B. L HANSEN Hydro Oil & Energy

The Barents Sea offers huge potential for oil and gas activities. Since May 2003 Hydro has been actively working with the "Supplier Development Project in North-west Russia" focusing on assisting potential Russian local suppliers to start early preparations for participation in the forthcoming development of large-scale oil and gas projects in this region.

Hydro's initiative is a direct response to the energy cooperation called for in the Joint Declaration signed by the Russian President Putin and the Norwegian Prime Minister Bondevik in November 2002.

The company has got considerable support and practical assistance from the regional administrations in Arkhangelsk and Murmansk, oil and gas companies Sevmorneftegaz, Gazprom and Rosneft, the Finnmark County, Innovation Norway, the Barents Secretariat and SOT Varanger commune in Norway. Hydro's Norwegian partners in the execution of the project are industrial group Aker Kvaerner, consulting company Storvik & Co. and international Joint Qualification System Achilles.

Hydro's experience from the Norwegian continental shelf is of high relevance to future oil and gas activities offshore North-west Russia, as the two regions feature several common characteristics. Hydro is known in the international industry for high offshore and subsea competence and also for being very professional at managing large-scale complex projects, keeping them on budget and schedule. The subsea development of the Omien Lange gasfield carried by Hydro in the North Sea can become a laboratory for testing and perfecting technologies that can be later adapted to the Shtokman gasfield in the Barents Sea.

Hydro is offering advice based on its knowledge and experience to Russian companies wishing to qualify as suppliers and is also helping to establish partnerships between supplier companies in Russia and Norway.

Many of the local companies in the North-west Russia have developed strong manufacturing skills as suppliers to the Russian navy and the fishing industry. This may give local suppliers a competitive advantage when oil and gas projects in the region are being developed, but there is a need for competence development and familiarisation with the requirements of the offshore oil and gas industry.

Hydro started the project with thorough mapping of all relevant companies in Arkhangelsk and Murmansk regions. The company used pre-qualification questionnaires of the international supplier register Achilles. Detailed gap analysis and the established database containing over 50 companies were main results of the project's first phase. Hydro identified clear need for improvements within project management, quality management, certification and implementation of HSE (Health. Safety, Environment) systems in compliance with the proven international practice.

In April 2004 Hydro entered the second phase with a focus on feedback and advice, basic competence development among the potential suppliers, more detailed assessment of 13 selected companies and international partner search for the Russian companies. In addition to that Hydro is considering establishment of a regional supplier competence development centre. The first ever qualification and registration of four Russian local companies (from Arkhangelsk, Severodvinsk. Monchregorsk and Murmansk) in the international Joint Qualification System Achilles is one of the sound results of the second phase. These companies are formally qualified to participate in Norwegian oil and gas projects. The qualification process, training in use of the system and registration fees were sponsored by Hydro.

At present the company is already planning the Phase П1 which has a working name "SUPPLIER DEVELOPMENT PROGRAM" and is intending to invite Russian oil and gas companies, authorities and major industrial companies to cooperation aimed at implementation of the program.
Hydro realises that it has to get the suppler development activities going ahead of time and considers this project as highly prioritised both in terms of attention from the top-level management and allocated to these purposes resources. Hydro is sure that it is a social responsibility of an oil and gas company to inform local society, industry about plans for future oil and gas projects in the region, and to assist them in preparing to take active part in such development.

Hydro considers Russia as one of its future core areas for its oil and gas business.

The company has been present with an office in Moscow for more than 15 years. Hydro owns 40 percent of the Kharyaga field (PSA) and cooperates with Total, the operator, and Nenets National Oil Company. The field started production in 1999 and currently has a production capacity of approx. 20,000 barrels of oil per day. An ongoing expansion of the field development will increase daily output to 30,000 barrels per day in 2004. Hydro has worked on the development planning for the Shtokman field since 1989, together with Russian and Western partners.

In October 2003 Hydro signed an agreement with Rosneft to cany out a new study of possible development alternatives for the Shtokman field. The study looks into the possibility of a sub sea development for the first phase, based on Hydro's experience from the Ormen Lange gas field on the Norwegian continental shelf.

Hydro has also been present with aluminium activities in Russia for a number of years. Today, Hydro's office in Moscow, is heading business activity throughout the former CIS states with focus on logistical support for metal purchases in the region. Hydro just started a 10-year purchase agreement with Russian Aluminium and the smelter in Sayanogorsk, Siberia, which will produce up to 200.000 mt/yr of extrusion billets based on Hydro's modern casting and homogenization technology The billets will be marketed to customers in Europe, the Far East and USA.

ARCTIC SHELF OIL AND GAS CONFERENCE 2004