Gazprom sends Russia's first-ever Arctic crude cargo to international market

Moscow (Platts)--18 Apr 2014 1200 pm EDT/1600 GMT

Russian gas giant Gazprom has sent the first cargo with crude produced at the Prirazlomnoye offshore field -- the country's only Arctic offshore hydrocarbon project -- to the international market, the company said Friday.

"ARCO, or Arctic Oil, the new sort of crude produced offshore the Russian Artic has for the first time been supplied to the international market," Gazprom said in a statement.

The start of the Arctic crude deliveries has strengthened Russia's role as an international oil supplier, Gazprom CEO Alexei Miller said in the statement.

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"We have raised the flexibility and stability of [Russian] crude supplies basically to any part of the world," Miller said.

A major European energy producer has bought the first 70,000 mt Prirazlomnoye cargo with delivery to Northwestern Europe under a direct supply contract, Gazprom said, providing no other details of the deal.

Earlier, representatives of Gazprom's oil arm, Gazprom Neft, which operates Prirazlomnoye, said the cargo was to be delivered to the Dutch port of Rotterdam.

As crude output at the field increases, part of the volumes will be sold under long-term supply agreements, Gazprom said, adding that in 2014 it plans to sell a total of over 300,000 mt of Prirazlomnoye crude.

The cargoes will be delivered to buyers by two tankers constructed specifically for transportation of the crude, according to Gazprom.

The sulfur content and the density of Prirazlomnoye crude is higher than another Russian crude grade, Urals, so the Arctic crude will trade at a discount to the blend, although the discount will likely be "insignificant," Gazprom Neft officials said earlier this year.

When the offshore field was launched in December, Gazprom said it planned to continue developing Arctic hydrocarbon reserves, such as fields in the West Siberian Yamal peninsula, based on the experience gained at Prirazlomnoye.

"There can be no doubt -- Gazprom will continue its activities in the Arctic," Miller said at the time.

Prirazlomnoye, located some 60 km offshore the Pechora Sea, is expected to reach its peak output of some 6 million mt/yer, or 120,000 b/d, by 2020.

The field contains recoverable crude reserves of over 70 million mt, located 2,300-2,700 m under the seabed. SECURITY MEASURES

As Arctic waters increasingly become available for oil and gas exploration, concern has grown regarding how companies would be able to handle large-scale spills the size of the Macondo disaster in the US Gulf of Mexico.

Gazprom said it has emphasized strict environmental control and security measures taken to prevent oil spills at the Prirazlomnoye offshore platform, the site of the controversial Greenpeace protest last September that led to the arrest of 28 activists and two journalists.

"Construction features of the platform rule out oil spills at the production, storage and loading [stages]," the gas giant said Friday.

Crude from the field will be stored in a 94,000-mt facility covered with corrosion-resistant steel, Gazprom said, adding the storage reservoirs have been constructed to minimize oxygen infiltration that can lead to explosions.

The offshore platform has two loading facilities, which will be used depending on weather conditions, ice drifts and wind strength to prevent oil spills, it said.

Last September, two Greenpeace activists climbed up the side of the Prirazlomnoye platform in an attempt to draw public attention to risks of Arctic exploration.

Russia charged all 30 crew members aboard Greenpeace's Arctic Sunrise ship with piracy, with potential prison terms of up to 15 years. But an amnesty bill was passed late last year that ended the prosecution.

Russia's President Vladimir Putin said at the time that Russia is open for discussions on environmental issues, including with Greenpeace, but hopes that such attacks would not be repeated in future.

--Dina Khrennikova,
--Edited by Kevin Saville,

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