Saturday, November 19, 2011

Nord Stream Brings Siberian Gas-Resources to Europe...

Nord Stream Brings Siberian Gas-Resources to Europe...

Quite recently the most anticipated project of the world power industry has begun operating — the Nord Stream gas pipeline. On November 8, Russian gas supplies to Europe started. The project will help decrease Russia’s reliance on transit countries and provide stability and safety for gas deliveries. The Nord Stream pipeline runs along the seabed of the Baltic Sea, from Vyborg (Leningrad region) up to Greifswald (Land Mecklenburg-Vorpommern) and connects Russian gas fields with European consumers.

Everyone understands how significant the Nord Stream is, but t the same time, no gas pipeline can operate without a stable gas feed. That is why the Nord Stream project should be reviewed in the integrated manner in terms of both logistics and resources.

Gasprom’s gas transportation system will ensure gas feeding to the Nord Stream. Initially, the Yuzhno-Russkoye field in the Yamal-Nenets Autonomous District will be used as a resource base, later Shtokman’s resources will be used for the same purpose as well.

Resource Base is the Way to Success

With regard to reserves, the Yuzhno-Russkoye oil and gas condensate field is the one of the Russia’s largest. Its total volume exceeds 1 billion cubic meters of gas and 40 million tons of oil.

The project is international, and the field is being developed by three shareholders: Russia’s Gazprom; German Wintershall, a 100-percent subsidiary of BASF; and E.ON Ruhrgas E&P, a 100-percent subsidiary of E.ON group of companies.

The Yuzhno-Russkoye field was discovered in 1969 by the Urengoi Oil and Gas Exploration Expedition. However, in Soviet period the field’s development was suspended. It started a new life in 2004 after Gazprom had defined the procedure to bring the field into operation using the project’s financing.

In 2006, works on the field infrastructure had been commenced and in October 2007, the actual gas production began. Also in 2007, the field officially went into operation and Gazprom’s CEOs stressed the field’s significance for Russia’s gas production. At the inauguration ceremony Gazprom’s BOD chairman Alexei Miller stated: “Start of the Yuzhno-Russkoye’s operation is the most important event in Gazprom’s business life in 2007. This is a striking example of implementation of the company’s consistent policy aimed at the increase of its production capacity and formation of reliable reserves to ensure stability and safety of gas supplies to both local and international markets.”

Today, the Yuzhno-Russkoye field has reached its estimated capacity in terms of production volumes. As of 2009, its annual gas production amounts to 25 billion cubic meters and this production level is not expected to decline in the next 10 years.

After the Nord Stream commissioning, Severneftegazprom’s responsibility with regard to maintaining the field’s production level increases given the company’s important role as the provider of a resource base for the gas pipeline.

Implementation of Innovations

The Yuzhno-Russkoye field was brought into operation and reached a commercial gas production level at the earliest possible date – in less than two years, given that the infrastructure had been built from scratch. One may say without exaggeration that innovative process solutions used for the project are the most advanced ones: to ensure gas production stability, for all stages of the project the state-of-the-art control systems with the latest generation hardware and software have been employed.

A complex gas treatment plant is the highly automated complex equipped with a modern Russian and foreign equipment combining modern precision technologies, automation and project solutions.

Control systems are equipped with special instrumentation, telemetry complex and software which enable to provide operative control of all processes, maintain optimal parameters of the equipment’s operation, instantly warn about problems, and prevent contingency and emergency.

Technical solutions employed at the Yuzhno-Russkoye field have to boost up productivity, efficiency and reliability of equipment as well as reduce additional expenses and negative impact on the environment.

The field’s booster station used to compress the formation gas employes four Ural gas compressor units, each equipped with electric drive gas blowers, magnetic levitation systems and dry gas seals. Severneftegazprom became the first one among Gazprom Group’s companies to employ such equipment. Innovative solutions are used in the systems which control operation of gas wells and of gas gathering line headers and also in the systems for gas dehydration and tank gas metering.

At the well they also constructed a captive power plant which is equipped with self-contained gas turbine units and which provides generation of total power and this power plant is also distinguished with a high operational reliability while having good thermal performance, environmental, technical and economic characteristics.

Nord Stream, the huge Russian-German gas pipeline project.....

High Technologies Overcome Difficulties

The main gas reserves (over 600 billion cubic meters) of the Yuzhno-Russkoye field are concentrated in the Cenomanian deposits which are considered to be normal in terms of their recoverability. Moreover, about 30 percent of total gas reserves occur in the Turonian gas reservoir. They are estimated as hard to recover reserves due to reservoirs’ low permeability, variability of their extension, small gas flow rate, low reservoir temperatures and abnormally high reservoir pressure. That is why, to efficiently develop the field, experience and technologies pertaining to development of hard-to-recover reserves are needed.

Severneftegazprom was the first in Russia to start development of Turonian gas deposits. Moreover, previously neither Russian nor Western companies attempted commercial development of such deposits in Western Siberia.

Development of Turonian deposits drilling straight holes is deemed inefficient and economically unsound. Given the above stated, the company’s experience in drilling a multilateral subhorizontal well is truly unique. The motherbore of the multibranch well has the system of well completion intended for separate operation of equipment at separate pipe strings. Such system of parallel tubing completion enables to perform the works on development and exploration separately in every well bore. Besides, this technology gives a separate access to the motherbore and to a branch hole of the well, thereby increasing the well’s productivity and the volume of produced gas.

Severneftegazprom invited the best Russian and Western specialists to work on the project: the well had been constructed under the project developed jointly with TymenNIIgiprogaz. Gazprom bureniye and Halliburton became the main drilling contractors.

In 2011, successful work resulted in drilling of the first multilateral well in Turonian reservoir. The well is currently in test production, and tests continue. However, they have already yielded good results: on May 12, 2011 the first Turonian gas was produced from the well. The well’s estimated production rate has been set at the level of 197,000 cubic meters per day. By the year-end, Severneftegazprom plans to connect it to the existing gas-collecting network of Senomanian wells.

Commercial gas production from the Yuzhno-Russkoye’s Turonian gas reservoir is expected to start after 2020. However, today the company is already laying down the foundation to ensure the long-term success.

Company Brief

Severneftegazprom is one of the largest gas producing companies in the RF. It is an international, Russian-German joint project in the gas production industry. As for the company’s shareholders, Gazprom is the main one (50 percent + six registered ordinary shares). The other two shareholders are BASF SE with 25 percent (three registered ordinary shares) + three privileged shares without the voting right, and E.ON AG, also with 25 percent (three registered ordinary shares) + three privileged shares without the voting right.

Severneftegazprom provides an example of efficient Russian-German cooperation, joining Western technologies and Russian experience pertaining to operation in severe climate.

In 2011 the company celebrated its 10th anniversary and showed outstanding performance specially mentioned by both shareholders’ and international industry’s representatives.

Stanislav Tsygankov, General Director, Severneftegazprom:
It is a great honour for our company and for me personally to participate in such a large-scale global project as Nord Stream. Any resources will be of no use without a developed transport infrastructure. Similarly, the infrastructure becomes useless without sufficient resources. That is why projects of this kind, where every link is important, may be considered integrated.

Currently, the Yuzhno-Russkoye field has reached the estimated gas production that ensures stable gas supply for the Nord Stream. The future may offer us many plans, projects and initiatives, and I am convinced that all of them will be implemented through the efficient teamwork, support of our shareholders and partners, as well as maintenance and improvement of our technological base....

Anisimov Sergey, Anna Forostenko
Nov 12, 2011

The Nord Stream offshore gas pipeline came into operation this week. Running along the bottom of the Baltic Sea, the pipeline will supply gas direct to European consumers.

Nord Stream runs from Portovaya Bay in Russia’s Vyborg to Greifswald in Mecklenburg-Vorpommern, Germany. The 1,224-kilometer pipeline consists of two parallel pipes and its capacity is 55 billion cubic meters a year. The pipeline will hit its intended capacity after the commissioning of the second line in 2012. For now, the second line is 70% ready. Nord Stream holds a particular significance given that the gas deficit in EU countries will reach 200 billion cubic meters by 2030.

President Medvedev has described the Nord Stream pipeline as important for European security.

"The launch of Nord Stream marks a significant step in relations between Russia, the EU, Germany and a number of other countries which participated in the project. In the long run, it will bolster security in Europe, including in the energy sector, particularly amid the current economic difficulties."

The pipeline brings economic benefits to 26 million households and is environmentally-friendly. It is subject to fewer duties and taxes and it doesn’t use compressor stations, which makes it possible to cut maintenance expenditures and reduce carbon emissions. Opponents of the project argued that Nord Stream carries environmental risks, a Russian energy expert Dmitry Lyutyagin recalls.

"Some EU countries expressed concern about the project’s failure to comply with a number of environmental requirements. At the same time, they claimed that the Nord Stream gas supply system would make Northern Europe dependent on Russian gas. They were concerned about energy security and the project's environmental risks."

The Nord Stream project underwent a thorough scrutiny for compliance with all international requirements: it runs along the Baltic sea bottom, bypassing munition dumps from the Second World War. Each line consists of more than 100,000 steel pipes, each weighing 24 tons. While the pipes’ diameter remains the same, the thickness of their walls varies depending on the operational pressure. Nord Stream guarantees safety at all levels, Director of National Energy Institute Sergei Pravosudov says.

"Nord Stream is currently the longest offshore gas pipeline in the world. It was built on the basis of advanced technology and guarantees maximum security."

From the outset, it became clear that such a sophisticated project would require the combined efforts from several countries in order to succeed. The Nord Stream AG consortium comprises Russia’s Gazprom, which has 51% of the shares, the German BASF SE/Wintershall Holding and E.ON Ruhrgas with 15.5% each, and the Dutch Gasunie and French GDF Suez, each having 9%. Each of the partners invested in the project according to their respective share in this enterprise. All in all, shareholders accounted for 30% of total investment in Nord Stream. The remaining 70% was raised by banks. The banks have found the project lucrative, Sergei Pravosudov says.

"The project will surely yield profit. Gazprom is supplying gas and companies in Europe are buying it. We have guarantees from both suppliers and buyers."

The banks that finance the project stake on its participants, Dmitry Chizhov, President of the Russian Gas Union, says.

"The banks that invested in Nord Stream did not study its feasibility report. Members of Nord Stream AG provided the guarantees. In the assessment of the banks, the project is lucrative for Russia, which supplies gas, and for buyers in Europe."

By linking Russia’s and Europe’s gas supply systems, Nord Stream will mark a new chapter in Russia-Europe partnership. Europe is fully aware that Nord Stream will give it access to Russian gas reserves in the north. For this reason, the project is exempt from the requirements of the discriminatory Third Energy Package. The Nord Stream project follows general economic laws to the letter: we offer the goods, you buy them. Why waste time?

Japanese Diplomat: The US is only committed to ensuring the free flow of Saudi oil to international markets....

“A Gas OPEC in the Making?”, click on the picture above or the link here, to discuss the Gas Exporting Countries’ Forum in Doha. Although the conversation was not focused on Iran per se, Flynt made some points that are relevant to thinking about the Islamic Republic’s strategic position and America’s Iran policy.

One of the many manifestations of internal incoherence in U.S. policy toward the Islamic Republic concerns energy: At a time of mounting concern about the adequacy of global oil and gas supplies in coming years (with all that portends for energy prices), Washington continues to insist that the world’s second-largest proven reserves of conventional crude oil (in Iran) and the world’s second-largest proven reserves of natural gas (also in Iran) should stay in the ground, for reasons that have nothing to do with the global energy balance.

–To reinforce the point, the United States forbids American energy companies from doing business in Iran. It also threatens third-country energy companies doing or contemplating doing business in Iran with so-called “secondary sanctions”—almost certainly illegal under the World Trade Organization, though no one has litigated the question yet—and various types of political pressure.

–Furthermore, American policymakers continue to insist that Iran’s massive hydrocarbon reserves should stay in the ground until they decide it is “OK” to monetize them—again, for reasons that have nothing to do with the global energy balance.

As the United States pursues this incoherent—or, as Flynt says on Inside Story, “schizophrenic”—approach, it also continues to insist that it is providing the world with the vital public good of energy security. More specifically, U.S. officials in multiple administrations, Republican and Democratic (including the Obama Administration), have claimed that America’s commitment to ensuring the physical security of hydrocarbon exports from the Persian Gulf—a commitment enshrined in the 1980s Carter Doctrine—is something from which everyone benefits. This includes not just traditional U.S. allies in Europe and Asia, but also major energy-exporting countries and rising powers like China.

However, if one considers some of America’s more provocative strategic initiatives in recent years, such as the 2003 invasion of Iraq, it is hard to avoid the conclusion that, notwithstanding these declaratory commitments, Washington often acts in ways that, in fact, limit the flow of Persian Gulf hydrocarbons to international oil and gas markets. (Behind closed doors, this assessment seems to be shared by critical clusters of people in the Middle East and China.) American sanctions policy toward Iran very much follows this pattern. If the United States moved to sanction the Central Bank of Iran, as part of an effort to impose an effective embargo on Iranian oil exports, the genuineness of Washington’s commitment to the free flow of Persian Gulf hydrocarbons as a global public good would be called into even more serious question, see here.

As a senior Japanese diplomat put it to us recently, the United States is really only committed to ensuring the free flow of Saudi oil to international markets. This suggests that America is only interested in providing the “public good” of energy security in ways that fit with its hegemonic ambitions in the Middle East. In the end, just how much of a public good is that?

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