Nobody is planning to leave

Gazprom magazine

Interview with Gazprom Neft Badra B. V. Executive Director Sergei Karavaev

Gazprom magazine Sergei Karavaev

Gazprom Neft Badra B. V. Executive Director Sergei Karavaev answers questions from Gazprom magazine

— Sergei Vladimirovich, what has been achieved on the project in 2014, and what’s in store in the short-term?

— The major milestone of 2014 was commencing commercial production. We began commercial production in May, concurrently with comprehensive testing of oil processing and transportation systems. Crude from Badra fields began to enter the Iraqi pipeline system and, subsequently, the export terminal in Basra, from the end of August. November saw us fulfil the key obligation (in terms of daily output) under the service contract — i.e., of producing at least 15,000 barrels over the course of 90 days. From that point onwards, all members of the consortium began to see a return on their investment in developing the field: once costs are reimbursed, they are paid a premium for every barrel of oil produced. That’s an important point for all partners, insofar as the project goes into profit. We are faced with completing the full range of pre-commissioning and start-up activities for the crude gathering system — something traditionally discharged during the first few months of commercial operation — by the end of the year. We also plan that by January the initial groundwork for the gas processing facility will be completed. Production at the field is currently being undertaken at two wells, with a third expected to be brought into production in the nearest future. We had started drilling that well as early as 2010, but had had to change technology several times, in order to finish the job.

— What are reserves (of oil and gas condensate) estimated to be?

— As soon as we started developing the Badra reserves, we obtained a great deal of new information on the geology of the block. The field contains two productive reservoirs — the Mishrif reservoir, and the Mauddud. Initially, we assumed that both held oil reserves. But while seismic surveys and other prospecting works have shown there to be no oil in the Mishrif reservoir, the Mauddud deposit, on the other hand, contains far more than we had anticipated. But this reassignment of reserves has had virtually no influence on total reserves, which show only marginal change. Although this new concept vis-à-vis the geology has a direct impact on infrastructure — we will definitely have to drill significantly more wells than planned. And, of course, this will increase CAPEX slightly. But, as regards gas reserves, these turned out to be more than initially envisaged, which will mean increasing the gas infrastructure capacity.

— What specific issues are involved in working in Iraq? How conducive is the tax regime?

— The tax regime has no major significance for us, insofar as we are engaged to develop the Badra field under a service contract. The field remains the property of the Government of Iraq, and our consortium — it’s effectively a contractor, responsible for developing resources and being compensated on that basis. What does present a problem in this region, however, is this: hostilities between rival factions can cause real problems regarding the recruitment and the engagement of contractors. We tightened security this summer, increasing the number of armoured vehicles, and developing various employee evacuation strategies, for use if necessary. Nonetheless, throughout all the time that the project has been in development, work at the field has never once been suspended.

— How do you view prospects for Gazprom Neft’s work — and that of other international companies in Iraq — in the long term?

— Iraq remains a highly promising region, and the government has succeeded in significantly increasing production volumes in recent years. If we’re talking about the investment climate then, looking at our colleagues in the sector, nobody is planning to leave or to scale back their business development; and projects initiated earlier continue to be successfully implemented.