In search of the optimum

Oil & Gas Journal

Conceptual engineering in field development planning, and in re-engineering mature fields, is today an integral functional area of expertise for any major oil and gas production company. The search for the optimum and most economically viable infrastructure design or layout, in line with the processes occurring in wells and strata, is seen as the most important stage in project development. Yuri Maximov, Deputy CEO for Conceptual Engineering and Capital Construction Support at the Gazprom Neft Science and Technology Centre talked to OGJRussia about how engineering, and the search for the optimum, is handled within the Gazprom Neft Group of Companies.

— Yuri Valerievich, what goes into the understanding of conceptual engineering at the Scientific and Technology Centre?

— The two key concepts are, already, contained in the name itself — a concept, and engineering. “Engineering” gives us to understand the calculations that have to be made from the moment a field model is constructed, combining the subsoil and above-ground parts. And the concept — that means the scenario of developing an asset, taking geological uncertainties, and the conceptual environment surrounding the project, into account.

Our task is to formulate that concept and define each stage of project development in order to take into account all of the potential risks that might impact the very diverse aspects thereof — from geological to economic risks, to country-specific issues (if we’re talking about international assets). For example, previously, when major projects were being developed, there was no such emphasis. Only a basic production profile was produced in developing a field, with a feasibility study then carried out on that basis. As a result, situations would arise in which the geology had not been confirmed and corrections had to be made to what that field infrastructure consisted of, as well as its capacity. Often, we get new information once we’ve begun drilling, which changes our initial impression or understanding of the geology of the block. But at that point the infrastructure is already in place — or else making adjustments to it, in fact, leads to a complete change in the concept of the project. Nowadays, as reserves are becoming ever more complex, and their development ever more expensive, we can’t allow situations like that to arise, and have to take all uncertainties and risks into account.

In developing conceptual projects we are looking for the optimum solution across all systems — which means the subsoil and the above-ground part — the infrastructure, or surface facilities. Taking all conditions and uncertainties into account, as well as the technologies that we have at our disposal at a particular point in time, we determine the option that delivers the best project economics. For example, by doing this at the Messoyakhskoye field we increased the net present value of the project (NPV) by 23 percent. Benchmarking suggests that if you don’t use conceptual engineering then project outgoings increase by 10 to 40 percent. Given the amount invested in field development these are colossal figures that — across the company — can be measured in tens of billions of rubles.

— So conceptual engineering then is a tool that allows you to take the greatest possible volume of data across various sectors and obtain the optimum solution for a specific objective?

— Yes, it’s an instrument that allows you to find a comprehensive, optimum solution taking the data and metrics of all sub-systems involved in the field-development scenario into account.

— And when does re-engineering happen?

— Re-engineering is used at mature fields, which have already passed peak production and which have, for example, an unnecessary amount of infrastructure. We undertake analysis, looking for an energy balance such that the operational costs of maintaining the project are kept to the minimum. This allows us to identify new solutions and improve the viability of development — prolonging the field’s life, in fact. Such decisions, as a rule, involve the potential for creating capacity for processing or monetising APG, reducing electricity costs, and optimising the costs of pipeline operation, through the use of more modern solutions and materials.

We’ve now expanded that initiative to include analysis of possible scenarios for developing residual stocks. A comprehensive study is being prepared on improving the project’s economy, increasing or optimising production, and abandoning the use of inefficient wells. We did similar work this year at Gazpromneft-Vostok’s Krapivinskoye field, and got very good outcomes. As a result, measures have been developed that have the potential to increase the project’s NPV by more than 10 percent.

— And what’s the principle behind cost engineering?

— One of the most serious challenges facing oil and gas producers currently is high-quality decision-making in the early stages of project development. An incorrect initial cost estimate leads to suboptimal project-development scenarios project being selected, which can lead to its failure.

To mitigate or reduce such risks Gazprom Neft has created a single and inclusive cost engineering system that allows us to make informed and sound cost decisions, and monitor projects — essentially based on a database, accumulated by the company, covering physical and cost metrics. Tools and techniques developed to estimate capital and operating costs are already being actively used by cost engineers and technical specialists to justify decisions. The accuracy of an assessment varies depending on the availability of data input, but does not, generally, exceed the margin of error.

— Tell us about IT developments in conceptual engineering.

— We’ve developed our own software product in the Science and Technology Centre, which allows us to develop conceptual projects in line with the problem of finding optimal solutions. The programme consists of several modules linking the subsoil and above-ground elements — that is, geology and infrastructure, well-pad distribution, the selection of production technologies, cost management, and project economics. This unique technology is based on performing a series of calculations to find the optimum solution, taking the uncertainties and the interrelated impacts of all systems into account. The programme, known as ERA:ISKAD calculates thousands of variations and presents scenarios with the greatest economic impact. A single digital platform makes it possible to achieve a manifold reduction in calculation speeds.

In terms of cost engineering, in order to improve accuracy in calculations the Science and Technology Centre is developing a software package on a full-fledged IT platform which allows calculations to be made across all kinds of oil production costs, including infrastructure, drilling and operating costs. Such a solution means any authorised user on the corporate network can work with calculation modules online, as well as receiving first-line support from experts.

— And are you developing this software independently, or in some kind of partnership?

— Our job, in the Science and Technology Centre, is to analyse business needs, set objectives, and develop unique algorithms and methodologies to address these. The software implementation and support for this is managed by our IT partners.

— There’s a lot of talk about developing specific software products. Is there any merit in making these available for sale?

— We’re focussed on addressing the specific challenges facing our own company, as a priority.

— Are there any competitive international products in conceptual engineering similar to those being developed by the company?

— Analysis of similar software products has shown that, while there are several programmes able to address tasks in individual areas, in terms of an inclusive solution for finding the optimum, which takes all risks and uncertainties into account, there’s nothing.

We are working towards ensuring that all the reserves that the company has at its disposal are developed. However, some of these reserves, while classified as recoverable, are below the margin of profitability. With the help of our new software tool, which we began using widely last year, we have the opportunity to determine the point at which new technologies can be applied to make the involvement of such reserves economically viable, and can begin developing them.

— How are such points identified and determined?

— Prior to the company’s Technology Strategy being adopted in 2014, the process of introducing new technologies came down to seeking offers regarding equipment and services available on the market, and subsequently adapting these for implementation in oil production processes. We were more led than leading. Today, we are addressing the problem of finding and implementing new technologies by developing our own technology management system.

This means we can systematically solve problems in analysing and assessing the value of oil production processes to identify possible areas of improvement through the introduction of new technologies. This gives us the opportunity of setting tasks and finding solutions in conjunction with equipment manufacturers and service companies.

As regards ground infrastructure, the key areas in introducing new technologies here concern reducing costs and improving speeds in facilities construction. Currently, technical requirements and equipment solutions in block-modular design are worked out in conjunction with manufacturing plants and design institutes. This is particularly the case in the Yamal region, where the challenging climate and logistics mean construction is very expensive, and reducing costs is something you have to think about.

— What companies are you collaborating with here?

— There are several leading domestic companies on the Russian market, currently. We hold regular technical sessions, during which we discuss our needs and have it confirmed that plants are ready and able to move over to that kind of equipment. Also, in terms of development, we focus on internationally competitive products. I’m confident that, after a while, we will be able to meet international best practices in terms of technological standards and, more importantly, costs.

— Can you give us an idea of the main areas such technologies relate to?

— These technologies can generally be used in all areas of surface facilities or above-ground infrastructure development: for example, we are, already, actively using polymer-lined pipelines, which are manufactured in large spools. It is convenient and quick — it arrives, gets unwound, and is connected — and all of this without welders having to do any work. A second example would be the modular oil treatment units being used at the Kuyumbinskoye field in Eastern Siberia and the Messoyakhskoye field in the Yamal-Nenets Autonomous Okrug. If installation typically took one and a half to two years, it now takes just four or five months.

— Have there been any new materials appearing on the market recently that have allowed you to change your views on designing any facilities?

— Ever more composite materials are appearing, obviously, but there’s not yet any marked trend towards rejecting, for example, metal. At the same time, we haven’t been looking at this area for some while. And we already see that the market has opportunities for increasing the strength, reliability and durability of road surfaces under permafrost conditions by using composites. I think in two or three years there will be more ideas as to what innovations can be applied to make work cheaper and better quality.

— Would you say design is now on the road to revolution?

— The revolution’s already started. But, unfortunately, the rules and regulations that have been in place since Soviet times haven’t changed. We already have the opportunity of developing projects on the basis of safety or specific technical requirements to reduce costs and improve efficiency, without any deviation in standards, and taking compensatory measures into account. But we’ve got something to work towards and learn from in terms of international practices, where regulations are not so conservative, and the level of workplace and industrial safety is certainly no lower than our own.

— What’s happening in terms of training specialists working in conceptual engineering?

— First of all, the company has developed an internal training programme, “PROConcept”, the like of which has no peer in Russia. It’s very competitive to get onto, and only the best specialists, with experience and skills in developing engineering solutions, are selected. Company employees undergoing this programme gain knowledge from related specialities, and make a thorough analysis of the principles underpinning complex decision making following analysis of all systemic uncertainties.

Secondly, together with the Tomsk State University we have developed the country’s first Master’s programme in conceptual engineering which, as it happens, involves training specialists with wide experience across related areas. Through this expansive specialist programme they are get to study all those specialisms essential to finding optimum solutions. Leading experts from the Science and Technology Centre are involved in teaching this programme.

I would point out, a further new specialism has emerged in recent years — cost engineering. Specialists here have to be able to make cost assessments of facilities in line with the best technological solutions, current cost or pricing strategy, and the cost of resources.


Yury Maksimov has been Deputy CEO for Conceptual Engineering and Capital Construction Support at Gazprom Neft’s Science and Technology Centre since 2013, having graduated from Udmurt State University with an honours degree in oil and gas field development and production.

He began his career at JSC Udmurtneft, gaining experience in several specialisms, from production operator to operations manager. He continued his career at TNK-BP, where he was part of the team implementing field development projects at the Kamennoye field and on the Uvat project, developing activities in engineering, conceptual design and project management.