Home > Energy > Struggles in Arctic: Risk is the Price

Struggles in Arctic: Risk is the Price

Development plans for the Shtokman natural gas field were put on hold this last summer as agreements expired between Gazprom, Statoil, and Total. The Shtokman Development AG, the corporation formed by these 3 players to explore the field, had a 5 year charter that expired in July with no further plans for cooperation.  During the most open Arctic sea ice season in history, the challenges posed by Arctic ocean drilling remain daunting and are still prohibitory.  The Development AG was created to share the risk of Arctic operations among the 3 participants. Not only are the costs of operations, risks, and precautions extraordinary in the Arctic, but the unimaginable cost of cleanup of an accident in this harsh, remote, offshore environment remains staggering and damning.

The Shtokman natural gas field has been a viewed as one of the most feasible gems in Arctic Hydrocarbon exploration. Several factors make this play so enticing, including it’s promising reserves, but more importantly its location.  Located in the Barents Sea approximately 600km north of Murmansk, RU, the Shtokman Field is relatively close to the largest city in the Arctic. This means it has (relatively) easy access to the drilling infrastructure and equipment. It also means that in the case of an emergency, rescue and spill response teams  will be better able to assist in support and clean up. Location is also a crucial factor in that it is located near some of the warmest (again relatively) waters within the Arctic Ocean.  This corner of the Arctic is home to the 10 biggest cities in the Arctic because of the warm waters brought to this area at the tail end of Gulf Stream which keeps waters warm and ice-free.

While exploration of this play will certainly continue, this breakdown in cooperation shows hesitation in response to the great uncertainty present in this last frontier.  Risk is inherent in Arctic operations. A unquantifiable risk poses a difficult question of when to proceed in increasingly difficult plays, especially in the recent volatile global natural gas market.

Categories: Energy Tags: ,
  1. 9 February 2013 at 10:53 pm

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    I hope you keep authoring and I am going to keep on viewing!
    Thanks -Brandi

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