As an oil and gas field operator, we frequently depend on local suppliers, either because of geographical conditions or due to political requirements for local content in foreign countries. However, the oil and gas industry is very challenging, with stringent demands concerning health, safety and the environment and high technical performance requirements for goods and services supplied to the industry.

In most regions that are not familiar with this industry, many suppliers lack or simply have no experience of supplying the oil and gas industry. This, in turn, gives rise to a need to develop a qualified and competitive local supplier industry.

Efficient, high quality procurement will be vital to the successful development of Shtokman and other offshore oil and gas fields in the Barents region. Investing in a competent, local supply network will lower costs and reduce project risks in addition to ensuring greater local participation in project benefits.

We are working to develop the local supply industry and private sector in north-western Russia, drawing on our experiences from the Snøhvit and Ormen Lange developments in Norway.

The primary goal of this programme is to increase local Russian contributions to supplying the oil and gas industry in general, and the Shtokman project in particular, during both the development and operational phases, through:

• Early mapping, identification and pre-qualification of potential Russian suppliers
• Capacity and skills-building, and
• The mobilisation and organisation of local suppliers into regional supplier associations

We have had an active presence in Russia for several years, and as early as 2002/2003 we started to lay the foundations for active involvement of the local supply industries in north-western Russia. In 2003, we began mapping and identifying existing suppliers in the region, and developed a comprehensive database containing key information about all potential suppliers.

Key suppliers - including the Murmansk Shipyard and Monchegorsk "Sevzapstalkonstrukciya" in the Murmansk Oblast, and ("Onega" and "Mostootryad # 9" in the Archangel Oblast - were also given assistance and training with a view to meeting the requirements of the Achilles Joint Qualification System (JQS) in order to ensure that they would subsequently be able to compete, both nationally and internationally, for contracts to supply the oil and gas industry.

Supplier competence centres, InterShelf, were also established in both Murmansk and Archangel in February 2006, offering training courses and capacity-building to local suppliers.

To ensure improved communication with suppliers and increase their awareness of project opportunities and requirements, we began working with the regional governments and the private sector in Murmansk and Archangelsk in 2006 to develop regional supplier associations - drawing on the successful Snøhvit experience of establishing the local business association, PetroArctic.

Technical assistance and experience transfer were also provided by PetroArctic, and an industrial relations expert was seconded for over a year to help with the establishment of the associations and to build relations with existing suppliers.

As a result, two supplier associations were created - "Sozvezdye" in Archangel and "Murmanshelf" in Murmansk. After three years of operation, the associations have become well-known and well-established organisations, attracting the attention of industry, the authorities and politicians in both regions, the country as a whole and abroad.

The associations have a combined total of more than 280 members and they have already established relations with Shtokman Development AG with a view to competing for contracts as soon as the project is initiated. 

The Russian regional supplier associations "Murmanshelf" and "Sozvezdye" organise seminars and training in marketing and business management, industry-specific experience and skills and technology, as well as in HSE standards and practices. More than 40 courses and seminars have been held since 2006 training more than 500 industry specialists from numerous Arkhangelsk and Murmansk companies.

In addition to ensuring the upgrading of skills required to compete and perform successfully, they have also established an extensive database of suppliers and provided a meeting place for both local and international industry.

In close cooperation with federal and regional authorities, associations and the industry itself, we identified, categorised and integrated more than 700 Russian suppliers of products, materials and services into a Long list of Potential Suppliers. This work has been synchronised with Shtokman Development AG and may be considered as an input by StatoilHydro to supplier relations in the Shtokman project.

We are also fostering cross-border industrial cooperation in the Barents region by sponsoring a number of conferences, Russian-Norwegian matchmaking events and venues in the region and helping Russian and Norwegian companies to find partners.