Research Associate, Ph.D. in Economics, United Institute of High Temperatures RAS e-mail: email@example.com
Research Associate, Extreme North Logistics Center, Northern University Business-School (Bodo, Norway), Gubkin Russian State Oil and Gas University Ph.D. student
Sustainable development of the Russian Arctic and innovations in the fuel and energy complex
The Arctic is far from being the resource region with enormous reserves of oil and gas, as well as with other valuable mineral resources. The Arctic was very much and remains the “deposit testing site” of innovation development for Russian economy and its fuel and energy complex.
The extent and area of the Arctic region development can be assessed based on the main target indicators presented in the updated Strategy for Development of the Russian Federation Arctic Zone and National Security Protection until 2035 (hereinafter – “the Strategy”) . Thus, in the Arctic area of the Russian Federation
it is assumed to create the conditions for positive migration balance and sevenfold expansion in the number of workplaces. By 2035, the oil production volumes in the Arctic shall make 26 % of the total Russian production, gas production – 79 %. The volumes of the liquefied natural gas (LNG) may increase by more than 10 times. Based on the Strategy target indicators, this growth shall be followed by sevenfold increase of cargo transportation via the Northern Sea Route (NSR).
The region resource potential is enormous, but its development is involved with no less than significant environmental, climatic and technological challenges. Vulnerability the Arctic natural ecological system, hard weather and climate conditions, remoteness and poor infrastructural development of the region toss a challenge to the existing principles of work and require qualitatively new organizational and technological solutions. It is important to note the problem of interrelationship between the climate changes in the Arctic and other parts of the world, which can have a serious geopolitical implication. It is necessary to consider the question of the Arctic region development in conjunction with the concepts of sustainable development.
The Arctic Sustainable Development
In accordance with usual classic appreciation, the sustainable development implies “the development ensuring satisfaction of the current generation needs, and, at that, with no undermining its capabilities
for satisfaction of the needs of the future generations” . In an advanced interpretation – within the framework of particular problems, 17 goals of sustainable development were indicated. In the scope of the Arctic development, they include such
topical issues as clean water, low-cost and clean energy, industrialization, innovations and infrastructure, sustainable cities and populated areas, responsible consumption and production, as well as preservation land-based and marine eco-development systems . It is notable that 7 of 17 goals are directly connected with social and economic development of the Russian Arctic. At the same time,the problems of environmental safety, minimization of damage as a result of social and economic activity and efficient infrastructure  are highlighted as key aspects of sustainable development in the studies of foreign and Russian scientists.
The power generation companies and oil&gas companies available in the Russian Arctic have already started to look more closely at environmental and socially responsible development of the region. Some companies include the objectives of sustainable the UN in its development strategy and highlight a list of prime goals (for example, Gazprom, NOVATEK and Gazprom neft).
Despite the public apprehension of importance for the Arctic sustainable development conditions, many aspects of the Russian Arctic region development on the whole, as well as development of fuel and energy complex in the Arctic, remain beyond the scope of concrete steps. Pathetic confirmation of this are the manmade disasters with serious environmental consequences – such as the accident at CHP in Norilsk in May 2020 . The wide-scale development of oil&gas resources in the Yamal peninsula region causes major concern. In the authors’ opinion, the narrow understanding of possibility for implementing the principles of sustainable development in business, and, correspondingly, the absence of particular managerial mechanisms do not let the companies to implement their potential in assisting SDG (sustainable development goals) in the Arctic to full extent.
Cognitive and integrated implementation of innovations in fuel and energy complex and related deposits can be one of the mechanisms for completion of development goals in the Arctic.
Adaptation of Technologies and Production Processes to Climate in the Arctic
Great seasonal oscillations and negative average annual temperatures are ones of the major features of the Arctic climate. Thus, for example, according to YNAO (Yamalo-Nenets Autonomous Okrug) Government, the minimal temperature on the Yamal peninsula dropped down to 59 °C below zero, and, at that, the average annular temperature makes from 5 to 10 °C below zero . The severity of climate in the Arctic determines the temperature of the ocean waters. The surface layer of water in the region of drifting ices has the temperature below zero all the year round.
The Arctic region is mostly sensitive to global warming. As a result of changes, the temperature in the Arctic rises much faster than in the rest of the world, which leads to more intensive ice-out and changes in the region delicate ecosystem. Methane and carbon dioxide are evolved due to melting of glaciers and permafrost on-shore in the Arctic . On the one hand, these processes create serious challenges and threats, and on the other hand, they open additional opportunities for development of the Northern Sea Route and biological, mineral and hydrocarbon resources.
The above mentioned natural and climatic features of the Arctic bring forth adaptation and optimization of technologies and production processes.
Application of technology for simulation of the deposit transport system optimization with account of ship traffic, filling the storages and the ice channel freezing is one of examples for optimization of the processes in the Arctic fuel and energy complex. Gazprom neft company  used this technology in its project on automation control with the main objective of implementing the integrated digital solution for minimization of costs for transportation and reduction of risks related to production and logistics in the Arctic. Within the project framework, the “Captain” system has been developed,which, at the moment, ensures efficient all-year-round shipment of all volume of produced oil from the Arctic deposits – Novoportovskoye and Prirazlomnoye, at that, reducing the transportation specific costs,
despite the severe ice conditions (fixed shore ice more than 2 m thick in the Gulf of Ob, drifting ice in the Kara Sea). As of today, implementation of the “Captain” innovation digital system is the most great projects on optimization in the Arctic area.
Concurrently, it is necessary to start the process of winterization including the set of measures on the stage of designing the vessels and drilling rigs on-shore and off-shore to provide the equipment uninterrupted functioning under extreme low temperatures and hard conditions . For operation under the temperature minus 40 °C, the protective metal casing and the heating system are provided in the shipshape drilling rig ensuring safe and efficient operation of the team and equipment above the sling shot space and the drilling derrick. The ice-class shipshape drilling rig Stena IceMAX Arc6 built in South Korea and operating in the Arctic is one of the examples, where the winterization methods are used. The vessel has the system of water separating column protection against the ice over by means of irrigation with the heated overboard water. This system is efficient in competing with the ice conditions, which, in its turn, ensures safe and comfort operation .
In Russia, development of the shipshape drilling rig “БС034” by the Krylov State Science Center is the analogous project. At the time of the article publication, the status of this project is unknown due to its conceptional nature .
The other example of adaptation to the Arctic conditions on the principle of using the alternative technology conditions represents the technology of seafloor well completion. It is a specifically updated approach for underdeveloped and remote regions with poor infrastructure. The main virtues for using the offshore subsea production modules are the significant economic advantages as compared to convenient offshore platforms, possibility for complete operational independence and uninterrupted operations under severe climatic conditions . In some cases, due to hard ice conditions the subsea modules become the obligatory and the only condition having no alternative.
The well sea bottom completion is actively developed in Norway, while the Norwegian oil&gas companies are for a good reason considered the leaders in production of the relative equipment (offshore subsea production module in particular). The Ormen Lange deposit developed in 2007 is an example. In Russia using of such technologies sufficiently restricted (including due to sanction restrictions to transfer of technologies). The only project using the similar technological solutions is Yuzhno-Kirinskoye deposit in the Sakhalin shelf .
One more outstanding example of using the alternative solutions is
development of the Arctic gas condensate deposit Snevit on the Norwegian shelf. This is the first project of developing the deposit located at significant distance from the shore and where the multi-phase transportation of the product along the sea bed to the Arctic natural gas liquefaction plant Melkeya. At that, despite significant processing complexities, the brand new liquefaction technology (Linde-Statoil process)  is used at the plant. This gas liquefaction process occurs by means of combined coolants,because it is impossible to implement the preliminary cooling by propane with ideal balance load between three cycles of cooling in the moderate and cold climate.
Besides the production complexes, the Norwegian company Equinor is planning to implement the remotely-controlled subsea plants for separation, reinjection and compression . In the transpolar deposit Osgard there has been already performed the first in the world testing of the equipment for subsea gas compression.
As far as many Arctic offshore deposits are significantly far away from the coast line (65–200 km and more), the electric power transition by ETL (electrical transmission line) becomes complicated. Therefore, one of the promising options for power supply of the subsea production complexes is creation of the independent sources of power supply with their operation not influenced by the available resource base or weather conditions. Nuclear power plants (NPP) are the most advanced examples of such independent sources . The CDB Rubin (Project “Iceberg”)  is involved in development of such subsea nuclear power plant for the Arctic region in Russia. According to developers’ declarations, the solutions designed in the project will provide completely the subsea and subglacial development of the hydrocarbon deposits in the area of all-year-round ice cover.
Use of climatic factors of the region for production intensification
Intensification assumes searching and applying of more efficient methods, technologies and arrangement of production through using the low temperatures in the Arctic.
For example, during LNG production the low temperatures become the positive factor. The allow for increasing the efficiency of cooling cycles and reducing the costs for power during gas liquefaction. The other advantages include
enhancing of efficiency when using the gas turbines due to increase of the air density, as well as reduction of costs for drying due to low temperature condensation units .
Another example taken not from the deposit of fuel and energy complex, but sufficiently illustrative in this context – use of water from the Arctic seas for cooling the server units. The primary benefits of this technology are reduction of costs and consumption electric energy due to natural cooling, as well as decrease of harmful effect on the environment. In September 2020, Microsoft company has completed the two-year project named Natick. The project consisted in testing the cold salty sea water resources as a natural coolant for server units located in the hermetically sealed container. The project testing was performed on the Orkney Islands in Scotland at 117 feet deep . Such unusual method for placing the data center was not selected accidentally. The Natick project developers proceeded from two main problems: (1) when using the server in usual conditions, there is great release of heat leading to immense costs for cooling; (2) a great amount of valuable fresh water is used for cooling. Therefore, the economy of costs for servicing the data center and reduction of fresh water consumption have become the main goals of the project, which, in its turn will have a positive effect on environment. According to the company report, the project has proven its efficiency to full extent.
Facebook company went the other way and placed its data center not far from the Arctic Circle in the Swedish city Lulea. The main idea of the company project was usage of specific things of the region natural conditions for cooling the servers. But the process approach differs from the Microsoft one utterly. Facebook uses the cold north air streams for cooling. In the words of the company head, such system is by 10 % efficient than the usual data centers and consumes by 40 % less energy .
Combined Technological Solutions
Transition from using the fossil fuel to the use of the renewable energy sources has been going on everywhere for a long stretch of time. Despite the complicated climate, the Arctic region has significant amounts of RES . However, they are of variable nature, and conventional weather deterioration can destroy the necessary balance in the energy production and consumption. At the stage of RES technologies implementation in the Arctic, the solution for this problem, with high degree of reliability in the conditions of decentralized power supply, is installation of combined RES plants, and diesel and gas
engine-generators (for example, Danfoss company’s). Such combined plants are transportable and have a wide range of capacities, they are cost-effective due to using several energy sources and allow for reducing consumption of hydrocarbons significantly, carry insignificant environmental load, as well as can have wide spectrum of variations and possibility for improvement, for example, by means of rechargeable batteries for energy accumulation or with hydrogen accumulation .
The potential for RES legitimate inclusion in the Arctic energy complex is its capability to reduce the costs and consumes by 40 % less energy.
for “deliveries of fuel to the Northern Territories”, reliability of power supply for these regions and reductions of СО2 emissions .
Despite the number of constraining factors (resource, natural and climatic, logistic, skilled, environmental, infrastructural, territorial and technological), the use of RES technologies can become one of the most important elements for adaptation to climate changes of the Arctic area energy infrastructure . The risk and constraint analysis allows for highlighting the following fundamentally important areas for development of the renewable energy production industry in the Arctic:
• low and medium capacity wind turbines for using in distributed and independent energy production industry;
• combined wind-diesel, solar-wind, solar-wind-diesel independent energy complexes including and without the energy storage systems;
• intelligent systems for control of combined energy complexes of the Arctic design for performing the most efficient parallel operation of several RES-generators;
• intelligent systems for protection of equipment against extreme conditions aimed at support of the required parameters of power supply quality;
• wind turbines for off-shore location.
Use of hydrogen technologies, which can be applied both at the electrical energy storage and with in the frame of further combination, for example in hydrogenation of solid coal feedstock (for example, on Spitsbergen Island)  is the especially important area.
The first in Russia by the company Gazprom neft current developments used in the fuel and energy complex can be assigned by using the combined solar and wind farm “Yurta” with 47.5 kW capacity in the Novoportovsky deposit near by the Gulf of Ob coast . It consists of two wind power generators, 30 solar panels and the unit of rechargeable batteries . This power plant supplies the control system unit responsible for pressure pipeline operation. The main “Yurta” advantages may be called environmental friendliness, energy production in any weather and low costs for power supply of the facilities remoted from the network infrastructure due to refusal from the electricity transmission lines .
The solar panels and the wind power generators for supply of the telemechanics system and block valve stations are used in the condensate pipeline Yurakhovskoye deposit – Purovskiy gas condensate processing plant. Their application allowed for reducing the time for construction of the condensate pipeline and refusing from construction of expensive high-voltage electric transmission line along the whole track .
Within the framework of the plan for reduction of СО2 emission NOVATEK company upgrades one of the eight gas turbines SGT-800 of Siemens production at the power station supplying the electric energy to the liquefied natural gas plant Yamal LNG. This process is implemented for partial use of hydrogen as a fuel. It is expected that the proportion of using hydrogen as a fuel for CCGT (combined cycle gas turbine) can grow up to 60 % .
Due to melting of ices (including seasonal) the ground transport infrastructure and water communications change . Transportation of oil, oil products and LNG by means of transshipment “ship-to-ship”, which is implemented in the ice-free deep waters from the tankers of the ice rate to the standard transportation tankers is such example of this. As compared to forward delivery, such scheme increases the efficiency of the export supplies significantly and reduces duration of the ice-rate tankers’ round voyages carrying out the oil from the Arctic deposits .
New Technological Solutions
In the Arctic area, the Academician Lomonosov floating nuclear power plant and the tankers Arc7 for Yamal LNG project are quintessential examples of hybridization.
The Academician Lomonosov floating power generating unit represents a new class of the energy source based on the Russian technologies of the nuclear-powered shipbuilding industry. It is the advanced project in the series of mobile transportable low capacity power generating units . This development is designed for provision of energy for large industrial enterprises, seaports and complexes on production and refining of oil and gas on the shelf.
The FNHPP (floating nuclear NPP)has the maximal electrical capacity 80 megawatt and includes two reactor systems KLT-40C. The project is designed for reliable all-the-year-round heating and electric power supply of the Arctic and Far East remote areas.
FNHPP substitute the retired capacities of Bilibinskaya NPGS operating from 1974 and Chaunskaya CHP, as well as supplies power to the large ore and metal cluster in the western Chukotka in the Chaun-Bilibinsk electric generation system .
The following advantages of the small nuclear power plants (SNPP) based on the ship-board technologies are noted :
- Compact size allowing for their location in the remote areas and on the limited sites.
- Possibility of using SNPP for sea water desalination and production of heating energy. Many countries of Africa, Asia and Europe experiencing a severe shortage of fresh water take an interest in such complexes .
- Environmentally friendly type of energy.
- Minimal volumes and и costs of major construction works on the NPP operation site.
- The small nuclear power plants can operate in the mode of load following, manoeuvering range from 10 to 100 %.
Following the conclusion of the Paris Climate Agreement in 2015, the interest to the nuclear energy production industry started growing again due to its significant potential in reduction of greenhouse gas emissions. The nuclear energy generation industry can provide regulated capacity depending on demand for electric power, and, under flexible operation in the mode of “following the load”, it allows for enhancing RES efficiency. Thus, the combined systems of nuclear and renewable energy can become one of the potential combined technological solutions. .
Yamal LNG project tankers Arc7 are in and of themselves hybrid solutions. They are equipped with the power plant unit and dual-fuel diesel-electrical system.
These tankers are also fitted with ship-board energy plants, which can operate on ship heavy fuel and stripping gas. Use of LNG as a marine fuel leads to reduction of emission of combustion products, including the greenhouses gases in atmosphere as compared to oil (heavy) marine fuels .
The floating LNG plant can be considered as a new concept in the LNG organization in the Arctic conditions. The most important ad vantage of this technology is the opportunity for operating at the small and remote deposits, for which it is economically unprofitable to build the ground plants or the coast line whatsoever does not go for LNG-plants construction at all. The similar plant has been put into operation by the Shell company at the end of 2018. The whole process of the natural gas production, liquefaction and storage occurs in the sea, and its shipment is made into the specialized ships for delivery to consumers immediately from the plant . The capacities on the gas liquefaction make 3.6 mln tons per annum and the project value is assessed by 14 bln dollars. Despite the fact that the similar value makes the final product, according to the experts estimation , the most expensive in the world floating LNG-plant is capable to change technological concepts of gas production and transportation, as well as development of the off-shore gas deposits.
Gazprom neft plans to use the pilotless helicopters for serving the oil and gas deposits onshore and offshore of the northern deposits . These technologies are particularly topical in the Arctic due to undeveloped infrastructure and large amount of existing and planned projects both for monitoring of the production processes and the cargoes deliveries. Thus, the KAMAZ self-driving trucks and the heavy pilotless helicopter Tiber KAGU-150  were tested in the Eastern-Messoyakhskoye deposit.
Innovation Development Strategies
The Arctic region presents the unique opportunities for the companies and the state to develop both new technologies and innovation strategies for business development. However, with the high level of vertical integration
of the oil&gas and energy business in Russia, the implementation of independent energy projects in the Arctic is complicated. At the same time, the oil and energy companies operate within pretty narrow bounds of their main area of activity.
The eco-innovation approach to business development, including the alternative business-models, for example, in the area of the electric energy generation and distribution, can become the alternative constant in the “growth strategy” for fuel and energy complex in the Arctic. According to the global practice, for many oil&gas companies the business diversification becomes not just the opportunity for development, but the necessity for adaptation to the changing realities. However, diversification, cogeneration and decentralization are not always considered as the alternative options for organization of power supply in the Arctic by the domestic companies (including those for production needs).
Unfortunately, the Russian companies have a small number of stimuli for adjusting the area of development to the side of eco-innovation strategies and development of the energy resources in the Arctic region, because the main motivational constituent – the state support – is absent. The strategy for the Arctic development up to 2035 implies significant expansion into the region for oil&gas resources, and reductions of the state financing in the area of the renewable energy sources  will hardly assist to development and implementation of the relative technologies. The problems of climate changes are considered frequently in terms of new opportunities for oil&gas business in the Arctic and more likely is the stimulus for adaptational development models.
New Products for Intra-regional Consumption
Despite the adjusted strategy of development in the Arctic area and total “complexity” of approaches to planning of social and economic development in the region, to the large extent, the fuel and energy complex in the Arctic is aimed at the external energy markets, and only as a residual – on the development and provision of the domestic energy needs.
Meanwhile, the Arctic region is a unique market for developing and implementing of innovational (or including adapted) types of products and servicers for power generation companies. The customary approach to considering the power supply in the Arctic as subsidized to the full extent based on the deliveries of fuels to the Northern Territories of Russia does not allow the power generating companies for taking a step beyond the framework of traditional conduct of business. The developments in the area of combined using of energy resources, integration of energetic and water supply systems, as well as distribution and storage of the electric energy are actively testes in the Arctic areas of the other circumpolar countries .
The Arctic presents a unique “deposit” for Russian economy and its fuel and energy complex. However, it is an extremely vulnerable region requiring special relation to conducting production and commercial activities.
The majority of domestic innovations is based on adaptation to external conditions of production and logistic operations. Despite the importance and operational necessity of the so-called “additional innovations”, to which adaptation of technologies to natural and climatic conditions can be attributed, the modern global challenges require revolutionary changes in approaches to production and commercial activities.
The concepts of the zero emission, carbon-neutral production facilities, priority of the energy saving and low power intensity take increasing importance in the world practice,
which shall be accompanied by solution of such global problems as access to clean and available energy, provision of responsible consumption and production, and other things.
The environmental principles of work and the relative technological innovations should be used as the basis for sustainable development of the Russian Arctic territories. The problem of climate change in the Arctic should be considered not only as an opportunity to intensify the region development, but in regards to mitigation and minimization of the related consequences as well.
The Arctic region creates favorable conditions for development of RES and alternative energy production industry with the use of local energy resources , and provides opportunity for working out the principles of decentralized power supply and implementation of the smart energy networks. It is worth noting that these areas of the fuel and energy complex development respond to the goals of providing the energy security and independence of the country to full extent.