Industry№ 1 July 2018

In the 1970s, after the Yom Kippur War, Arab countries froze the supply of oil to any country that supported Israel, sparking the biggest energy crisis in history. As a result, countries had to figure out a way to reduce their dependence on Middle Eastern oil.

The biggest play of all

"For many centuries, fishermen had the North Sea to themselves…. But by the mid-1970s, a new breed of seafarer could be seen from a helicopter on the waters below: floating drilling rigs, supply boats, platforms, pipe-laying barges…. Here on the waters of the North Sea, between Norway and Britain, was the biggest new play for the world oil industry." These are the words of economist Daniel Yergin in his bestselling The Prize: The Epic Quest for Oil, Money and Power.

The oil crisis of the 1970s stimulated the West to develop its own oil production, including offshore projects

According to the consulting company Douglas Westwood, offshore production requires an oil price between USD 40 and USD 57 per barrel in order to be profitable. The November 2017 World Energy Outlook by the International Energy Agency (IEA) predicts that, based on US production forecasts, oil prices will remain in the range of USD 50–70 per barrel in the long term. This is high enough to justify further development of offshore oil. Schlumberger forecasts that by 2030 offshore fields will supply more than 55% of the world’s oil.

The Brent oil field, which gave its name to a trading classification for crude oil, went into production on the North Sea Continental Shelf in 1976. Offshore production offered Western countries a way out of the crisis by giving them a "safety cushion". In the half century since, over a trillion dollars has been invested in exploring and building offshore fields and developing the technologies necessary to exploit them.

The energy of the future

The rise of offshore oil and gas is driven in part by a decline in easily recoverable reserves on dry land. For the same reason, serious consideration is now being given to the offshore mining of strategic metals – nickel, copper, cobalt, gold, molybdenum and silver.

It is estimated that 20% of total global oil reserves and 30% of total global gas reserves are offshore. Offshore fields are characterised by very rapid growth in production. Offshore production has risen from 8% of the global total in 1960 to approximately a third today.

Yevgeny Khartukov

head of Russia’s Oil and Gas Business Centre observed (in an article for Neft Rossii magazine)

However, the wealth of minerals beneath the ocean floor is not the only motive that spurs industry to migrate from land to sea. Saving land (especially around major coastal cities) for other uses is also a concern.

The electricity industry is a perfect example. Advanced energy generation projects are now being implemented at sea, including tidal and floating power plants (e.g. Rosatom’s floating nuclear power plant ‘Akademik Lomonosov’). On a larger scale, wind farms are now in operation in littoral zones.

Offshore wind generation was pioneered by Denmark. DONG Energy (now renamed Ørsted) opened the world’s first offshore wind farm at Vindeby in 1991, with a capacity of 5 MW. It was dismantled last year at the end of the turbines’ service life. "Still, Vindeby played a decisive role in expanding technology and cutting costs to a level that makes offshore wind energy attractive," said Leif Winter, responsible for offshore wind power at DONG Energy.

The total global generating capacity from offshore wind is now estimated at 17.6 GW, the equivalent of 15 of the latest nuclear power stations. The UK has commissioned more offshore wind farms than anyone else, although Bloomberg New Energy Finance predicts that it will soon be overtaken by China. They expect offshore wind capacity to grow by 16% a year and reach 115 GW by 2030. That is twice the electricity demand of a large European country, such as Spain.

Steel frame

Hydrocarbon extraction and renewable energy are the best-known offshore industries. Yet building an industrial plant at sea is a challenging technological task whatever the industry. For example, the development of the Prirazlomnoye field in the Pechora Sea (a Gazprom Neft project) required the construction of an ice-resistant platform for well drilling, oil production, storage and offloading, and heat and electricity generation. The platform measures 126 m in both length and width and weighs 117,000 tonnes excluding ballasts. The majority of the structure is built from steel.

If in the 1960s, the share of offshore oilfields accounted for 8% of global production, now is around a third

The high-tensile steels used in such projects must meet special requirements. They must have a stable chemical composition and comply with both international standards and the demands of the Russian Maritime and River Registers (RMRS and RRR). The product quality must be certified. For example, the high-tensile steel plate made by Ural Steel (part of Metalloinvest) was granted an RMRS certificate of compliance in January 2018 after a series of tests. It is now certified for use in the manufacture of seagoing vessels and floating and stationary drilling rigs.

Designing new steels and certifying the constructions built from them is important to a company facing intense competition and increasingly demanding customers.

Andrei Ugarov

Production Director at Metalloinvest

As well as tensile strength, customers have traditionally sought enhanced corrosion resistance. Engineers have devised several ways of minimising the harmful effects of seawater on carbon steel. One of the most common is sacrificial coating, i.e. the application of a surface layer, which corrodes instead of the steel. The disadvantage of sacrificial coating is that it needs periodic replacement, which is difficult if access is limited. In such instances, cathodic protection is used, but this requires an uninterrupted power supply. For this reason, a combination of both methods is often used.

Customers do have concerns beyond just tensile strength and corrosion resistance. In the offshore environment, it is especially important to minimise the energy consumption of industrial processes. The Nord Stream gas pipeline linking Russia and Europe via the Baltic Sea bed consists of a large-diameter (1220 mm) steel pipe. It transports gas over a distance of 1224 km without compression – a unique feat achieved for the very first time. This is possible thanks in part to the special properties of the material used: the inner surface of the pipe has been designed to be completely smooth, with a surface roughness of less than 0.006 mm.

When building offshore production platforms, steel with specific tensile strength requirements is used

Offshore projects present new opportunities to increase the demand for steel. For example, wind farm generators are made almost entirely of steel – including the gondolas which each weigh 300 tonnes. A wind turbine, according to WSA experts, is made up of approximately 80% steel. The growth of offshore industries means a higher demand for steel quality as well as quantity. Therefore, offshore projects can be regarded as not just another consumer of steel, but a driver of technological advances in the industry. 


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