, according to Mr Cole, the rapid disappearance of existing coal plants, but Missouri currently has the lowest electricity rates in the nation, and such a burden on their carbon production would have to be passed on as a very rapid increase in power costs per kWh to the customer to more than double that of today. The results when the requirements of the Waxman Markey bill were evaluated were even more severe.

Ameren is part of the Electric Power Research Institute (EPRI) which has examined different technologies (pdf) to see if, in fact, these targets are attainable, anticipating increases in efficiency of use, and a 0.1 to 0.7% growth in demand.

Their conclusion was that renewable sources will only act to stabilize carbon dioxide levels, and that while increased use of nuclear power can initiate a drop in levels, it will be a switch to advanced coal generation that will be required to make significant reductions. But to have a real impact the focus must look at coal, focus on adoption of new technology, and be international in application. But the answers will come as silver buckshot not as a silver bullet.

This is the third post on the Energy Summit
The second post covered the Keynote, and the first described the program.

The final speeches of the first day will be covered next.