Timan-Pechora is within the scope of Gazprom Neft’s strategic interests

Interview with Viktor Savelyev, Head of the Exploration and Production Directorate of OJSC Gazprom Neft
June, 2010. Oil and Capital

Viktor SavelyevToday, OJSC Gazprom Neft appears to be one of the most dynamically developing Russian Vertically Integrated Oil Companies (VIOC). By 2020, the company expects to produce 90-100 million tons of oil equivalent per year. By the end 2009, the company’s production rate was 50.2 million tons of oil equivalent, while the production rate at the main production fields in Yamalo-Nenets Autonomous District (YNAD) is starting to decrease due to depletion of the fields. It is obvious that meeting the challenge and doubling the production rate in 10 years will only be possible by launching new projects and developing new regions.

Oil and Capital (“O&C”) talked to Viktor Savelyev, Head of the Exploration and Production Directorate of OJSC Gazprom Neft, on the company’s prospects in Timan-Pechora Province.

— Gazprom Neft holds the license for development of the South-Toraveiskoye field in Timan-Pechora Province. To what extent had the area been explored by the time the company acquired the right to use the subsurface resources? When was the license registered?

— On the one hand, the site was characterized by a high degree of geophysical prospecting research and, on the other hand, by a low degree of exploratory drilling. Information on the deep structure of the site increased considerably with the beginning of 2D seismic surveys, which resulted first in mapping (in 1971) and then development (in 1977) of the South Toraveiskaya structure. Altogether, 5 exploration wells with total drilling footage of 11 935 meters and average depth of 2459 meters were drilled on the site. The well spacing density is 1 well per 8.2 square kilometers; the bottom hole rock age is Upper Devonian - Lower Carboniferous. Production capacity of the South Toraveiskoye field is associated with carbonate and terrigenous deposits of Devonian, Carboniferous, Permian and Triassic systems. Six flat sheet roof oil deposits tectonically screened in the upper part of the cross section have been discovered. The occurrence depth is 950 to 2500 meters. The largest recoverable reserves contain carbonate reservoirs of Lower Permian Age occurring within the 1500 to 1580 meter interval. The field is currently in conservation. In 2006, in line with the company’s development strategy, Gazprom Neft purchased the South Toraveiskoye field at an auction for the right to use the subsurface resources; the corresponding license was obtained in February 2007.

What kind of exploration work was carried out on the field? Was there any drilling? Was there any increment in reserves, and, if so, by how much?

- Within the framework of fulfilling licensing commitments and the requirements of RF legislation, an exploration program was established to study the South-Toraveiskoye field and prepare it for development. Ecological monitoring projects were developed, and a field ecological survey was performed. In 2008, field seismic operations were performed which covered the whole of the licensed site area. Naryanmarseismorazvedka was the contractor of the seismic operations. The results of these operations allowed a detailed study of the geological structure of the discovered deposits, itemization of potential hydrocarbon traps not tapped by drilling in the deep-seated Silurian-Lower Devonian complex of deposits and a recommendation that two prospecting wells be drilled. A geological field model was developed which became the basis for re-estimating the hydrocarbon reserves. The increment of recoverable oil reserves in category C1 amounted to 1 595 thousand tons; in category C2, to 2 231 thousand tons; and of dissolved gas in category C1, to 60 million m3. As of the beginning of 2009, the RF State Register of Reserves for the South Toraveiskoye field listed in-place (recoverable) oil reserves in category C1 of 58.3 (11.5) million tons; and in category C2, of 4.1 (0.8) million tons. For dissolved gas, the same figures in terms of category C1 category are 9 (0.3) billion m3; and in terms of C2 category, 0.9 (0.003) billion m3.

In addition, we have prepared the design documentation: geological exploration project, and a pilot development flow chart of the South Toraveiskoye field. Currently, we are developing up a detail design for building a prospecting and appraisal well (the design depth is 4800 meters) and a master plan for construction of the South Toraveiskoye field facilities. The start of drilling the first prospecting well in the southern part of the field is scheduled for 2011.

What volume of investments is required to launch the South Toraveiskoye field?

- We are currently working on design estimates, which will be used to determine capital investments in field development and the economic efficiency of the project as a whole.

Can you tell us something about the quality of South Toraveiskoye field oil?

- In terms of the basic physical and chemical properties, the hydrocarbon deposits of the South Toraveiskoye field are primarily bituminous (the density is over 895g/cm3), hyper-viscosity and high-viscosity (dynamic viscosity is ≥ 5-25mPa-sec), low-paraffin (0.77-1.23%) and high-sulfur (2.03-2.75%).

In 2007, Gazprom Neft and LUKOIL established a joint venture called Development of Regions; one of the objectives of the venture is implementation of joint projects in Timan-Pechora. What are the projects in question? What is the joint venture doing at the moment?

- It’s true that Gazprom Neft and LUKOIL, with shares of 51% and 49%, respectively, have established a joint venture called Development of Regions Oil and Gas Company, LLC. The corresponding documents were signed by the heads of both companies. The joint venture is managed on a parity basis.

The company was established to implement various oil and gas projects. In particular, the field of activity of the joint venture will include acquiring the right to use the subsurface resources, exploration of subsurface sites, hydrocarbon exploration and production, construction of field facilities, implementation of infrastructure projects, as well as transportation and commercialization of recovered raw material. One of the priority regions of the joint venture is the Nenets Autonomous District.

Do you plan to build infrastructure to implement oil and gas production projects jointly with LUKOIL? If so, then when and where? If yes, then under what conditions might the common infrastructure be operated?

- At present, the joint venture is busy studying issues of implementing options for joint activity.

The Labaganskoye field is located near the South Toraveiskoye field; the field production license is owned by Rosneft. Have you contacted this company to discuss the possibility of building common infrastructure to transport the recovered raw material?

- No negotiations on the issue are being carried out with Rosneft at the moment.

In what directions should the pipelines in the Nenets Autonomous District be laid, in your opinion? Should the infrastructure be developed in the direction of Varandey, Indiga or as far as Usinsk?

- The choice of an optimum hydrocarbon transportation scheme in the region depends on many factors, such as the field commissioning dates and when peak production peak are reached, economic efficiency of the routes, consensus of major subsurface users and the government. At present, all options for the pipeline route in the Nenets Autonomous District are being studied, and so far no final decision has been made on this issue.

Does your company plan to participate in auctions for the right to develop the Timan-Pechora field? Are you interested only in the Nenets Autonomous District or are you also considering some options in Komi? What are the company’s guiding criteria for the choice of sites in Timan-Pechora?

- Timan-Pechora oil and gas province is within the sphere of Gazprom Neft’s strategic interests, therefore; we plan to participate in auctions to purchase subsurface sites in this region. A decision on the feasibility of purchasing a subsurface site is based on the results of an integrated geological and economic assessment and the company’s development strategy.

Our experts are constantly on the lookout for subsurface use sites put up for auction by the Russian Subsurface Resources Agency (Rosnedra), and estimate their exploration potential and probable investment attractiveness. Basic site evaluation criteria are the size of hydrocarbon reserves/resources, availability or proximity of transport infrastructure, previous geological and geophysical research, degree of exploration risk, and volumes and structure of investments. The economic efficiency of purchasing the site is analyzed on the basis of a comprehensive analysis of all the existing data. If the project is considered to be economically feasible, a decision is made on the company’s participation in the site purchase auction.

Folder, Viktor Alexeevich Savelyev

Born on January 24, 1963, in the town of Almetyevsk.

In 1985, he graduated from Kazan State University majoring in Geology and Oil and Gas Field Exploration.

He is a Doctor of Geology and Mineralogy and professor.

1985 – 1986 – geologist with the Kolpashevsky oil and gas exploration expedition in Tomsk Region

1986 – 1987 – engineer, senior engineer of the exploration geology department of the TatNIPIneft R&D Institute

1988 - 1994 – junior research assistant, research assistant, senior research assistant in charge of the laboratory of the TatNIPIneft Institute, acting head of the exploration geology department

1994 – 1995 – head of the geological laboratory of the UdmurtNIPIneft Institute

1995 – 1999 – deputy director for research work – head of the department for new methods and stimulation of oil production, director of the UdmurtNIPIneft Institute

1999 – 2000 – Minister of Fuel, Energy and Communications of Udmurt Republic

2000 – 2006 – Deputy Prime Minister of Udmurt Republic

2006 – 2008 – vice president for geology and development of oil deposits, acting senior vice president for production of oil stock of OJSC Russneft Oil Company

2008 – 2009 – Director General of Gazprom Neft Research and Development Center, LLC

From the end of 2009 to the present - head of the Exploration and Production Directorate of OJSC Gazprom Neft