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Gazprom Neft, the Ministry for Industry and Trade of the Russian Federation, and the Government of the Khanti-Mansi Autonomous Okrug confirm cooperation in developing the Bazhenov Formation

Press-release Technology Partnership

Gazprom Neft, the Ministry of Industry and Trade of the Russian Federation, and the Government of the Khanti-Mansi Autonomous Okrug (Yugra) have signed a Memorandum of Understanding (MoU) on addressing the challenges involved in developing the Bazhenov Formation, with the partners planning to prioritise concluding Special Investment Contracts to implement the national project on “Developing Domestic Technologies and High-technology Equipment to Develop Reserves at the Bazhenov Formation” (“the Bazhen Project”).

On the photo (from left to right): Governor of Khanty-Mansiysk Autonomous Okrug-Ugra Natalia Komarova, Minister of Industry and Trade of the Russian Federation Denis Manturov and Gazprom Neft CEO Alexander Dyukov

Pursuant to the MoU, the Ministry of Industry and Trade, for its part, will facilitate the conclusion of Special Investment Contracts with technology partners (production and oilfield services companies) involved in developing new production facilities and capacity on the Bazhen Project, while the Government of the Khanty-Mansi Autonomous Okrug, on the other, will establish a highly concessionary tax regime under such contracts. Gazprom Neft will be investing all of the resources committed to implementing the project at this stage, and coordinating the activities of all technology partners involved.

An agreement was signed between Gazprom Neft and the Government of the Khanty-Mansi Autonomous Okrug on establishing the “Bazhen Technology Centre” in September 2017. This industry-wide platform, bringing together the resources of oil and gas and oil services companies, the scientific community, investors and government, will concentrate and consolidate the cutting-edge competencies and technologies essential for creating economically effective methodologies for developing the Bazhenov Formation.

The establishment of this technological complex will ensure the achievement of target production volumes from Bazhenov reserves — planned to reach 2.5 million tonnes per year by 2025.

Gazprom Neft CEO Alexander Dyukov commented: “Developing the Bazhenov Formation is a strategic project, successful fulfilment of which will lead to the creation of a new oil province in Western Siberia, at which production and transport infrastructure is already in place. This is a task of national scale and importance, and it is essential that all participants — the scientific community, developers, investors, federal and regional government — are brought together. It is important that the project promotes and facilitates the creation of a range of domestic technologies and equipment for developing the reserves of the Bazhenov Formation.”

Notes for editors

The “Bazhenov formation” refers to a specific geological stratum identified in the centre of Western Siberia, running to depths of 2,000–3,000 metres. Estimates suggest that oil reserves at the Bazhenov reservoir could amount to as much as 100–170 billion tonnes in Western Siberia alone. The stratum covers an area of approximately one million square kilometres and is 10–100 metres thick. The Bazhenov Formation is classified as unconventional type of reserves, comprising what is known as “shale oil”, development of which currently awaits the selection of technological solutions for its full-scale development.

Gazprom Neft began its first investigations into the Bazhenov formation at Vyngayakhinskoye field in the Yamalo-Nenets Autonomous Okrug in late 2015. Fracking operations have been undertaken in the Bazhenov deposits at a new prospecting well and two directionally-drilled wells, with all wells obtaining oil inflows. Appraisal wells were drilled for sampling and well-core analysis, and an extensive range of geophysical information recorded for detailed examination of the drill core and development of a geological model.

Bazhen Technology Centre

2016 saw the completion of the full development cycle at the Krasnoleninskoye field, Khanty-Mansi Autonomous Okrug, with two high-technology horizontal wells drilled for multi-stage fracking, achieving a commercial-inflow of 45 tonnes of oil per day. Total cumulative production at these wells has now reached 10,000 tonnes per month, proving the operational efficiency and technological effectiveness of the essential technology, as adapted for the Bazhenov Formation.

Gazprom Neft is a vertically integrated oil company, primarily involved in oil and gas exploration and production, refining, and the production and sale of oil products. Gazprom Neft’s corporate structure comprises more than 70 production, refining and sales subsidiaries throughout Russia, the CIS, and abroad.

The company’s proved and probable reserves (SPE-PRMS) are estimated at 2.78 billion tonnes of oil equivalent (btoe), making Gazprom Neft one of the top-20 largest oil and gas companies in the world, and one of Russia’s top three largest companies in terms of production and refining volumes. Total production in 2017 reached 89.75 million tonnes of oil equivalent (mtoe), with refining volumes of 40.1 million tonnes.

Gazprom Neft products are exported to more than 50 countries worldwide, and sold throughout the Russian Federation and abroad. The company’s filling station network totals more than 1,850 outlets throughout Russia, the CIS and Europe.

Gazprom Neft’s net profit in 2017 was RUB253 billion — a 26.5-percent increase year-on-year. The company is an industry market leader in terms of both financial growth and various efficiency metrics, including its internal rate of return (IRR).

The company’s main shareholder is Gazprom PJSC, which has a 95.68-percent interest, with the remaining shares in free circulation.