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Alex Iyerusalimskiy, Marine Engineering Lead

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1 Alex Iyerusalimskiy, Marine Engineering Lead
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 Statement The 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).

3 Introduction 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) 2012 0.4 bbl/mbbl 1970’s 146 bbl/mbbl

4 Introduction Continued
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

5 Varandey Year-Round Arctic Marine Crude Oil Offtake System
A Success Story Varandey Year-Round Arctic Marine Crude Oil Offtake System The following technical presentation is only intended to provide an example of ConocoPhillips' past experience in Russia.

6 Open Water Tankers to Market
Varandey Project Overview LUKOIL and ConocoPhillips Joint Venture NaryanMarNefteGaz (NMNG)* Approximate seasonal ice boundary Open Water Tankers to Market Transshipment Point Murmansk Varandey Source: Design Challenges for Large Arctic Crude Oil Tanker by A. Iyerusalimskiy and P. Noble. ICETECH 2010 *ConocoPhillips is no longer a partner in NMNG Joint Venture

7 Varandey Project Overview: Key Components
Arctic Shuttle Tanker FOIROT BLS FSO

8 Icebreaker Shuttle Tanker: Key Project Element
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

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

10 Varandey-Specific Arctic Design Challenges
No trafficability data Maneuverability There was no precedent for an icebreaking crude oil tanker of this size No icebreaker support No full-scale performance data Ice pressure Design Backing performance Very limited full-scale Ice loads data Work on schedule

11 Ice Performance and Hull Form
Load case Design Ballast Comments Ahead 2.8 knots 3 knots 1.5 m level ice + 20 cm of snow Astern 2.95 knots 3.4 knots

12 Specified and Class Approved Power
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

13 Propulsion, Power and Rules
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

14 Ice Class and Hull Strengthening
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

15 Varandey Icebreaking Tanker: State of the Art
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 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)

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 System Bridge Monitor Source: The Interim Results of Long-term Ice Loads Monitoring on the Large Arctic Tanker by A. Iyerusalimskiy POAC 2011

17 Ice Loads Monitoring System

18 Varandey Experience and Learning
Three 70,000 DWT Arctic tankers have been delivered by SHI shipyard in 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

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
Is there enough evidence to say that Arctic crude oil tanker offtake is reliable, safe and economically viable? Perhaps, too early for definite conclusions either way Experience with Varanday marine crude oil export system demonstrates a well-designed, maintained and operated vessel can provide safe and reliable year-round transport through Arctic ice of south-eastern Barents Sea"

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