Web Exclusive: Largest discovery ever in Barents Sea takes shape

Article By Judy Maksoud - Executive Editor

According to Komarov, the Shtokman development will have three subsea production facilities and three production platforms (either a spar or other type of floating production unit).

The Shtokman field, which lies 342 miles (550 km) from the Kola Peninsula, is a giant. It holds 3.8 bcm of gas (initial gas in place), and at full field development is expected to produce 71.1 bcm/year for 50 years. It is the largest discovery to date in the Barents Sea and will cost US $15 billion to develop.

Uri Komarov, CEO of Shtokman Development AG, talked about development plans for the Shtokman field at the Offshore Northern Seas conference in Stavanger, Norway, on Wednesday, Aug. 27, in a panel discussion titled “Access to Energy Resources.”

According to Komarov, the Shtokman development will have three subsea production facilities and three production platforms (either a spar or other type of floating production unit). Two 342-mile (550 km) pipelines will carry gas to shore, where the company is planning to build an LNG facility. Komarov said the company expects to build 16-20 ice class LNG carriers to transport the gas to market. “We are keen to prepare a brand new business model to make this project feasible,” he said.

The development will take place in four phases. Phase 1, which began in 2007, has already been completed. This phase consisted of outlining the project concept, creating a business plan, costing the development, and choosing partners.

Komarov qualified Phase one as a success, saying the project has “the right timing, the right place, and the right partners” [Gazprom (51%), Total (25 %), and StatoilHydro (24%)], noting as well that Gazprom has the support of state and local authorities in Russia.

Phase 2 of the project, which will take place from 2008 to 2009, includes front-end engineering and design, finalizing key legal agreements, finalizing project financing and shipping and marketing arrangements, securing construction permits, and bids for EPC.

Phase 3 will occur between 2010 and 2013. It will include construction, commissioning, and first gas.

The final phase will be operations, beginning in 2014.

Komarov talked about the timing of Shtokman, noting that the project will break new ground, but will build on successes in the region, including those achieved at Ormen Lange in the Norwegian Sea, and Snøhvit, in the Barents Sea. He pointed to rising demand for gas and strong pricing as harbingers of success. The Shtokman project, Komarov said, is “in line with Gazprom’s strategic and marketing plans.”

Part of that strategy is to form new relationships. Komarov said the straightforward and transparent business model being applied at Shtokman will allow Gazprom to forge alliances for possible future endeavors. Although produced gas will be marketed by Gazprom, Komarov said, all of the partners will be exposed to potential upsides and downsides from the market fluctuations. He explained that each partner will get a pre-defined share of revenues, and that all of the shareholders are fully aligned, having reached all of the decisions so far unanimously.

This project will allow the integration of know-how, skills, and financial capabilities of three major energy companies with high strategic and reputational motivation, Komarov said, expressing his approval of the integrated team approach, which will allow the top specialists in the industry to work on this project.

Shtokman is a unique opportunity for Russian and international contractors that could well lead to rapid development of innovative technologies and know-how both within Russia and worldwide.

The Shtokman project will open a new frontier for oil and gas projects as the first major development in the Barents Sea, paving the way for future arctic developments. Komarov believes the project will be the first in a series in the region, noting that reserves estimates in the Barents Sea are placed at 7 Tcm and that the Priyamalsky shelf could hold as much as 16 Tcm.

“This is a very big area for future development,” Komarov said.