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Vol. 13, No. 23 Week of June 08, 2008
Providing coverage of Alaska and northern Canada's oil and gas industry

Consultant calls Norway’s Snohvit a ‘fiasco’

Arctic resources can and must be developed, Ian Fitzsimmons says, but Norway and Russia should learn from Alaska and Canada

Sarah Hurst

For Petroleum News

Almost all Arctic sea ice could disappear in the summer months as early as 2048, UK-based consulting engineer Ian Fitzsimmons predicts in a commentary piece published recently in Offshore Engineer. This could enable Arctic hydrocarbon resources to be developed as replacements for the world’s largest producing oil fields, Ghawar in Saudi Arabia and Burgan in Kuwait, he believes. In an e-mail interview with Petroleum News, Fitzsimmons expanded on his views about the future for Arctic oil and gas.

“The Arctic ice sheet is going to disappear regardless of any oil exploration and production activities,” Fitzsimmons said. “The Arctic is responding to global warming events that were instigated by Mother Nature (Gaia) more than 10,000 years ago. Nothing and nobody can change that. Animals and people around the Arctic rim have everything to gain from melting ice. Loss of the ice sheet will rejuvenate the Arctic Ocean in every respect and the human residents will be the biggest beneficiaries.”

Alaska and Canada are further ahead than Norway in the development of offshore technology, despite Norway’s claims to the contrary, according to Fitzsimmons, who isn’t surprised that the Snohvit gas project in the Barents Sea has been experiencing startup problems. “The Snohvit fiasco graphically illustrates the shortfalls of Norwegian Arctic technology, both technically and financially,” he said.

“Remember that Statoil is a state-owned organization, and it is funded by the state of Norway — regardless of financial control,” Fitzsimmons continued. “The real problem with Norway is that Statoil only exists within domestic Norway — it simply cannot, and does not know how to compete with the outside world. ... Snohvit is a technical and commercial disaster, but Statoil is a state corporation, so the taxpayer always foots the bill and nobody is responsible.”

Russia hostile environment

State involvement in the oil industry runs even deeper in Russia. “Russia is a hostile environment for all foreign companies at the moment and likely to remain so for the coming decades,” Fitzsimmons said. “You have read about their ‘asset recovery program’ at the expense of BP, Shell and so on. ... I am sure that both Statoil and Total will come to regret their involvement with Shtokman-Gazprom in the same way that Shell regrets their involvement with Nigeria and Sakhalin Island LNG (and ENI with Venezuela).”

Nevertheless, Russia will initially be dependent on Western technology, Fitzsimmons thinks. “This will prove beneficial in the short term for foreign manufacturing-installation companies. In the long term this opportunity will disappear,” he said. “All foreign design companies-consultants are required to have a Russian design house partner in order to get work for Russia. They will thereby acquire Western technology by stealth.”

The undeveloped Shtokman field in the Barents Sea contains an estimated 3.8 trillion cubic meters (134.1 trillion cubic feet) of natural gas and more than 37 million tons (1.8 tcf) of gas condensate. “The biggest hurdles that Russia faces in the development of Shtokman are the internal politics and parochial hurdles to be found within Russia. Bureaucracy and corruption are well to the fore in this respect,” Fitzsimmons said.

“The West can supply all the hardware at a price, and the Russians have billions of dollars to invest. That is not a problem,” he continued. “Yes, I am confident that Shtokman will be developed — eventually. But I am sure the Russians are playing the long game (nothing wrong with that) in anticipation of dwindling Arabian oil production. As the Russians see it, they have everything to gain by delaying Shtokman. The price of LNG increases by the minute.”

Fitzsimmons has completed strategic and development studies for the North Sea, Newfoundland and the Barents Sea, and has worked as a consultant with Shell, Woodside, Eni Australia and other companies on offshore projects.

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