Arctic Economics

Russian oil tankers bump into each other on the Northeast Passage

Two Russian oil tankers transiting the Northeast Passage evidently collided on the night of July 16 near the New Siberian Islands.  No one was hurt, and none of the diesel fuel they carried was spilled: Collision was ’just a situation’.

For more background, see (a) Arctic oil tankers collided and (b) Oil tankers through Northeast Passage.

The Arctic's evitable gas industry

There's a lot of natural gas in the Arctic: maybe 30% of the world's undiscovered natural gas resources.  But the value of those resources, and the likelihood of development, depends on the availability of substitutes. 

Unfortunately for Arctic jurisdictions hoping to cash in on their resources, there's been a big increase in the availability of substitutes recently.  The Economist has an overview this week: Natural gas, An unconventional glut.  

What happened to the price of oil last year?

Oil price movements in 2007-08 were memorable:

 

Source: Hamilton.

What happened?  James Hamilton of UC San Diego (and Econbrowser) takes a stab at an explanation.  Here's the short version ( in two parts from Econbrowser): Causes of the Oil Shock of 2007-08 and Consequences of the Oil Shock of 2007-08.  Here's the long version (from the Brookings Institution) - Causes and Consequences of the Oil Shock of 2007-09.

Snoehvit's Shaky Start

 

Snoehvit gas field and the pipeline to the LNG plant near Hammerfest.  Source: StatoilHydro.

Guy Chazan reports (Norwegian Oil Firm Goes to Energy’s Last Frontier) that StatoilHydro's Snoehvit project was ambitious. Remote-controlled gas wells at the bottom of the Barents Sea; 90 miles of underwater pipeline bringing the gas to shore; a liquification plant built in Spain, floated to a remote island in northern Norway on the world's "largest heavy-lift vessel," and floated into position on "a high tide" and "a full moon."

But things haven't gone as well as they might:

Does NATO have a role in the Arctic? What is it?

In late December, NATO's Secretary General, Jaap de Hoop Scheffer, gave a keynote address at a Reykjavik seminar on "Security Prospects in the High North."   Does NATO have a role in the Arctic.  He thinks so:

Sometimes you have to choose

Source: BarentsObserver.com

Gazprom may not have enough money to develop both the gas resources of the Shtokman Field in the Barents Sea (in the upper left of the figure) and the resources of the Bovanenkovo Field on the Yamal Peninsula (upper right).  If it has to choose, it may postpone Shtokman development: Shtokman, Yamal, or both?:

Gazprom is a champion on the laying of pipelines and developing land-based fields, but has little experience from developing huge offshore fields. That might make the company choose Yamal as priority number one.

Gazprom is reportedly already well underway with the development of the biggest of the fields in Yamal, the Bovanenkovo field. Thanks to this field alone, Gazprom will according to plans be able to increase annual gas production with 115 billion cubic meters. When the whole peninsula is developed, regional gas production will boost to a projected 250 billion cubic meters....

While the development of the Bovanenkovo field is progressing, no actual construction works have yet started in the Shtokman project. There are still no signs of the planned railway line, roads and other infrastructure. The project final investment decision is to be taken in fall 2009.

North Slope gas hydrates

The U.S. Geological Survey estimates that about 85 trillion cubic feet (TCF) of natural gas could be extracted from North Slope gas hydrates: Assessment of Gas Hydrate Resources on the North Slope, Alaska, 2008.  The USGS gas hydrates web page is here: Gas Hydrates.

The USGS describes gas hydrates as,

Gazprom explores Alaska

Senior Gazprom executives met with State of Alaska and energy company executives earlier this week.  They were interested in local business opportunities, including potential participation in one of the projects to build a gas pipeline from the North Slope tthrough Canada to the Lower-48.  Wesley Loy reports for the Anchorage Daily News: Russian Gas Conglomerate Visits Alaska.

ConocoPhillips in Russia

 

Polar Lights operation.  Source: ConocoPhillips.

Houston based ConocoPhillips is deeply involved in Russian oil and gas projects and has been for a while: ConocoPhillips Russia. 

Will the financial crisis slow development of the Shtokman gas field?

Location of the large Shtokman gas field in the Barents Sea (Gazprom map)

From the Barents Observer: Shtokman in jeopardy?

The rapidly unfolding world financial crisis could have wide-reaching consequences for a number of giant regional industrial projects. One of them is the Shtokman field in the Barents Sea.

Several major industrial projects are under planning in the Barents Region. Now, the financial crisis and falling raw material prices could result in the postponement of several of them. As BarentsObsever recently reported, leader of the Shtokman Devlopment Company, Yuri Komarov already last month expressed concern about possible Shtokman consequences from the world financial crisis. The situation looks far more gloomy today. Gazprom is heavily dependent on loans and credits for the development of new projects. Now, the credit market is drying out, and new major loans for Gazprom might be put on hold.