The high north the natural resources the northeast passage


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The high north the natural resources the northeast passage

  1. 1. The High North The Natural Resources The Northeast Passage Jan Magne Markussen Managing Director, Senior Research Fellow Ocean Futures, OsloNorwegian Business Delegation to The Republic of Korea Seoul 15 May 2012
  2. 2. Part 1: IntroductionOcean Futures, Oslo © 2012. All rights reserved
  3. 3. Natural Resources – Oil and gasPossibilities – 22% of the Undiscovered petroleum resources in the High North – New Border with Russia in the Barents Sea – New Petroleum Province in the Barents Sea due to recent, major petroleum discoveries – 5 May 2012: Agreement between Rosneft and StatoilUncertainties – The remaining 78% – Shale gas – Cost
  4. 4. Northeast PassagePossibilities – Strong Increase in the Number of Sailings – Increased Sailing Season – Improved Ice Conditions – Significantly Bigger Ships – Increased International interestUncertanties – Commercial TEST sailingsMajor Shipping Focus in the High North – Destinational Shipping – Intra Arctic Shipping
  5. 5. EnvironmentMajor Paradox – Global Climate Change has created the opportunitiesNecessary Focus on the Environment – We are witnessing the fastest and biggest changes in the Climate in the High North – Resources explotation and transit sailings must be done in an environmentally sustainable way
  6. 6. Part 2: Ocean FuturesOcean Futures is co-located with the FAFO research center in Oslo
  7. 7. Ocean Futures Competence• Independent, multidisciplinary research institute• Polar regions, oceans and seabed• International projects• Holistic approach• Cooperation with foreign and Norwegian research communities - and with representatives of industry and shipping.
  8. 8. Ocean Futures Projects (High North Projects 2012-2011)• November 2012: The Shipping in Arctic Waters- report will be published as book on Springer Verlag• September 2012: Circumpolar Maps• May 2012: Planning Document for “The First International Narvik Conference on Arctic Ports”, to be Organized 9-11 April 2013
  9. 9. • April 2012: The Fishing Fleets Future Framework Conditions• May 2011: Arctic Wiki• April 2011: Arctic Shipping – The Effects for Northern Norway
  10. 10. • April 2011: Arctic Shipping – Status and Research Gaps• March 2011: Natural Resources in the High North• March 2011: Safety at Sea in Northern, Ice- Covered Waters
  11. 11. New Ocean Futures High North Programmefrom October 2012 Focusing on:• Natural Resources• Trade Flows• Ports• Shipping• Logistics• Environment• Safety at Sea• Industrial Development
  12. 12. Ocean Futures organisational CV• The org CV is available by contacting (temporary address)• Ocean Futures new web site will be available July 2012
  13. 13. Part 3: Northeast PassageDanish vessel Nordic Barents sailing through the Northeast Passage Oct 2010
  14. 14. Part 3 ASome Introductory Remarks
  15. 15. Research on Arctic Shipping1. The International Northern Sea Route Programme (INSROP) was a six- year (1993-1999) international research programme (Russia, Japan and Norway) that produced 167 working papers, and several articles, reports and books.2. Arctic Marine Shipping Assessment (AMSA) report (2009), Arctic Council.3. Ocean Futures completed in May 2010 a multi-disciplinary 339-pages study, Shipping in Arctic Waters, to be published by the Springer publishing house in November 2012. The study compares the Northeast, Northwest, and Trans Polar Passages, and includes natural resources, infrastructure, geopolitics, legal issues and environmental aspects. Initiated by Ocean Futures, commissioned by CHNL, financed by Innovation Norway, CHNL and Ocean Futures.
  16. 16. Northeast Passage• Northeast Passage (NEP): connects the Atlantic Ocean and the Pacific Ocean on the northern coast of Eurasia, from Murmansk to the Bering Strait.• Northern Sea Route (NSR): The main stretch is known by its Russian name, the Northern Sea Route.• The difference between NEP and NSR is that the former consists of NSR in addition to the Barents Sea.
  17. 17. Displaying two shipping routes. The NortheastPassage (red) compared to the Suez Canal route (yellow)Source: PAME 2006
  18. 18. Types of Shipping• Intra-Arctic shipping is shipping between destinations within the Arctic Ocean, for example between Dudinka and Murmansk.• Destination-Arctic shipping is shipping from the Arctic to destinations outside the region, for example between Murmansk and Rotterdam.• Transit-Arctic shipping is transit sailings between ports in the Pacific and the Atlantic Oceans via the Arctic Ocean, for example sailings from ports in Japan to ports in Germany, via the NEP.
  19. 19. Ice Conditions in the Arctic• The extent of the Arctic sea ice was at its second lowest in the satellite record, on 9 September 2011.• The minimum extent was only slightly above 2007, the record low year, even though weather conditions this year were not as conducive to ice loss as in 2007.• Northeast Passage had a record long sailing season in 2011, spanning from 29 June to November 18 (Barents Observer, accessed 20 December).• The Northwest Passage was open for a period during September.
  20. 20. Sea ice extent in the ArcticSeptember 18 2011.Source:National Snow and Ice DataCenter, Boulder, CO
  21. 21. Part 3 B Northeast PassageStatus and Prospects
  22. 22. Northeast Passage Sailings Some Transit-/Destination Sailings Summer Seasons 2009 og 2010Owner Ship Dwt Destinations Cargo Comments (Date)Beluga Shipping MV Foresight 12 000 Ulsan (21.08.09) - Components to First foreign ship inGroup Novy Port (07.09.09) power plant transit through the MV Fraternity 12 000 - Northeast Passage (NEP) Murmansk-Beluga Shipping MV Houston 12 000 Norrkoping - Components to DestinationalGroup Novy Port (26.07.10) power plant shipping, where MV Fortitude 20 000 parts of the NEP are usedMurmansk Shipping Indiga 16 000 Murmansk Diesel fuel Startet the transitCompany Varzuga 16 000 (14.07.10) - Pevek season 2010 (22.07.10)Sovcomflot SCF Baltica 100 000 Murmansk Gas condensate The biggest gas (14.08.10) - Pevek transport in transit through NEP in 2010 (25.08.10) - season Ningbo (Kina) (06.09.10)Nordic Bulk Carriers MV Nordic Barents 41 000 Kirkenes (04.09.10) Iron ore First foreign bulk - concentrate ship in transit Kina (30.09.10) through NEPNorilsk Nikkel Monchegorsk 18 000 Murmansk Metal concentrate First ship without ice (15.09.10) - Dudinka breaking assistance - in transit through NEP Shanghai (17.10.10)Russian state owned Georg Ots 12 600 Murmansk Passenger ship First passenger ship (09.09.10) - Anadyr in transit through (26.09.10) - NEP Petropavlovsk - Vladivostok (10.10.10)Source: Ocean Futures 2011
  23. 23. Northeast Passage Sailings Cont. Some Transit-/Destination Sailings Summer Seasons 2011Cont.
  24. 24. Some Transit-/Destination Sailings Summer Seasons 2011 Cont. Sources: Ocean Futures 2012 and CHNL 2012
  25. 25. Volume of transit-Arctic shipping cargoes transported on the Northeast Passage in 2011Volume of transit cargoes transported on the Northeast Passage in 2011Cargo Volume ton VoyagesGas condensate 600 607 9Kerosene 64 500 1Diesel fuel 21 409 5Iron-ore concentrate 109 950 3Fish 27 535 4General cargo 10 930 4Total 834 931 26 Source: CHNL’s High North Logistics Information Office
  26. 26. Part 3 C Northeast PassageSome Additional Comments
  27. 27. Developments Last Year Within Transit Sailings• The number of transit sailings have increased considerably (32/34 in 2011)• The ships are becoming increasingly bigger – cf the 162.000 Capesize “Vladimir Tikhonov”• Different types of raw materials are still being transported• Ice conditions have been extremely good last two seasons• The sailing season has increased due to the ice conditions• Russian sailings versus Western and Asian sailings• We are still talking about commercial test sailings• Test sailings without ice breaker support cause environmental challenges – how safe is this?
  28. 28. Part 4: Natural ResourcesMelkøya, Finnmark Foto: Allan Klo.
  29. 29. Why Are Northern and Arctic Areas Attracting so Much Interest?1. Resources, especially oil and gas - plentiful2. Climate change and global warming – easier access3. The new boundary line in the Barents Sea between Norway and Russia4. Military-strategic issues - less prominent5. Increasing interest in northern and Arctic affairs on the part of non-Arctic states
  30. 30. The New Boundary Line in the Barents Sea© Ocean Futures 2012. All rights reserved.
  31. 31. Petroleum Exploitation in the Norwegian Part of the Barents Sea• In 2007, Norwegian LNG plant in Melkøya in the Barents Sea started to produce and ship liquefied gas from Snøhvit field for export.• The oil field Goliat is expected to start producing in 2013, but it is still uncertain how much it will produce and thus how much will be transported at sea.
  32. 32. • Two more discoveries in April and August 2011: – Skrugard, a large oil field and Norvarg, a significant gas field in the Barents Sea, respectively.• In January 2012, Statoil announced that they had found another oil field, Havis, only 7 kilometers Southwest of Skrugard.
  33. 33. • Combined, Skrugard and Havis are the 16th largest discovery on the Norwegian continental shelf all- together and the volume lies in the range of 400-600 million barrels of recoverable oil equivalents ( and, 9 January 2012, ).• Havis is the second most significant oil discovery in the Barents Sea in nine months. It has approximately the same volumes and reservoir properties as that of its twin Skrugard.• With these two significant findings, a new petroleum province opens in the Norwegian part of the Barents Sea.
  34. 34. Share of World Reserves of Oil and Gas 2010Country Oil (bbs) % World Gas (tcm) % World___________________________________________________________________United States 30.9 2.2 7.7 4.1Canada 32.1 2.3 1.7 0.9Russia 77.4 5.6 44.8 23.9Norway 6.7 0.5 2.0 1.1Arctic states 147.1 10.6 56.2 30.0totalWorld total 1383.2 100.0 187.1 100.0 Source: BP Statistical Review of World Energy June 2011
  35. 35. Arctic Areas Share of Oil and Gas Reserves of Arctic States in 2007 At end 2007 Arctic share At end 2007 Arctic share billion total tcm total barrels Oil reserves Oil Natural Gas reserves Natural GasUnited States 4.2 20.0 % 0.18 3%Canada 2.0 0.1 % 0.16 10 %Russia 59.2 75.0 % 38.07 90 %Norway 0.2 2.0 % 0.21 7%Arctic total 65.6 5.3 % 38.41 22 % Source: BP Statistical Review World Energy June 2008 and Arctic Oil and Gas 2007
  36. 36. Arctic Proven Reserves of Oil and Gas• Oil: 5.3% of world reserves• Gas: 22.0% of world reservesArctic Production of Oil and Gas• Oil: 10.0% of world production• Gas: 25.0% of world production of whichRussia produces 80% of the oil and 99% of the gas
  37. 37. Oil and Gas in the Barents Sea© Ocean Futures 2012. All rights reserved.
  38. 38. Arctic Undiscovered Oil and Gas US Geological Services estimated in 2008 that 22 % of world undiscovered O&G (o.e.) are to be found in the Arctic - 13% of undiscovered oil - 30% of undiscovered natural gas - 20% undiscovered NGL (Arctic defined as all land and sea territory north of the Arctic Circle)
  39. 39. In the Arctic, but where? ProvincesMMBO Million barrels ofOil Oil Provinces (Mil Natural Gas Billion cubic feet oil Provincesbarrels Oil) Arctic Alaska 29.960.94 West Siberian Basin 651,498.56 •Natural Gas Amerasia Basin East Greenland Rift 9,723.58 East Barents Basin 317,557.97 Basin 8,902.13 Arctic Alaska 221,397.60MMBO (Million barrels Oil) East Barents Basin 7,406.49 •Natural Gas Provinces West Greenland- East Canada 7,274.40 Sub total (70.3%) 63,267.54 Sub total (71.3%) 1,190,454.10•vinces Total Arctic 89,983.21 Total Arctic 1,668,657.84 •MMBO (Million barrels Oil) •Natural Gas Provinces•SSSOurceSourceBCFG (Billion CF
  40. 40. Source: US Geological Survey
  41. 41. Will the 22% undiscovered Arcticpetroleum resources be found and recovered? Probably yes
  42. 42. BUTLet’s not forget the other 78% of the world’s undiscovered oil and gas! Where are they?
  43. 43. In areas of the world that are climatically friendlier and much less costly to develop. Some Examples1. Four West African geological provinces from Senegal in the northwest, almost uninterrupted to Namibia in the south. OIL – 72 billion barrels. GAS – 187 trillion cubic feet. NGL – 11 billion barrels.2. 22 geological provinces in Southeast Asia. OIL – 22 billion. GAS – 299 trillion cubic feet.3. Geological provinces in the eastern Mediterranian and Egypt. OIL – 3,5 billion barrels. GAS – 345 trillion Cubic feet.Source: EIA, US Dept of Energy
  44. 44. CostsEstimates suggest that costs of developing onshore gas projects in Alaska can be 50-100% more than similar projects in Texas. Estimates of cost of offshore exploration anddevelopment in the Arctic vary from twice to four times or more as financially demanding as elsewhere.
  45. 45. To be profitable Arctic oil and gas activities aredependent on high prices and strong demand, or, put differently, weak or insufficient supply from other sources.This is precisely the «condition» that does not obtain today as far as Arctic offshore gas is concerned. The main reason: US Shale Gas
  46. 46. Potential Shale Gas Producers (onshore) (Select countries)• UK 200 trillion cubic feet• Poland 187 - « -• France 180 - « -• Norway (existing offshore• gas reserves 72) 83 - « -• Ukraine 42 - « -• Sweden 41 - « -• China 1,275 - « -• US 862 - « -• Canada 388 - « -Source: Energy Information Admnistration (EIA), US Dept of Energy
  47. 47. When and how fast Arctic petroleum resources will be developed will depend on1. The state of the world economy.2. On economic growth in the big energy consuming countries that now experience little or anaemic growth, for instance in the US and Europe.3. On demand in emerging market economies like China and India that now grow somewhat less strongly than in past years.4. On availability of sources of supply not located in the Arctic of which there are plenty.
  48. 48. Part 5: Announcements Port of Narvik
  49. 49. First International Narvik Conference on Arctic Ports Narvik 9-11 April 2013 The Conference will be focusing on Resources, Trade Flows, Shipping, Ports, Logistics, Environment and Industrial Development.For further information please contact:• Rune Arnøy, Port of Narvik, Conference Co-Chairman• Jan Magne Markussen, Ocean Futures, Conference Co-Chairman/responsible for the programme (temporary address)• The planning document for the conference is available by contacting Jan Magne Markussen Conference organizers In coop with
  50. 50. New Book November 2012 SHIPPING IN ARCTIC WATERS written byWilly Ø streng, Karl Magnus Eger, Arnfinn Jørgensen-Dahl, Brit Fløistad, Lars Lothe, Morten Mejlæ nder-Larsen and Tor Wergeland Approx. 500 pages To be published by Springer Verlag in cooperation with Ocean Futures Available from and book shops
  51. 51. A special thanks to my colleaguesSenior Research Fellow, Dr. Arnfinn Jørgensen-Dahl, Ocean Futures Researcher Ø ystein Russ Kristiansen, Ocean Futures
  52. 52. Thank you for your attention (temporary address)