Tanker Offtake System for Arctic: Experience and Challenges Alex Iyerusalimskiy, Marine Engineering Lead

The United States Association for Energy Economics Conference (28 – 31 July 2013)

2

Cautionary StatementThe following presentation includes forward-looking statements. These statements relate to future events, such as anticipated revenues, earnings, business strategies, competitive position or other aspects of our operations or operating results. Actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict such as oil and gas prices; refining and marketing margins; operational hazards and drilling risks; potential failure to achieve, and potential delays in achieving expected reserves or production levels from existing and future oil and gas development projects; unsuccessful exploratory activities; unexpected cost increases or technical difficulties in constructing, maintaining or modifying company facilities; international monetary conditions and exchange controls; potential liability for remedial actions under existing or future environmental regulations or from pending or future litigation; limited access to capital or significantly higher cost of capital related to illiquidity or uncertainty in the domestic or international financial markets; general domestic and international economic and political conditions, as well as changes in tax, environmental and other laws applicable to ConocoPhillips’ business and other economic, business, competitive and/or regulatory factors affecting ConocoPhillips’ business generally as set forth in ConocoPhillips’ filings with the Securities and Exchange Commission (SEC).

Two strong trends in world maritime trade can be highlighted over several decades: Seaborne oil trade is steadily growing (might imply increased risk) Oil spills are continue to decline (encouraging)

1970’s146 bbl/mbbl

20120.4 bbl/mbbl

Introduction

3

Crude oil shipping in the Arctic Tanker trade in the Arctic remains just a fraction of overall world tanker

operations An AMSA study in 2000’s noted over 6,000 ships per year were recorded in the Arctic,

but only 200+ were tankers

Most shipping traffic in the Arctic is in waters that are either permanently or seasonally ice-free

Exceptions include the year-round export of the concentrates from Dudinka and the nickel from Deception Bay

This status began to change in 2008 with the opening of the first year-round crude oil export system from Varandey terminal located in the ice-covered part of the Barents Sea

No medium or large oil spill has been recorded in the Arctic ice from tankers

44

Introduction Continued

Varandey Year-Round Arctic Marine Crude Oil Offtake System

5

A Success Story

The following technical presentation is only intended to provide an example of ConocoPhillips' past experience in Russia.

Murmansk

Open Water Tankers to Market

Approximate seasonal ice boundary

Varandey

Transshipment Point

LUKOIL and ConocoPhillips Joint Venture NaryanMarNefteGaz (NMNG)*

*ConocoPhillips is no longer a partner in NMNG Joint Venture

Source: Design Challenges for Large Arctic Crude Oil Tanker by A. Iyerusalimskiy and P. Noble. ICETECH 2010

6

Varandey Project Overview

Arctic Shuttle Tanker

FSOBLS

FOIROT

7

Varandey Project Overview: Key Components

Design Basis Environment conditions

Dynamic area of first-year pack ice in the extreme years up to 1.5 m

The ridge thickness may reach 9 – 10 m

Ice drift of various directions at FOIROT up to 1.5 – 2.0 knots

Air temperature as low as -40oC with -45oC as extreme value

Wave height at loading point may exceed 4.2 m

The ice transit distance may exceed 250 nautical miles

Reliable and safe ice transit to ice-free Murmansk year-round No icebreaker support on transit route Reliable and safe operations at the FOIROT year-round Ice management and tug assistance at the FOIROT are provided

8

Icebreaker Shuttle Tanker: Key Project Element

Design Basis

Technical Requirements,Specification

Ice performance

Icebreaking concept and propulsion system

Hull form, Resistance and Powering

Winterization

Ice Class and hull strengthening

Arctic Features

Common design issues to be addressed for any vessel intended for Arctic operations

9

Arctic Design Challenges

There was no precedent

for an icebreaking crude oil tanker

of this size

Design

No trafficability

data

No full-scaleperformance

data

Very limited full-scale

Ice loads data

No icebreaker support

Work on schedule

Icepressure

Maneuverability

Backing performance

10

Varandey-Specific Arctic Design Challenges

Load case Design Ballast CommentsAhead 2.8 knots 3 knots 1.5 m level

ice + 20 cm of snowAstern 2.95 knots 3.4 knots

11

Ice Performance and Hull Form

12

Propulsion and Power

ARC 6 Required

• 23 MW+

Initial Ice Model Test

• 17 MW

Specified and Class Approved Power

• 20 MW• Ice Q = 1.5

bollard Q

Rules on ice class selection need to be validated for large ships Arc 6: Ramming is not allowed Arc 7: Ramming is allowed Eliminating the necessity of backing and ramming provides the

opportunity to lower the ice class from Arc 7 down to Arc 6 without compromising safety, but rather increasing it

13

Propulsion, Power and Rules

The azimuthing propulsion concept improves maneuverability and provides good steering ability while going astern Increased use of backing and Icebreaking astern in ice Changed the icebreaking pattern around the hull Most classification societies have not yet fully adopted changes reflecting this

new icebreaking technique

B-IB-II B-III

AI-IAI-III

A-I+A-I AI-IAI-III

A-IAI-IAI-III

C-I B-IB-II B-III

Russian Maritime Register of Shipping LU 6 Ice Class Requirements

Specification Ice Strengthening Requirements

TURNI NG DI RECTI ONConventional

Podded

Active icebreaking and high loads zone

Most strengthened region

Leaststrengthened region

TURNI NG DI RECTI ONConventional

Podded

Active icebreaking and high loads zone

Most strengthened region

Leaststrengthened region

14

Ice Class and Hull Strengthening

15

Varandey Icebreaking Tanker: State of the Art

Length Overall 257.0 m

Length b.p. 234.7 m

Beam 34.0 m

Design draft 14.0 m

Deadweight/Displacement 71254/92047 MT

Open water trial speed 15.8 knots at 15.7 MW shaft power

Icebreaking capability at 3 kn 1.5 m of ice + 20 cm of snow

Propulsion system Diesel-electric, 2 X Azimuthal Units

Total installed power 27,300 kW

Propulsion power 2 X 10,000 kW

Cargo oil tank capabilities (approx.) 85,000 m3

RS Class KM, *ARC6, 2AUT1 “OIL TANKER” (ESP)

Double hull, twin screw icebreaker tanker is the largest vessel for Arctic today Ice performance equal or exceeds most of modern non-nuclear icebreakers Utilizes bi-directional concept: equal icebreaking ahead and astern New Technology: AZIPODs; Ice Loads Monitoring System

System Bridge Monitor

Source: The Interim Results of Long-term Ice Loads Monitoring on the Large Arctic Tanker by A. Iyerusalimskiy

at.al. POAC 2011

16

Effective Ice Loads Monitoring System

Purpose: Risk mitigation and safety of

ice navigation Potential operational cost

reductions Validation of the criteria and

requirements to be used for new Arctic ship

Validation of ice stress monitoring system concept

Ice loads statistics collection and operational data analysis

System developed by ConocoPhillips ABS Samsung Heavy Industry

7

System OverviewDesign, Installation & Commissioning 2008-2009

Accelerometer:Ship’s response

Camera system:Ice thickness monitoring

GPS, Anemometer,Azipod data processing:Navigation info.

LVDT:POD deflection Strain sensor:

Ice load monitoring

System Configuration

2.536 MN Max Force

0.1

1

10

0.1 1 10 100Pr

essu

re (M

Pa)

Area (m^2)

Maximum Bow Pressure Area Curve and Force

Pressure_B123934Pressure_B130813Force_B224959Force_B124524Force_B123934Force_B130813Limiting PressureMax Force

17

Ice Loads Monitoring System

Three 70,000 DWT Arctic tankers have been delivered by SHI shipyard in 2008-2009 and chartered by NMNG

First crude oil lifted on June 08, 2008 (five-year operation) Never missed the cargo (Some offloading delays at FOIROT) Over 500 crude oil lifts performed (over 250 MM bbl) No icebreaker escort ever required for transit, but ice management

is used at offloading terminal The vessel meets specification requirements, but operational

performance significantly exceed predictions

18

Varandey Experience and Learning

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec0

20

40

60

80

100

120

0123456789101112131415

Average winter Severe winter Speed Average winter Speed, Severe winterSpeed, Actual. Laden

Perc

enta

ge o

f max

imum

di

stan

ce o

f the

yea

r, %

Spee

d, k

nots

19

Varandey Experience and Learning: Average Transit Speeds

20

Varandey: Lessons Learned

The challenges and the lessons of the Varandey project could be projected on the design process and operations of other large ships built for a similar purpose

Several factors found crucial for Arctic Tanker Offtake System development: Vessel concept should be developed at the early stage of the project State of the art icebreaker tanker requires advanced training of the ship drivers

and engineering crew Near real time ice information for transit planning greatly mitigates the risk and

improves the efficiency Learning ice regime, currents, tides and other local factors specific to offloading

locations is necessary

21

Conclusions and Thank You