A project revolution

Mars Khasanov

Interview with Mars Khasanov, Director of the Gazprom Neft Science and Technology Centre

Gazprom magazine»

There’s this stereotypical view that science in Russia lags behind that in the West. That’s not the case. Specialists at our scientific centres and higher educational establishments are finding answers to the most complex problems

— Mars Magnavievich, why was the Science and Technology Centre (NTC) set up 10 years ago, and how has its function changed over time?

— The NTC was established in line with the traditional Russian scientific and project institutes that were responsible for evaluating reserves at oil and gas fields, recording these in the National Register, and developing project documentation for field development. The responsibilities of such institutions also included developing and implementing new technologies and materials; they often had a weak point, however, in being somewhat remote from the needs of the business. Initially, after receiving the appropriate approvals from the Central Commission for Field Development, the NTC stepped aside, and production workers took over. Now, though, we work as a single team, and have established a scientific-project structure that is fully integrated with production.

From gigantic fields to minor ones ...

In the space of 10 years, even the nature of project documents has changed. Previously, these were not sufficiently comprehensive, being focussed predominantly on what was below ground — strata modelling, well placement, and working out the production profile. But decision making on production levels, drilling rates, well location and construction is heavily influenced by infrastructure issues, the oil price, and transportation costs. Scientific and project institutes traditionally paid little attention to these aspects. So we had to move away from studying a formation in isolation, and look at field development in conjunction with the reservoir, wells, construction, transport, and the economy. It became obvious that infrastructure costs have a major influence on our decisions vis-à-vis strata. And vice versa.

So we introduced a new optimisation framework. Previously, this would be undertaken piecemeal, with us offering various services in respect of each part — from strata, fitting out and drilling, to well clusters, and so on.

— And why was such a situation allowed to develop? It’s logical to suggest that optimisation should, of necessity, be undertaken holistically. Why was all the attention, initially, focussed solely on the strata?

— This was largely down to historical reasons — the first going back to the mid-20th century when we were working with gigantic fields like the Samotlor (with total production volumes for more than 2.7 billion tonnes). Fitting out such a large-scale project straight away is impossible, it had to be done step by step. As a result, specialists were given the opportunity to build, say, a central oil collection point (central gathering plant), for example, with a specific fixed capacity, and to then use it, at their leisure, under no pressure. That is to say, the size of the asset guaranteed the extent of the infrastructure. Added to which, developing the full resources of such a vast area is not possible all in one go, so we were able to build up the necessary experience on a small plot, and then replicate this throughout the remaining parts of the field.

Much more modest assets are being brought into operation now. Reserves of 30 million tonnes (or even less) are considered quite respectable. And these are 100 times smaller than fields in the middle of the last century! So now, all production facilities are built immediately, and practically all at the same site. Licence blocks move into full capacity very quickly.

There’s no time for training — while we’re studying, reserves will simply run out.

There’s also another reason. Tools and methodologies are developing.

Previously, there simply weren’t the resources available to us now. At present, we develop revenue models that mean we can design the most effective possible investment solutions right from the concept stage.

The most important outcome is that Gazprom Neft has, in recent years, and with our involvement, created an entire methodology — and all the necessary tools — for systems engineering.

The fundamental science and production

— Against these changes, how has the NTC changed?

— Initially, there were about 100 people working at the STC: today, we have about 1,000 employees. Because we are now working with new technologies, and in scientific engineering, in addition to the geologists, developers, and miners traditional to science centres, we also need physics specialists and mathematicians classically trained in their respective disciplines. They have a background in the traditional basic sciences, which helps us develop new approaches and algorithms — because even those used in the 20th century are no longer suitable. Apart from which, one of the NTC’s roles is to develop its own digital programmes, to make working with “Big Data” and machine learning possible. We are currently using some three dozen different digital systems, undertaking tens of thousands of calculations and determining the best options, in very short periods of time.

— So how, then, do you reconcile the fact that you work closely with production, while also turning to basic science? You don’t see any contradiction here?

— Our specialists work on concrete, specific projects, not on abstract tasks.

All the same, we, ourselves, can’t afford to engage in the “pure” sciences — that’s the prerogative of the academic establishments. In our activities, everything depends on setting tasks and objectives, and these dictate operational needs. The challenges we face are so complex that new models, optimisation strategies and software are needed to solve them.

We take a multidisciplinary approach. Take wells as an example. Multiphase fluids (water, oil, gas or a combination of these) flow into a well. Which means — we need specialists in hydrodynamics.

Paraffin (wax) is precipitated, salts are deposited — so we need chemists. We need pump specialists, electrical equipment specialists, and many, many others. Specialist groups are put in place for a specific project for which, where necessary, specialists are recruited not only from among STC staff, but also from among professionals in specialist directorates within Gazprom Neft, as well as from production companies. Specific operations are undertaken by representatives from the so-called “Innovation Environment” — universities and scientific research centres.

— Which higher educational establishments do you work with most closely?

— There’s more than two dozen, covering practically all of the country’s most important universities, industry-specific institutions, and scientific research centres. The number of projects is growing, there’s loads of talented researchers and academics in our country, and we are gradually involving ever newer organisations in our activities.

We are, today, implementing approximately 80 scientific research projects within various academic centres, investing in the order of RUB350 million every year. There’s this stereotypical view that science in Russia lags behind that in the West. That’s not the case. Specialists at our scientific centres and higher educational establishments are finding answers to the most complex problems. We involve them in solving the physico-mathematical, physico-chemical, and mechanical problems that relate directly to our specific technological projects — i.e., hydraulic fracturing (fracking), drilling, infrastructure development under challenging climatic conditions, industrial and environmental safety, all kinds of digital technologies for increasing business efficiency and decision making in investment portfolio management, and so on. That is, we set specific tasks, and we have, already, identified those universities that specialise in one subject or another. In addition to which, some 100 students undertake internships or placements at our centre, every year.

— How do you select which higher educational establishments to collaborate with?

— We identify the process we’re going to work on, and then separate out the physical, chemical and mechanical content thereof — and it becomes clear what scientific teams are best placed to address this.

— How do you go about finding and identifying them? Do you follow publications and individual specialists’ citations , or hold — and attend — specialist conferences?

— The majority of our colleagues are graduates. I myself am a professor of higher mathematics. That is, we have a sufficiently good understanding of higher educational establishments, and of the Academy of Sciences, to navigate the Russian scientific community confidently.

Global science

— And what about the international scientific community?

— We use bots that search for keywords in specialist libraries, online. We establish which specialist most threads lead to, on a given topic. We get in touch, talk, request a short discussion or consultation, and take a view on the outcome. The attrition rate is very high. Sometimes we encounter people who publish a great deal of articles or work, but they’re not, necessarily, valuable or worthwhile specialists.

We also monitor the activities of scientific consortia closely. This is the sort of collective work that is still poorly developed in our country — of several experts getting together to investigate a specific issue, collectively.

These groups make their plans and intentions known. For example, by offering oil and gas companies the opportunity to support a consortium financially, if they’re interested in the outcomes. The amounts invested are small, and all the information obtained can be used by sponsors.

— On what issues has the STC had to turn to foreign specialists for help?

— We have taken advice on issues relating to hydraulic fracturing (fracking), on assessing enhanced oil recovery (EOR) techniques, on mitigation response, on interpreting seismic data, and on the construction of geological models. That doesn’t mean that, without assistance from abroad, the work would pile up — we have excellent specialists capable, without exaggeration, of carrying out unique technological operations. It’s just that you have to keep your eye on the ball; sharing experience in the scientific world — that’s fundamental to development, generally.

— As I understand it, specialists from those countries with the most developed oil and gas industries — the USA, Norway, Great Britain — are, predominantly, in greatest demand?

— You’re right. Petroleum sciences developed, initially, here, and in the United States. But once large-scale production began in the North Sea and the Middle East, other players began to appear. Conditions are different in each case, so lead times differ. The USA, the Netherlands, Norway and Great Britain have the most interesting experience, currently, but China is starting to break out.

— Do you collaborate with China?

— Yes, we’re expanding our cooperation at the moment, as it happens. The Chinese, in fact, follow the Soviet scientific tradition. Plus, they’re actively building up American experience.

A look into the distant past

— We’ve discussed how you recruit and involve specialists and share experience with peers in addressing various tasks and objectives. But we’ve missed the point somehow — which is, what tasks and objectives are these, exactly?

— We have nine programmes encapsulated in our Technology Strategy. First, we, together with other Gazprom Neft specialists, determined precisely what challenges the company faced. We gained an understanding of what technologies were needed to reduce capital and operating costs, and what could be done to improve efficiency in geological prospecting and exploration.

We’ve identified a number of “game changers” — that is, areas that could help us completely change the balance of power within the industry. And we’ve been able to put in place nine areas of strategic focus.

One of which is — geological prospecting and exploration.

The quality of reserves is getting worse. The structures we are developing are ever less defined and clear-cut. There’s a high level of heterogeneity in the strata. In this situation, we need to learn to understand the structure of a field in more detail before we even start drilling exploratory wells. Technology plays the main role here, allowing us to improve the accuracy of our research.

—Do you involve palaeo-geologists in your work?

— Of course. The places we extract oil from were part of the earth’s surface 100–300 million years ago. Where there are now rivers and mountains, there might once have been oceans. All oil fields are located on the site of ancient oceans and rivers. Our work begins with us aggregating all information about the region under investigation and creating a model of how it was formed, how segmentation occurred, how geological deposits occurred, how oil accumulated, and where it migrated to. Today we can simulate geo-mechanical stresses to determine which faults were formed and how the oil moved through them. That is, we are recreating processes that took millions of years, in order to determine, with considerable accuracy, where it is worth looking for new, undeveloped sites.

— You say there are no gigantic fields left, only small ones. Does that mean there’s only a small amount of oil left?

— There are no major deposits remaining in the usual places. But there are offshore. Although they can also occur onshore — in deep horizons. It’s worth mentioning that the age of low viscosity oil has come to an end. Although technology is being improved. We can now extract the sort of oil that, 20 years ago, would have been impossible to produce. In addition to which, the question of price is important. After all, mining has to be not just technically possible, but also economically viable. These calculations are also handled by the STC.

In which context, we can move on to the second area of focus outlined in our strategy, which is — working with non-traditional reserves: and that, in our country, essentially, is understood to mean the Bazhenov Formation.

Russian “shale oil”

The Bazhenov Formation is a genuine “game changer” in Russian shale oil. The formation covers in the order of one million square kilometres and, even on reasonably conservative estimates, contains dozens of millions of tonnes of recoverable oil. But that’s another class of reserves altogether, compared to those we’re used to working with.

The Bazhenov Formation has been well known for some time. Initial experiments in production were undertaken as early as the 1980s. But, thus far, it’s been a question of individual wells. There aren’t yet any viable technologies that would allow us to dot an entire block with wells and produce oil on an economically viable basis. We’re working on such technologies at the moment.

The main technologies used to produce shale oil in the USA are horizontal wells, together with multi-stage fracking. But just transferring these to the Bazhenov Formation isn’t possible, they’d have to be adapted. That’s the first thing.

The second is that wells at the Bazhenov Formation would have to become a matter of routine. That is, wells would have to be built quickly, and without any complications. The problem is the same as for American shale — which is that the oil is located in very low-permeability strata, and a lot of the oil only flows out of the well over a period of a year to a year and a half. You have to drill constantly in order to maintain productivity. And drilling is an expensive operation, which plays a major role in driving production costs. The longer you spend drilling a well, the more expensive it becomes.

— But why do we need the Bazhenov Formation, if we’ve got traditional fields, offshore fields, and so on?

— We’re thinking years ahead. The Bazhenov Formation is a larder the Russian oil industry will be using once traditional fields have been seriously depleted. The formation is located across traditional production areas, where all the necessary infrastructure is already in place. The Bazhenov Formation will mean all of that can be rebooted again. Apropos of which, the presence of existing infrastructure is the most important economic factor.

— And what sort of perspective — lead time — are we talking about?

— Decades. Added to which, work on low-permeability strata isn’t just being undertaken at the Bazhenov Formation. There are the Achimov deposits, for one. Which is to say, those technologies under development can be applied to various areas of activity. Technologies developed at the Achimov deposits can be applied to the Bazhenov Formation.

As regards permeability — that is, a rock’s ability to let oil pass through it. The major deposits of Western Siberia have a permeability of around 100 — 200 millidarcies (mD). Permeability at our traditional reserves has now dropped to 1 — 0.5 mD. At the Achimov deposits it’s 0.1 mD and at the Bazhenov Formation — 0.01 to 0.001 mD.


— What’s the next area of focus?

— Electronic asset development. We’ve been developing our own information technologies since 2012 — before the current digitalisation boom, although we were, already, preparing for it.

We are committed to developing our own methodologies and software products for collecting and analysing information, engineering design, preparing and taking decisions on investments, and for project portfolio management.

The company generates the greatest potential profit — or bears the greatest losses —as early as the concept development stage, when the decision is taken on developing a project and the optimum means of doing so selected. Up to 50 percent of project efficiency is determined at precisely this point.

Once the infrastructure has been built, we can engage in optimisation, but that delivers economies of no more than 10 percent. So the software products we are focussing on are directed at concept development, for building integrated models based on “the strata, the well, and fitting out”.

—Who’s involved in development?

— Those engineering practices integral to software products are being developed by the NTC. Sometimes we involve our innovative community. For example, the information framework, as a rule, is developed by Gazprom Neft’s specialist subsidiary, the Information and Technology Service Company LLC (ITSC). We are also involved in developing software products for field management once these go into operation — the “Digital Field” Project. But the overwhelming majority of companies offering various digital solutions for the oil and gas industry are working in this area. In our view, however, the focus should be on the earlier stages. Again, the greatest opportunity for efficiency arises at the concept development stage of field development.

The key question — drilling

— What’s the next area?

— The development of oil-leg reservoirs — that is, oil-bearing sections below gas reserves. There have been relatively few exclusively oil-bearing fields brought into operation in recent decades. The majority are oil and gas or oil and gas condensate fields. The Novoportovskoye field in the Yamal Peninsula being a vivid example.

Under these circumstances it makes no sense to use vertical wells.

And multi-stage fracking isn’t possible, since there might be some ingress of gas or water from neighbouring strata. And the subsequent drop in pressure would make oil production highly unpromising.

— And how are you resolving that problem?

— We’re building wells of highly complex design — so-called “fish-bone” wells, with branches drilled out from a single horizontal shaft, making it possible to reach small deposits, for which drilling separate boreholes would be completely unviable. It sounds pretty simple, on paper, but imagine you’re at a depth of two or three kilometres, you can’t see the object, you’re locating the position of the drill solely on indirect markers or signs, and you’re drilling a horizontal well, constantly against the force of gravity. Added to which, you’ve got to remain within the boundaries of the strata — which is often not more than two or three metres thick — for a stretch of several kilometres.

It’s like getting a needle, threaded with a wire several metres long, into a coin.

It’s well known throughout the global oil and gas industry that Gazprom Neft can now drill any well. But you need high speed.

As you see, we once again come back to the question of drilling. Drilling technologies have been separated out, into a separate area of work. This also concerns well construction at low-permeability strata and unstable formations.

Today, in developing complex fields, about 70 percent of capital expenditure goes on drilling. And the main factor impacting drilling costs is — time. The faster and better you build a well, the less money you spend. But there are technological limitations on lead times in well construction that can’t be escaped. So we are interested in overall performance — the specific value of a well. That is, the cost of the well, vis-à-vis the level of production achieved.

In order to reduce the unit cost factor, it’s possible to increase production. This is currently being improved by increasing high-technology in wells. Horizontal wells are used instead of vertical — and horizontal wells of complex design. Building wells like this is more expensive, but their productivity is higher — which means their unit cost factor is lower.

Surfactant agents mean the oil recovery rate (ORR) can be increased by 13 to 14 percent. If surfactants were to be used in polymer flooding across all assets, then additional production would exceed 170 million tonnes.

14 percent up on oil recovery factor

— And what sort of work are you doing at traditional fields?

— For deposits close to depletion, we are developing enhanced oil recovery (EOR) techniques to increase oil recovery. It’s no secret that no one in the world can extract all the oil contained in a reservoir. Today, we extract 40 percent, at best — that sort of oil recovery factor (ORF). Surfactants can be used in order to increase this.

As at the start of this year, Gazprom Neft, together with Salym Petroleum Development, Tyumen State University and Norkem, were able to synthesise 11 new surfactant agents capable of replacing internationally competitive products.

Many people believed that using surfactants would not, generally, deliver any sort of result. But we have conducted a number of successful experiments, including a pilot project at the Salym group of fields. We are making preparations for field testing at the Kholmogorskoye field. It is already clear that surfactants can increase the ORF by 13 to 14 percent.

Calculations suggest that polymer flooding at the Kholmogorskoye field alone could deliver an additional 30 million tonnes of oil for the company. And if this methodology were to be used across all assets, additional production would be more than 170 million tonnes.

We’re now continuing to fine-tune the content of these “cocktails” in an attempt to make them as effective as possible, while still competitively priced.

Potential demand on the part of the Russian oil and gas industry is estimated to be in the order of several million tonnes per year, and in order to meet that it will be essential to build factories and plants. This means job creation, and a significant impact on the country’s economy.

But creating such large-scale production facilities has to involve the government, including in terms of the sort of tax concessions that would guarantee a return on investment.

The next area of focus in our technological development concerns the development of carbonate and fractured reservoirs. The proportion of oil reserves in carbonate reservoirs, worldwide, is increasing. Ever more new fields fall into the category of carbonate strata. The main problems here are low permeability, and low sweep efficiency (a low ORF). These problems can be addressed through high-technology wells and hydraulic fracking. We are collaborating with oil companies that have experience with similar reserves, as well as with the French Institute of Petroleum.

In this field you have to gather together the necessary volume of pilot projects in order to build up know-how.

A further area of strategic focus in our activities is infrastructure development. We have a large number of very remote fields which are subject to challenging climatic conditions.

You have to take a modular approach, allowing the capacity of such capital-intensive facilities to be expanded step-by-step — like, for example, a central gathering facility. Working under conditions involving permafrost and extremely low temperatures has forced us to develop skills and competencies in soil science, permafrost specialisms, new materials, and so on.