Moving forward

Argus

Gazprom Neft has launched a series of major upstream projects in the north of Russia in recent years, which saw the company ranked Russia’s third largest oil producer at the end of last year. Denis Sugaipov, Head of Gazprom Neft’s Major Projects Directorate, Upstream, talks about future plans for the Novoportovskoye field, the Messoyakha group of fields and other greenfield projects at Gazprom Neft in this interview with Argus.

— What projects are the priority for Gazprom Neft’s Upstream Major Projects Directorate, of which you are head, at the moment?

— I would divide our projects into two parts. The first relates to continuing previously initiated projects — the development of the northern part of the Novoportovskoye field and deep horizons at the Vostochno-Messoyakhskoye field, as well as the development of Zapadnaya Messoyakha. The second part of these projects includes the Nadym-Pur-Tazovskaya zone, the major “Yamal gas” project, and a major project to develop Achimovsky deposits at the Yamburgskoye field. Apart from these we need, at our joint ventures (JVs) with NOVATEK and Rosneft — Arcticgas and Krasnoyarskneftegaz, respectively — to kick-start some projects previously initiated: infrastructure at the Yaro-Yakhinskoye field by the end of this year, and first gas at the Kuyumbinskoye field in Eastern Siberia in Q1 next year.

— What’s happening at the Novoportovskoye field and the Messoyakha project?

— At Novoportovskoye — in the northern part of the field, pilot works on drilling horizontal wells for multistage fracking have been ongoing for the past two years, indicating some promise in developing the northern part of the field. So we’ll be moving on to construction of surface facilities next year. That will allow us to reach plateau production of eight million tonnes of oil per year by 2020, and to maintain that for a longer period than originally planned.

The outlook at Messoyakha is now tied up with other projects. That is, the development of deep deposits at Vostochno-Messoyakha, and work on the western license block. The project at the eastern block includes developing Achimovsky deposits. These are located at a depth of more than 3,000 metres, and are made more complex by low permeability and high lateral heterogeneity; and the oil is low-viscosity oil. Pilot works have been ongoing here over the last two years. Work has been undertaken concurrently with the development of Cenomanian high-viscosity oil deposits, located at a depth of 700 — 900 metres. Potential production from developing deep horizons is estimated at two million tonnes per year from 2021, which offers the opportunity of the Vostochno-Messoyakhskoe field maintaining plateau production of six million tonnes of oil per year for a period of approximately five years. We’re moving on to drilling-over this project, and will be connecting to the central gathering plant at the Vostochno-Messoyakhskoye field.

— You’ve spoken in some detail about your plans for the Vostochno-Messoyakhskoye field, but there’s also Zapadno-Messoyakhskoye — what do you plan to do there?

— At the Zapadno-Messoyakhskoye field, where we’ve been continuing geological prospecting works throughout all this time, we ‘ve been fortunate enough to discover a major oil reservoir, at the furthest eastern part of the license block, close to the Vostochno-Messoyakhskoye field. Reserves in place at the deposit discovered are estimated at 85 million tonnes, which could be brought into production by connecting to infrastructure at the Vostochno-Messoyakhskoye field.

In general, the Zapadno-Messoyakhskoye field represents a very large license block with major resources. We’ll be continuing fracking there in order to find new viable cases.

Another major project for Messoyakha concerns the utilisation and monetisation of associated petroleum gas (APG). This envisages the creation of a complex of facilities allowing the compression, transportation and reinjection of APG from Vostochno-Messoyakha into strata in the neighbouring Zapadno-Messoyakhskoye field. Construction of the necessary infrastructure has already begun. The first batch of gas for underground storage will be obtained in 2020, and the project will make possible 95-percent utilisation of APG throughout the Messoyakha license blocks. APG is being used now for day-to-day requirements and to ensure uninterrupted operations at the Vostochno-Messoyakhskoye field.

— What level of investment do you plan for these projects next year?

— At Zapadno-Messoyakha we plan to start production in 2021, which will require drilling about 47 wells. Investment in drilling over the next three years is measured in terms of several billions of dollars. As regards the project to develop deep horizons at Vostochno-Messoyakha — we’ll reach plateau production in 2021 — 2022: prior to that we’ll gradually start drilling that deposit.

Investment in developing the northern part of the Novoportovskoye field will run to about RUB70 billion on drilling and installing infrastructure to connect to the existing central gathering plant. We expect to be drilling about 185 wells there in 2019 — 2020.

—What are the plans as regards gas at the Novoportovskoye field?

— This year the company took the decision to finance a project to utilise APG from the Novoportovskoye field and the resource base from neighbouring license blocks acquired over the past two years — the Kamennomyssky Susha, Yuzno-Kamenomyssky, Yuzhno-Novoportovsky and Surovy license blocks. Total gas volumes — both APG and natural gas — should be sufficient to put together a sustainable business case for laying a gas pipeline from the Yamal Peninsula to the Gydan Peninsula and on to the Yamburgskoye field to join the integrated gas supply system. In addition to which, construction is starting at the Novoportovskoye field on the second stage of the combined gas treatment plant, which will allow gas condensate to be accepted to support shipments from the Arctic Gates terminal, as well as treating the necessary volumes of gas and despatching this by pipeline. Investments will total in the order of RUB100 billion. We expect to commission this gas pipeline in 2022.

— Bearing in mind that Gazprom Neft is, first and foremost, an oil company, why are you involved in what is, in fact, a completely gas-oriented project?

— We initially injected the natural gas and APG produced at Novy Port into strata — but this gas cap has certain limits. Our forecasts indicate that maintaining reservoir pressure at the gas cap by injecting APG will be effective until about 2022. Thereafter, according to our model, we will start getting gas breakthroughs (gas leakage), so it will be more effective to transport this gas out of the field rather than injecting it into the strata. We are taking this decision understanding, at the same time, that construction of a gas pipeline for APG alone would not be viable, and we need to involve natural gas resources available at both Novy Port and other license blocks. The problem is that the southern and central parts of Yamal are dominated more by gas than by oil, so Novy Port, with its major oil reserves, is the exception rather than the rule. The further north we go, the greater the chances of encountering gas fields rather than oil, given the regional geology. The gas pipeline is going to be a crucial component of strategic infrastructure. All the fields we develop, going forward, are going to need both oil and gas infrastructure. An oil terminal — the Arctic Gates terminal — has already been built in Yamal. We are continuing exploration at our newest license blocks and over the 2018 — 2019 winter season will begin seismic works and get ready to drill exploratory wells.

— Tell us about your projects in the Nadym-Pur-Tazovsky area

— The Nadym-Pur-Tazovsky fields comprise a complex of projects — oil-rim (gas-cap) fields, united by a single infrastructure — the Tazovskoye, Severo-Samburgskoye, En-Yakhinskoye and Pestsovoye fields (these last two being oil rims attached to Gazprom gas fields) — as well as the Zapadno-Tarkosalinskoye field.

The Tazovskoye field has been through pilot works, with 10 horizontal wells drilled, which have confirmed the possibility of these oil rims being brought into development. This project has been found to be viable and we will begin construction of oil and gas infrastructure in the coming winter season. Full production is expected to start in 2020. To that end, we need to build a central gathering point (CGP) and a 60-kilometre intra-field pipeline to the Zapolyarye—Purpe trunk pipeline system. Target capacity for oil is two million tonnes and for gas — six billion cubic metres per year. The gas will be fed into the integrated Gazprom system. We plan to develop the Severo-Samburgskoye field as part of a complex and in synch with the En-Yakhinskoye and Pestsovskoye fields. These are located closer to Transneft’s so-called alternative branch — the central crude oil delivery and acceptance point (CODAP). These fields are at an earlier stage of investigation: drilling of the first horizontal well cluster in Achimovsky deposits is currently ongoing at the Severo-Samburgskoye field, while we’re preparing to drill the first wells at En-Yakhinsk and Pestsovy. We plan to take an investment decision on building infrastructure in 2019 — 2020.

— In what year will these oil-rim projects reach planned capacity?

— After commissioning in 2020, the Tazovskoye field will reach planned capacity in 2021, and the En-Yakhinskoye and Pestsovoye fields in 2022/2023. Peak oil production is likely to last about five years, and peak gas production about 15. These lengths depend heavily on the Excess Profits Tax (EPT) regime — without which development of the oil part of the Tazovskoye field would be economically unviable.

— The government is now discussing offering concessions for gas-field oil-rim deposits. How critical are these concessions for deposits of this kind?

— It’s certainly the case that there are not yet any concessions for developing oil-rim reservoirs because oil-rims are, by their nature, an element of a gas deposit, more often than not already under development, for which income has been received by both the subsoil user, and the state. We see greater promise in applying new technologies in developing oil rims, where reservoir pressure has not dropped radically. So we’re using horizontal-trilling technology at wells of up to two to 2.5 kilometres in length, which allows us to develop these reserves profitably. An integrated approach is important — then the low economic efficiency of oil alone is compensated for by other products.

— Which of your Yamal projects is most promising in terms of transitioning to the Excess Profits Tax (EPT) regime?

— The Tazovskoye field is very much predicated on the EPT regime; its use at Novy Port and the Gas Yamal project is strongly improving the economic attractiveness of bringing low-profit reserves into development. We haven’t yet taken a final decision at Messoyakha — either to move over to the EPT regime, or to continue using the (preferential) export regime.

—How is development of Gazprom’s East Siberian Chayandinskoye gas condensate field going?

— Our job at the Chayandinskoye field is to ensure the launch of Gazprom’s oil infrastructure, which is expected to be brought into operation in Q4 2019. We see the necessity of continuing pilot works here. In 2019 we’ll be continuing the drilling started in 2017, and will drill a further four horizontal wells. Depending on the results of pilot works we’ll take a decision on the full-scale development of the entire oil rim in 2020.

— What projects, in your view, will Gazpromneft-Razvitiye be working on in 10 years’ time, when most of the projects you’re currently working on will have been implemented?

— Some future directions that the Major Projects Directorate is likely to be involved in after 2028-2030 are already clear: first and foremost, this means Yamal, which will remain an area of strategic interest to Gazprom Neft to the end of 2030. The Gydan district is also of interest. In order to make a profitable case there, we might need additional reserves apart from Zapadnaya Messoyakha. We already have encouraging exploratory (prospecting) data on deep-layer Achimovsky deposits in the northern part of Zapadno-Messoyakha. In other words, there might be big discoveries there.

— What prospects do you see in developing Achimovsky deposits?

— We’re already studying Achimovsky condensate deposits in partnership with NOVATEK through our Arcticgas joint venture. In terms of oil we plan to develop the Achimovsky deposits at the Severo-Samburgskoye and Tazovskoye fields. In total, Achimovka reserves in the Yamalo-Nenets Autonomous Okrug are estimated at several billion tonnes. I can, with considerable certainty, say we’ll be working on precisely these over the next decade. A major challenge for us will be developing Achimovsky deposits at the Yamburgskoye field, where reserves stand at more than one billion tonnes of oil. A major plus is the pre-equipped gas part of that field, which has roads and all necessary infrastructure. In terms of the minuses — the fact that the Achimovsky deposits are very heterogeneous, and that it will be necessary to select the right area for initial development and develop it in a way that is economically viable. I expect us to bring the first phase into development by 2020, and to be working on subsequent phases closer to 2030.

— Where else do you plan to expand the company’s presence?

— We’re going to expand our presence in the Middle East and the northern and southern parts of Eastern Siberia. In Iraq we’re considering several options on the basis of service contracts — mainly close to Badra in order to utilise pre-installed oil and gas infrastructure in bringing nearby resources into production.

— Are you interested in projects in Libya?

— I can’t say Libya isn’t an area of potential interest to the company, but it all depends on the political situation. In terms of international development, the Middle East and North Africa are priority regions for Gazprom Neft’s development.

— The company talks a lot about efficiency — what’s been achieved?

— In major projects, efficiency is connected with reducing development time — we call this speeding-up process “Smartfasttrack”. Organisational and digital optimisation are directed at speeding up lead times in project implementation in order to get us closer to the global benchmark. We are working towards figures of five to six years per project overall, and have already made a major step forward, moving from 12 years towards a level of seven to eight years.