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Vol. 14, No. 25 Week of June 21, 2009
Providing coverage of Alaska and northern Canada's oil and gas industry

Investing in the Arctic

Companies must work together to conquer Far North, speakers tell OTC audience

By Ray Tyson

For Petroleum News

No aspiring oil company can be an island when it comes to living and working in Arctic conditions, according to those in the know. So complex and formidable are the challenges that sharing information, even with competitors, is no longer an option; it’s a necessity. And it’s not all about technology and engineering, either, although each certainly carries its own set of challenges.

“We really need to look at the Arctic in a holistic way,” ConocoPhillips chief naval architect Peter Noble told an audience at the Offshore Technology Conference in early May.

“There are a lot of issues around the environment,” he explained. “There are local inhabitants that need to be considered as a high priority. They live there; it’s their backyard.”

Thirty years ago when Noble began working in the Arctic, “we’d say we’ll find out where the ice is and we’ll sail the ships there,” he recalled. “The problem is those are the places where the whales are moving; it’s where the migratory birds are and a lot of other things. So it’s probably not a good idea to mix these. We’ve got to think about all of those things. There are a lot of issues and they’re all interconnected.”

Qualified personnel a challenge

Gary Mandel, executive vice president for big oilfield services company Aker Solutions, said that while “local resources” are available in Arctic regions, finding and maintaining qualified personnel is a major challenge for his company, as well as health and safety issues.

“In these remote areas, putting 6,000 to 7,000 people in camp locations presents challenges for family issues, substance abuse, disease; and you have to manage all that; you have to plan for it, with clinics and hospitals,” Mandel told OTC. “With the rotation of the people in and out, due to these extreme conditions, many don’t come back. So you have to plan for the high turnover during execution of the projects. With these remote locations, long tiebacks and long distance to market is another issue that brings complexity to these developments.”

And that’s not all. As part of its planning, Aker attempts to “minimize the manpower” on site and does as much facility prefabrication and modular work as possible. Additionally, facilities have to be designed to house workers during the construction phase and for operators during the production phase.

“Obviously there are constraints to the amount of prefabrication and modularization you can do off site,” Mandel said. “Some areas are only accessible by rivers in certain periods of the year. Additionally, winterization of facilities is to an extreme. You almost have to keep track of almost everything you do there, to be able to construct as well as operate.”

Knowing the ice

Moreover, if a company plans to operate in the Arctic, ice management is critical, Mandel said, noting that since 1967, Aker has maintained an “ice laboratory” in Finland. Consequently, Aker has accumulated one of the largest and most extensive ice-management data bases in the world.

“We’re constantly doing research and feeding that database,” Mandel said, adding that there has been a “huge collaborative effort” at sharing information. “And that’s why you see that multiple owners and operators have benefitted from that ice laboratory. We share that data for the benefit of industry.”

Aker companies, which have executed projects in harsh environments globally from Sakhalin to Newfoundland, also have designed more than 60 percent of the world’s icebreaking vessels, as well as some of the most advanced cold and harsh climate drilling rigs.

“So there is a lot of experience and lessons learned … that gets into each generation of design,” Mandel said. “One of the things that our experience tells us is that you have to thoroughly test all Arctic concepts and solutions, to see how they behave in ice before implementing them, and we do that in the ice laboratory.”

Mandel noted that in addition to dealing with the long winter months, including ice conditions, extreme temperatures and extreme winds associated with cold temperatures, the typically short summer months present their own unique challenges.

“There are myriads of mosquitoes and problems associated with remote locations,” he said. “There’re very limited weather windows to bring in equipment and materials — the logistics, etc.”

Arctic work not new

ConocoPhillips, largely through its position on Alaska’s North Slope, is among the globe’s largest and most experienced Arctic producers, with a proportionally large chunk of annual capital expenditures going to cold climates, including the North Slope, as well as to its partnership with Russia’s Lukoil and to sub-Arctic operations in Sakhalin Island.

“Working in the Arctic is not new,” ConocoPhillips’ Noble told OTC. “The Arctic has been seen as a potential for all kinds of resources for a long time,” including fishing, whaling and mining. “So there is a lot of experience in doing large-scale resource extraction projects in cold regions far from logistics. We’re not starting from square one. We do have a long history of doing that.”

Noble suggested that because much of the Arctic lies offshore in relatively shallow waters of 300 feet or less, remote oil and gas developments in countries bordering on the Arctic Circle could be challenged by a lack of ice-free, deepwater ports necessary to harbor product tankers. Though there are “ice-free zones” in areas of the Barents Sea and western Greenland, for example, “by and large we’re talking about a shallow sea,” he added.

On a positive note, Noble indicated that news stories playing up potential jurisdictional disputes over areas of the Arctic that currently lie in international territory are misleading. In a highly publicized stunt, for example, Russia laid claim to a remote area of the Arctic by planting a flag beneath the polar cap using an unmanned submersible.

“I don’t see this kind of thing as being a big hurdle. … The places where oil and gas companies want to go are clearly within one jurisdiction or another,” Noble explained.

Technology has improved

Noble agrees with Aker’s Mandel that ice management is a critical factor when it comes to planning offshore Arctic oil and gas projects. For one, ice detection technology has improved significantly since the last major push into offshore Arctic during the late 1970s and early 1980s, when there was a flurry of exploration activity in the Canadian Beaufort Sea, some of which resulted in significant natural gas discoveries that would anchor a proposed gas pipeline from Canada to the U.S. Lower 48.

“We have better information on where the ice is, how thick it is, and what it’s doing,” Noble said, explaining that in addition to traditional ice charts, SAR (synthetic aperture radar), largely formed from satellite imagery, is among several new tools available to industry. “It allows you to make pictures whether it is dark or cloudy … which can determine ice conditions and that is a big plus.”

Moreover, rather than send manned fixed-wing aircraft and helicopters into potentially dangerous weather conditions, unmanned drones equipped with the latest imagery technology can be dispatched to verify satellite data.

“So there are a lot of tools available to us today that are being used and can be further adapted to work,” Noble said. “But we need to improve ice forecasting, ice information.”

Because each offshore project must be tailored to fit specific ice and weather conditions, designing and building exploration rigs and production facilities for offshore Arctic remains a major industry challenge. For example, some rigs work well in light, early winter ice conditions but are unsuccessful when it comes to open waters with limited drilling seasons.

“Arctic Ocean drilling systems solutions are quite important … so getting the balance in design and development of these systems is important,” Noble said. “We have very limited seasons, sometimes in the tens of days. So that extends the whole exploration (process), and certainly when it comes to development drilling, it extends that too. We need to get better solutions for that.”

Transportation an issue

Seasonable shipping from remote Arctic regions is possible although probably not doable for natural gas, Noble said, adding that produced oil could be stored but that option may damage reservoirs, if they are shut down when storage is full and then restarted when ocean shipping resumes.

“We need to develop year around shipping,” he said. “Pipelines, even though I’m a naval architect and certainly favor marine solutions, even in the pipeline world there is a lot of marine work in how you trench pipelines, how to lay them in the Arctic. And it will be a combination of developments, I think.”

Noble concluded:

“You really have to be self-sufficient (in the Arctic). It may be that we have to look at different ways of doing things. But no one company, whether it is an oil major or a contractor can do this alone. And it’s important that we work together on this … and understand what it is we need to do, do it, and then let the rest of the world know that we can be safe and have sustainable development in the Arctic.”

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