Cooperation Offshore and Overseas
- By Pat Davis Szymczak
- Jun. 18 2010 00:00
In the energy sphere, France and Russia are forging alliances to promote shared interests and win-win outcomes for both countries, something that they have been doing for a long time.
France's national oil company, Total, has worked in western Siberia since 1995 as part of the Kharyaga PSA, or production sharing agreement. Today, Total holds a 40 percent interest and is the operator. In Kharyaga, Total is in partnership with Norway's Statoil, Russia's Zarubezhneft — a Gazprom subsidiary also working abroad in India and Vietnam — and the regional Nenets Oil Company.
The trust developed has more recently led to Total securing a 25 percent stake in the joint venture to develop the giant Shtokman gas condensate field in the Barents Sea. Total joins Statoil and Gazprom in developing Shtokman, whose reserves of 3.8 trillion cubic meters of gas and 37 million tons of gas condensate make it one of the world's largest gas fields.
Shtokman's gas is expected to begin flowing in 2015, most likely to Europe via the Nordstream pipeline, which is being built under the Baltic Sea from Vyborg in Russia to Greifswald in Germany. This source of natural gas represents not only profits for Total, Gazprom and Statoil, but also greater energy security for the European Union, which imports from Russia 25 percent of the total gas it consumes. Shtokman gas had originally been targeted for development as liquefied natural gas for the United States, but over the years, when choosing partners, Gazprom and the Russian state, which controls the company, found a greater alignment of interests with Europe.
Analysts predict the fields supplying gas that Russia sells Europe will begin a steep decline in production starting in 2015. The only way out is to modernize.
Total is not the only recipient of Russian interest. Just this spring, Gazprom and Italy's ENI, also a national oil and gas company, cut French electricity supplier EDF in for a 20 percent share on the proposed South Stream pipeline.
For Russia, partnering with national oil companies through government to government relationships is a more comfortable way to gain experience and management know-how in the use of the new technologies that Gazprom will need if it wants to develop the Russian Arctic and to compete for projects globally.
Russia might hold titles to the world's largest natural gas reserves, and right now it might produce more oil daily than Saudi Arabia. But analysts predict that the fields supplying most of the gas that Russia sells to Europe will begin a steep decline in production starting in 2015. The only way out for Russia is to modernize, and quickly. The same is true for oil.
"Gazprom's super-giant gas fields, Urengoy, Yamburg, and Medvezhe, are relatively shallow — 1,000 meters or so — and contain practically pure methane, which makes processing the gas simple," explained a petroleum engineer working for an international oilfield service company in Moscow. "New gas projects are deeper and tend to be much smaller. They also have complex reservoirs requiring new technologies to produce and are in remote locations without infrastructure to get the gas to market."
Russia needs technology and Europe needs natural gas, which the global energy industry is promoting as the cleaner and greener alternative to oil. Russia also needs to master offshore techniques and technologies so as to develop its Arctic resources. It is estimated that three-quarters of unexplored hydrocarbon deposits may lie off Russia's shores above the Arctic Circle.
Offshore project management, especially in Arctic conditions and in deep water, is so overwhelming that even the most experienced global oil giants, such as Exxonmobil, BP or Shell, develop such fields as part of a consortium so as to share risks and expenses.
In letting Total into Shtokman, and, more recently, short-listing Total as a preferred partner for projects in Yamal, Gazprom expects Total to invite it into projects outside of Russia.
A year ago, the head of Total's Africa Unit, Pierre Nerguararian, told Reuters that Total was ready to invite Gazprom to join its international projects, including those in Africa. The French firm, which operates the Girassol deepwater project off the coast of Angola in the Gulf of Guinea, used Girassol as a show piece to convince Gazprom it needed Total's expertise to develop Shtokman.
The Girassol reservoir lies 1,300 meters below the ocean floor in water depths of 1,400 meters. At these depths, production is controlled remotely from a floating crude oil processing factory — a giant ship three soccer pitches in length. Total was behind the construction of the Girassol Floating Production, Storage and Offloading vessel — the world's largest FPSO ever built — and Gazprom, the world's largest gas company, wants to learn from Total how to do it.
Statoil is also a partner in Girassol, along with Esso, BP and Angola's national oil company, Sonangol. Like Total, Statoil was invited into Shtokman, also on the basis of cordial government to government relations.
Besides Girassol, Total works in technically complex fields such as Dalia, Rosa and Pazflor, also in Angola, the Elgin-Franklin field in the U.K. sector of the North Sea, PetroCedeno in Venezuela, Akpo off the coast of Nigeria and Moho-Bilondo in the Congo. Technology was the key to unlocking those fields and Gazprom would not mind being part of it all.