Interview with former Gazprom Neft Badra B. V. Executive Director (2010 to October 2014), Alexander Kolmatsky
Former Gazprom Neft Badra B. V. Executive Director Alexander Kolomatsky answers questions from Gazprom magazine
— Alexander Viktorovich, tell us the story behind Gazprom Neft’s entry into Iraq.
— The company was, at that time, studying possibilities for the development of its international business. But it was obvious that there are not that many places in the world with so much readily accessible oil, as in Iraq. Which meant the majority of other countries and companies were also paying attention to this country, not just ourselves. Nonetheless, up until the mid-2000s, with some exceptions, very few were actually doing business in Iraq. But then major international companies began to move in. And, you have to remember, Russia had inherited reasonably good relations with Iraq, at the governmental level, through the USSR.
We lost the first licensing round for the right to drill for oil in Iraq, without even being considered as operator or as a partner. The main reason for our being turned down being the fact that we had no international experience. Only at the second tendering round were we able to convince the Iraqis of our ability to fulfil major projects, and gain accreditation as Operator. That was our first victory. We were presented with about six fields to consider, including the Badra field. Continuing our battle to develop the block depended on our setting up a consortium. We invited those companies with which we had already established some form of partnership to join us. We had come across Petronas at the end of the 2000s, in considering the Anaran project in Iran; KOGAS works closely with Gazprom; and TPAO is also a well-known partner. Establishment of the consortium was essential not just because of the requirements of the Iraqi government: we needed someone with whom to share the geological risks of a new project, as well as the financial burden. Since we were the leaders on the project, we prepared a feasibility study — in which only two points were, ultimately, of interest to the Government of Iraq: the production regime, and remuneration. A further competitive advantage for us was the fact that, prior to this, we had studied the Anaran block, in Iran. This does, in fact, form part of the same structure as the Iraqi Badra field, just on the other side of the border. Part of the geological data, therefore, essential for getting an idea of the Badra structure, we already had, although there was virtually no intelligence on the field itself. Prior to our commencing work, only one well had been drilled — and that, moreover, drilled in the late 1970s, so much information, basically, had been lost. All we could be sure of was that we would be faced with minefields on the Iraq—Iran border, the result of military conflicts, and very complex geology. And at the start of the project, moreover, we had absolutely no idea how complex the geological aspects of the project would prove to be. It became clear that this was the most complex field in the region, in terms of geology. It is partly due to this reason that the premium received by the consortium for developing the field amounts to $5.50 per barrel of oil produced. At the time the contract was signed, this represented the highest level of royalty approved by the Iraqi government for the development of a field within the country. Initially, we had envisaged a total 17 wells to allow full development of the field. It has now become clear that that first draft of the development plan needs to be corrected, and drilling volumes increased.
— How do you manage relationships between project participants; how far are these productive?
— Roles are clearly defined within the consortium; all partners control production development, within the context of the joint operating agreement. Of course, operational issues do arise from time to time, but we have always found a consensus. As regards service companies, what has been good has been the way Iraqi and Chinese contractors have come to the fore. China, in general, has a special relationship with Iraq, which is evident at the governmental level. Apart from which, Chinese companies operate a pretty strict chain of command, which means everything works like clockwork. And moreover, world-leading oilfield service companies cannot always guarantee us the result we are relying on.