Melting sea ice is creating a path to more drilling in the Arctic, and operators are stepping in but treading cautiously. As some companies unveil Arctic exploration, development, and production plans, other companies and organizations are beefing up technology with goals of successfully and safely extracting hydrocarbons in one of the world’s most fragile environments.

The prize could be a share of the 90 Bbbl of crude oil and the 50 Tcm (1,669 Tcf) of natural gas the US Geological Survey believes remains undiscovered in the region. In terms of oil, Arctic Alaska has the most to offer, with technically recoverable conventional resources at an estimated 30 Bbbl, while the West Siberian basin – among the largest basins in the world at more than 2.2 million sq km (849,000 sq miles) – could hold an estimated 20 Tcm (652 Tcf) of natural gas.

Additionally, unconventional potential exists in the Arctic. Researchers in places that include Alaska’s North Slope and Japan are chipping away at how to safely unlock hydrocarbons from gas hydrates, which are abundant in the Arctic. Data from the US Energy Information Administration (EIA) show that .03 cm (1 cf) of gas hydrate releases 4.6 cm (164 cf) of natural gas. But the amount of energy resources that could result varies considering the wide-ranging estimates of hydrate resources – 300 Tcm (10,000 Tcf) to more than 3,000 Tcm (100,000 Tcf) of natural gas.

Climate change has given operators more opportunities to drill, especially during the summer months when sea ice has decreased as much as 30% in some places.

Figures from the National Snow and Ice Data Center show the Arctic sea ice extent continued its retreat in December 2013, only extending 12.38 million sq km (4.78 million sq miles). The figure was 700,000 sq km (270,300 sq miles) short of the 1981 to 2010 average – the fourth lowest for December. Areas seeing drops included the Barents Sea, the Bering Sea, and the Sea of Okhotsk, while the Greenland Sea and Baffin Bay saw near-average ice extent.

“I think the perception is that less ice is more of an opportunity than an obstacle, but that is not always the case,” said Per Olav Moslet, arctic technology program director for Norway-based DNV GL. “Even though it might be easier to have seasonal drilling operations during the summer, during the field development phase you still will encounter quite severe ice conditions during the winter.”

Harsh conditions remain

Conditions vary by location, Moslet said, so “in the Arctic it is very important to understand the local conditions.

“Even though there are trends across the Arctic, in order to operate you need to understand the actual conditions at that site,” he said. “Many are not aware that it is the extent of the sea ice during summer that has receded in the past decades, while the winter ice has not been reduced to the same extent. This has also led in some places to a more dynamic ice regime.”

DNV GL has undertaken several Arctic-focused projects, including predicting and mitigating marine icing on offshore arctic vessels and structures. Moslet explained that the project was motivated by increased traffic and activity of oil and gas exploration drilling “driven by the great paradox of climate change and the rising temperatures in the Arctic.” This is especially true offshore Norway and the northern coast of Siberia, he said.

The problem of marine icing, however, has existed for a long time. For example, smaller fishing boats have been surprised by low pressures called “polar lows” that have caused substantial ice accumulations that have capsized vessels, Moslet said. For the oil and gas industry, he said, “it’s more of the operability of the drilling vessels with respect to getting access to life-saving equipment such as lifeboats, and it means that you need to be enclosed in workable areas.

“It is typical to have enclosed topsides so there are workable conditions,” he said. “For the planned production platforms, an additional challenge has been to ensure that you have sufficient ventilation in the process plants so you don’t get increased gas entrapments and as a consequence have higher explosion risk.”

As part of the project, which began in 2009 and concluded in December 2013, researchers conducted campaigns offshore Norway on vessels to better understand sea spray generation and how sea spray carries through the air before it hits the structure.

The most important result of the project was the creation of a marine icing computational model developed in cooperation with a Norwegian university.

“This [model allows] us to do specific analyses to quantify how much marine icing you can anticipate,” Moslet said. “That enables the rig or vessel designer to do modifications so that you can at least ensure there is no icing on [for example] life safety equipment such as communication aids needed in case of emergency, lifeboats, or doors and hatches.”

But more work and studies are needed as companies face a myriad of challenges in the Arctic. Three of the top obstacles in Moslet’s opinion are the lack of qualified competence across organizations; the lack of personnel evacuation means, especially lifeboat capabilities; and the lack of response measures to oil spills in ice. In the meantime, companies push plans forward.

Production begins

Gazprom, which reached a milestone in December 2013 when production started in the Prirazlomnoye oil field, pointed out some of the safety features of the company’s arctic platform, the Prirazlomnaya, located over the Pechora Sea shelf. Production commenced despite protests from Greenpeace, which has voiced safety and environmental concerns about arctic drilling.

“The Prirazlomnaya offshore ice-resistant stationary platform secures every process operation in the field – drilling for oil, its production and storage, end product processing, and offloading,” Gazprom said in a press release. “It is the first time in the world that hydrocarbons in the Arctic shelf will be produced by a stationary platform. A high-strength deflector secures the platform from wave and ice exposure.”

Other platform features include wellheads positioned inside the platform, which Gazprom said buffers the well from the sea; a 3-m (10-ft) high concrete wall covering oil stored in the caisson; and a zero-discharge system that pumps drilling and production waste into special absorption wells or tanks destined for the shore for disposal. The company also plans to use a wet method for oil storage, which aims to eliminate “the possibility of oxygen getting inside the tanks and thus prevents the creation of an explosive environment.”

The Prirazlomnoye oil field has recoverable oil reserves of nearly 479 MMbbl, and Gazprom plans to produce at least 2 MMbbl of oil annually. The company anticipates making its first oil shipment this quarter.

“Last year we conquered Yamal, having created an unparalleled-in-the-world new onshore gas production center in the Arctic,” said Alexey Miller, deputy chairman of Gazprom’s board of directors. “Today we have pioneered the Russian Arctic shelf development. There is no doubt that Gazprom will continue advancing in the Arctic.”

But challenges remain in the region. The EIA has pointed out that near-term obstacles include transportation infrastructure constraints in the Yamal Peninsula/ Arctic Circle – something Russian authorities hope to alleviate with construction of the Purpe-Samotlor and Zapolyarye-Purpe pipelines. Also, there is still the issue of whether methods and procedures put in place to prevent spills or accidents will work as planned should they be needed.

Reducing risks

Statoil, which is no stranger to drilling in arctic conditions, is planning to use vertical christmas trees in a field north of the Barents Sea to reduce wellhead fatigue. Geir Tungesvik, the company’s senior vice president of drilling and well technologies, spoke about Statoil’s new strategy for subsea trees during a 2013 media briefing in Houston.

With horizontal trees, the BOP is installed on top, Tungesvik said, adding that in deeper water there is more movement and more stress on the well itself.

“It’s been a big issue,” he said, adding that there is less pressure on the wellhead when vertical christmas trees are used. “We reduce the risk of getting damages to the well. We have now gone out in the market and asked for standardization. We have increased the size so it can fit all fields.”

In 2014, Statoil plans to continue its arctic drilling campaign with five to seven new wells in the Barents Sea. The company will test the potential in the Hoop area and continue exploration drilling around the Johan Castberg discoveries (Skrugard and Havis). During 2Q 2014 and 3Q 2014, Statoil said it will drill the Atlantis and Apollo prospects in PL615, approximately 50 km (31 miles) north of PL537.

“There is a new licensing round coming up, and we probably will apply – and hopefully get –something there as well,” Tungesvik said. “We see that we need to be present in the Arctic [Norway] and make discoveries even farther north. We have a strong position. We have drilled, I think, more than 90 wells, so we really have the knowledge to operate.”

Finding solutions

Statoil also is on a mission to build a complete subsea factory by 2020, and the company known for its deep-water prowess and technological expertise is making this goal a top priority. Generating more than half of its production subsea, Statoil has more than 500 subsea wells, said Margareth Ovrom, executive vice president of technology, projects, and drilling. “Why is subsea very important?” she asked. “First of all, future oil and gas reserves. They are farther from land, in deeper water, and in colder and harsher environments.

“Subsea is perfect,” she said. “It is environmentally friendly, and you get higher energy efficiency. It’s good for the fisheries, it’s profitable, and it’s a very good measure to increase recovery. This is one of our business-critical technologies, which is top priority. Our slogan is longer, deeper, and colder.” Having a full-fledged processing facility on the seafloor will be important not only in the Arctic but also other regions. The subsea factory menu includes several types of factories based on short-term, medium-term, and long-term needs. Each factory has a unique set of potential applications and associated key technology elements to increase recovery and maintain production. Applications for the arctic factory/subsea-to-gas market include improving the process of oil storage and offloading in the Arctic.

“This is our ambition,” Ovrom said of the subsea factory concept. “It will open up many areas that we can’t operate in today. It will increase recovery. It will increase energy efficiency. It will enable marginal field development. We will, as we have been doing in the past, have a stepwise approach. It is challenging, but I think we have proven that we have delivered so far.”

Moving forward

ExxonMobil Corp. and Rosneft are also set to begin on their first Arctic well in 2014 in the Kara Sea. Plans are to have fully winterized rigs and ice-defense systems with multiple advanced icebreaker vessels and an extensive ice detection system.

Last summer Rosneft completed extensive fieldwork concerning the Kara Sea, working in partnership with the Arctic and Antarctic Research Institute. The expedition included collecting metocean data such as wave, currents, and sea level fluctuations for exploratory drilling in the Vostochno-Prinovozemelsky-1 license block; collecting ice data for conceptual design of year-round oil and gas production facilities; and improving the quality of Kara Sea weather forecasts.

The first well by ExxonMobil and Rosneft will target a geological structure that potentially holds 9.4 Bbbl, according to a Bloomberg report.

In addition to Norway’s Barents Sea and Russia’s Kara Sea, other areas that could see drilling action include offshore Greenland, which awarded blocks in December 2012. JX Nippon Oil & Gas Exploraton Corp. was among the companies that won offshore exploration licenses in this area.

Working with Shell and Chevron, as operator JX Nippon said the 2013/45 and 2013/46 licenses are in the Kanumas Area, “a frontier area where no well has been drilled for oil and gas exploration and [where] many E&P companies expect major oil and gas discoveries.”

Statoil and its partners Conoco-Phillips and Nunaoil also were awarded a block during the East Greenland license round. But Russia could be the site where most of the action takes place. Investments related to Russian Arctic development are estimated to reach US $100 billion over the life of the projects, Barclays said in its Global 2014 E&P Spending Outlook.

“While all eyes will be on Rosneft and Exxon’s arctic program, we note that there is an expected backlog of over 90 offshore Russian Arctic wells to be drilling by 2020,” Barclays said. “As a result, we expect meaningful exploration to move forward in the Russian Arctic regardless of this summer’s results due to the strategic nature of the reserves for Russia.”

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