Rus­sia adopts Texas drilling to re­vive oil fields

The Pak Banker - - COMPANIES/BOSS -

Frack­ing isn't just for shale. In Rus­sia, pro­duc­ers are im­port­ing tech­niques from the U.S. to squeeze bil­lions of dol­lars of ex­tra oil from Sovi­etera fields.

TNK-BP, Rus­sia's third­largest pro­ducer, will use hy­draulic frac­tur­ing com­bined with hor­i­zon­tal drilling in al­most half the wells it sinks this year, a six­fold in­crease in just two years, the com­pany said. OAO Ros­neft (ROSN), OAO Lukoil (LKOH) and OAO Gazprom Neft have sim­i­lar plans.

So-called frack­ing, the process of blast­ing oil from rock by in­ject­ing a mix­ture of water, sand and chem­i­cals into wells, has been used for years in Rus­sia's Siberian oil heart­land to stim­u­late pro­duc­tion. What's new is al­ly­ing it with hor­i­zon­tal drilling, turn­ing the drill-bit 90 de­grees to bore hor­i­zon­tally to reach more oil­bear­ing rock. The pair­ing was per­fected in the U.S. to get eco­nom­i­cally vi­able flows out of shale de­posits. Used in Rus­sia, pro­duc­ers are re­cov­er­ing 15 per­cent more crude from ag­ing de­posits.

"This is a very big change in the way the com­pany ap­proaches pro­duc­tion that has lit­er­ally hap­pened in the last year and a half," said Gazprom Neft's deputy chief ex­ec­u­tive of­fi­cer. "We have made break­throughs."

En­hanc­ing pro­duc­tion from decades-old fields is needed to main­tain Rus­sia's crude pro­duc­tion above 10 mil­lion bar­rels a day for a fourth year, a fig­ure that sur­passes Saudi Arabia and the U.S., said Cliff Kupchan, an an­a­lyst at Eura­sia Group. Apart from the Rus­sian state, which gets half its rev­enue from oil and gas, the other win­ners are sup­pli­ers of peo­ple and equip­ment to frack wells in­clud­ing Sch­lum­berger Ltd. (SLB), Weather­ford In­ter­na­tional Ltd. (WFT) and C.A.T. Oil AG.

"Ros­neft is be­com­ing a more tech­no­log­i­cally ad­vanced com­pany," Igor Sechin, chief ex­ec­u­tive of­fi­cer of Rus­sia's largest pro­ducer, said in a speech in Hous­ton this month.

State-con­trolled Ros­neft will em­ploy the tech­nique at 50 wells this year at its largest pro­duc­tion unit, up from just three in 2012, ac­cord­ing to a com­pany pre­sen­ta­tion. Gazprom Neft, the oil unit of Rus­sia's nat­u­ral gas mo­nop­oly, will dou­ble the num­ber of wells where fracks are used this year.

Lukoil, Rus­sia's sec­ond­largest pro­ducer, plans to use frack­ing in 55 hor­i­zon­tal wells over nine years to raise pro­jected pro­duc­tion 15 per­cent at Urevskoye, a 60,000 bar­rela day Siberian field that first started pump­ing in the 1970s, a com­pany pre­sen­ta­tion showed. The com­pany ex­pects to get an ex­tra 35 mil­lion bar­rels from the field, val­ued at about $3.7 bil­lion based on to­day's price for Rus­sia's bench­mark grade.

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