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Sibneft Launches Production From Romanovskoye Field

Moscow, 16 May 2000; Sibneft has launched commercial production from its Romanovskoye field, marking the latest step in its aggressive upstream investment programme. The start of production from the field coincides with a turnaround in the company’s oil output, which has been rising steadily for the last three months.

Sibneft will develop the Romanovskoye field with the help of its strategic alliance partner, international oilfield service company Schlumberger. The field is located in the Yamal-Nenets district near the company’s main production base at Noyabrsk. The acreage is believed to harbour recoverable reserves of around 125 million barrels (category ABC1 under the Russian classification system).

Sibneft plans to drill a total of seven wells at the field this year. The pilot phase of development is expected to yield output of some 600,000 tonnes per year (12,000 b/d), while peak production is targeted to reach one million tonnes per year. Sibneft secured the license to the field at the end of 1998.

The legislature of the Yamal-Nenets autonomous district approved the Romanovskoye field for development under a production sharing agreement (PSA) in December, benefiting from a provision in the law on PSAs which allows smaller fields to be approved directly by the regional legislature. Sibneft also hopes to secure approval to develop the Sugmut, Novogodnoye and Yarainerskoye fields under PSAs.

Sibneft earlier this year launched commercial production from the Yarainerskoye field, where recoverable reserves are estimated at around 180 million barrels (category ABC1 under the Russian classification system). The company plans to drill nine wells at the field this year, out of a total of 14 wells due to be drilled during the pilot phase. Once fully developed, the field is expected to yield production of around 400,000 metric tons per year (8,000 b/d).

The development of the new fields is part of a vigorous programme of upstream investment being carried out by Sibneft this year. The company plans upstream capital expenditure of $220 million in 2000, and it is currently on target to achieve its goal of hiking annual production to 16.5 million tonnes (330,000 b/d) from 16.323 million tonnes in 1999.

Sibneft’s upstream investment drive is already beginning to yield results, with production from fields belonging to the company’s Noyabrskneftegas upstream subsidiary on the rise for the first time in a decade. The increase has come on the back of a sharp increase in development drilling, which was almost three times higher in January and February this year than in the same period in 1999. Development drilling totaled 85,300 metres in the first two months of 2000, against 29,300 metres in the same period last year.

Sibneft last year undertook a radical overhaul of its operating practices, which led to a number of unprofitable wells being shut in. Sibneft now evaluates all its investments at the level of individual wells according to four criteria, including internal rate of return and buy-back period.

Sibneft president Eugene Shvidler commented: “I am pleased to report that our aggressive programme for opening up new fields is proceeding on schedule. Taken together with the steps we have taken to enhance recovery from existing reservoirs, we are laying the foundations for continued and sustainable growth in production.”