Analysis
Guest post
License: All rights reserved. Credit: Greenpeace

Arctic drilling: A question of trial and error? Part 1

Energydesk
License: All rights reserved. Credit: Denis Sinyakov / Greenpeace

A week-long industry conference on Arctic drilling operations recently kicked off in Oslo, to identify the technological, economic and environmental challenges to drilling in the Arctic and where possible, present solutions to deal with them.

The overall picture painted was one of caution: the industry is not ready yet.

An almost total lack of infrastructure in the Arctic to aid exploration and development was not the least of the several challenges listed over the five days. Even in relatively well-developed regions like the Norwegian Barents Sea, there are insufficient rescue hubs and problems with dealing with the odd iceberg.

Move this into Baffin Bay, Disko Bay, the Chukchi, Pechora or Kara Seas - areas that are dominated by huge icebergs or ice cover for several months of the year - and these logistical problems increase manifold.

Ice management

A day-long seminar was focused on ice management alone; a huge issue in Arctic operations.

Several (at least four) ice guard vessels are recommended for ice management to be effective, a requirement that companies do not meet in most cases of drilling in the Arctic so far.

Smaller icebergs, or growlers, can sometimes only be detected a couple of miles, or fewer, out.

If the oil major has not employed the required number of vessels to deal with towing a piece of ice away, or if it simply proves too difficult to move, the call has to be made on the rig for the whole operation to be shut down, for the well to be disconnected, and for the rig to be moved away.

One provider of ice management services said: ‘’Everytime this disconnect is made, some equipment has to be abandoned and simply falls to the sea floor. The cost of returning to pick up this equipment adds substantially to the costs of putting in place the ice management plan.

"It requires a ‘combat mentality’ where you need to get to and dispose of the icebergs before they get to you.’’

Shortage of rigs and icebreakers

The shortage of drilling rigs was cited as another major problem, with even fewer existing rigs adapted to drill below - 40 degrees C.

A representative from Rystad Energy illustrated this: ‘’There are currently only three rigs active on the East Coast of the Canadian Arctic; this would need to increase to 45 rigs to meet the production demand. In the southern Kara Sea only three to four months are ice free and this will pose big challenges too.’’

The director of the Russian consulting company GECON said: ‘’Drilling rig services will be the most important market for Russian oil. Five fields in the Pechora Sea are currently being developed. Gazprom has approved several Arctic license blocks and two hours ago a contract was signed between Petrovietnam and Rosneft for eight blocks in the Pechora Sea.’’

A shortage of icebreakers for ice management is also a major issue in the Russian Arctic. One speaker said that Russians also have to make decisions on prioritising the existing ice breakers between drilling fields and the Northern Sea Route, which would make them available to either one or the other, as the distances involved are significant.

The director general of the National Energy Authority for Iceland presented on the country as a new energy frontier, but a complete lack of oil infrastructure was cited as a problem.

‘’In terms of infrastructure in Iceland, it is up to the companies as to how much they develop it. They can operate with a base out of Aberdeen if they choose. HSE resources are very limited but we aim to follow the Norwegian model on this.’’

Higher costs

Costs were touched upon: the cost of drilling in the Arctic were put at at least 20% higher than other, warmer regions. But this was acknowledged by many in the room to be far from the real, substantially higher figure.

Drilling rigs designed for the Arctic cost significantly more, as do measures for emergency response, ice management, limited drilling windows and the additional energy required for heating. It is more challenging and costly to get drilling permits in the High North because of a lack of collaboration among operators.

A speaker from industry consultants ECON Oil and Gas said, ‘’More collaboration can significantly reduce costs. On Sakhalin, not counting infrastructure, costs were 30% higher. Joint drilling campaigns involving several operators can lead to larger economies of scale. Sharing extra drilling rigs and using tested technology under operational environment is crucial for avoiding cost overruns.’’

This lack of collaboration could be a major issue, and not just for cost-cutting reasons. In the case of an emergency, collaboration among players would make for much quicker response time to accidents and use of shared rigs or equipment could save lives or help to mitigate environmental damage. 

According to a conversation with one major player in the Chukchi Sea however, this kind of collaboration seems unlikely, because of the profit motive. In spite of the logistical problems, oil majors are often not willing to invest in developing new ports or investing in extra ice management or oil spill response vessels until they make a significant discovery that makes the investment ‘worth it’.

Leaking wells

Old wells drilled in Arctic regions in the past have also been faced with massive issues because of the cold temperatures. Sintef, a leading Petroleum research institute, made a presentation at the conference highlighting the fact that 38% of a 193 temporarily abandoned wells studied on the Norwegian Continental Shelf alone were found to have leaks.

This can be related to similar issues with leaking wells onshore in the Alaskan and Canadian Arctic. This puts increased pressure on companies and regulators to invest in addressing these issues at an early stage, and to ensure continued monitoring and maintenance of old wells, all of which would also add substantially to costs.

According to a scientist from industrial research organisation Sintef: ‘’No one really knows how many wells already drilled in the Arctic might be leaking today.’’

Guest posts do not represent the editorial views of Greenpeace or Energydesk.

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