SPE DISTINGUISHED LECTURER SERIES is funded principally through a grant of the SPE FOUNDATION The Society gratefully acknowledges those companies that support the program by allowing their professionals to participate as Lecturers. And special thanks to The American Institute of Mining, Metallurgical, and Petroleum Engineers (AIME) for their contribution to the program. Russia's Recent Past and Future in Oil & Gas Production Dr. Iskander Diyashev Chief Engineer, Sibneft Member of Russian Academy of Natural Sciences e-mail: [email protected] Summary • Russia is capable of increasing its oil production to 12 mln bbls per day over the next 7 to 10 years. • This will require about 12 bln $ per year in oilfield CAPEX. • The Russian resource base is much larger than it is commonly believed, at least over 150 bln bbls of oil (not just BOE) Recent past and the future • Oil production in Russia has grown from 6 to almost 9.4 mmbopd the last 7 years. Exports: 3.7 mmbopd (1H 2005). • My estimate is that Russian oil production will peak at about 12-12.5 mmbopd (historical maximum of the USSR) during the decade of 2010 to 2020. Available for export 6.7 mmbopd. MajorMajor producingproducing areasareas andand ExplorationExploration maturitymaturity From Dr. Raymond C. Leonard presentation Future of Russian Oil • During 2010-2020 the decline of Western Siberian production will be compensated by the development of the new oil fields in Eastern Siberia (available for export 1.1 mmbopd in the Pacific), Timan-Pechora and Russian Arctic offshore (available for export 1.0 mmbopd in the Atlantic). • After 2020 the decline of Western Siberia will not be compensated completely, and it will result in a gentle annual decline of approximately 5%. Historical production (to 2004) and forecast of oil production in the Russian Federation 15 300 Daily oil production, actual to 2004 and forecast, mbopd Cumulative oil production, actual to 12.5 2004 and forecast, Gbbl 250 10 200 7.5 150 5 100 Daily oil production, mmbopd 2.5 50 Cumulative oil production, bln bbl 0 0 1920 1940 1960 1980 2000 2020 2040 2060 2080 Years ExplorationExploration maturitymaturity From Dr. Raymond C. Leonard presentation Cumulative discoveries of oil reserves and “creaming-curve” prediction of 300 ultimate reserves 250 200 Total discoveries 150 100 50 0 Cum. oil reserves discovered, Bln bbl 1950 1970 1990 2010 2030 2050 Time, years Reserves life, years 33.2 35.0 30.0 25.0 20.8 19.3 16.1 20.0 LUKOIL 12.9 15.0 11.3 10.3 8.9 7.5 Sibneft 10.0 Sibneft (2003) Slavneft (2004) Exxo n BP 5.0 Shell Conoco Chevro 0.0 1 companies Oil and gas resources and exploration activities in 1995-2003 Oil and Gas Resources Exploration Wells Drilled (1995 - 2003) 28% 27% Middle East FSU 5% 2% 64% North America Europe Others 9% 22% 24% 12% 7% • No major discoveries in the recent years. Exploration activities not matched by exploration potential; • 25% oil and gas resources are in the Arctic shelf (P.Grini, OG21). TimanTiman--PechoraPechora oiloil andand gasgas provinceprovince Oil and gas reservoirs found in the interval from Ordovician to Triassic. 185 oil and gas fields discovered. Total oil and gas resources (in place volumes) are estimated: - in Timan Pechora and Barents and Karskoe sea at 36 bln tons of OE, 260 bln BOE, - in land - about 8,5 bln tons of OE, 60 bln BOE. Reserves 1,32 bln tons, 10 bln bbl, gas – 1000 bcm, 35000 bcf. Available for export at the plato 1-1,2 mmbopd East Siberia Oil Potential Proven Reserves (C1) 431 MMT Probable (C2) 789 x 0.50 395 MMT Identified Prospects (C3) 2238 x 0.25 560 MMT Resources (D1) 9197 x 0.10 920 MMT Risked Recoverable Reserves 2306 MMT (16.6 Billion Barrels) Production plato 2,5-3,0 mmbopd Available for export 1-1,25 mmbopd From Dr. Raymond C. Leonard Major prospective oil and gas basins of Russian arctic offshore Chuckchee Sea East Siberian Sea Laptev Sea Barents Sea Karskoe Sea Estimated oil and gasresourcesof Bln. Tons OE 100 10 1 Russian arctic offshore Barents Sea Karskoe Sea From Okeangeologia Institute, 1993 Laptev Sea East Siberian Chuckchee Total Gas Oil Sea Extensions of onshore tends Barents, Pechora and Karskoe Sea The north-eastern region of the Barents Sea Yamal offshore Ludlovskoe Ledovoe Rusanovskoe SHTOKMANOVSKOE Leningradskoe Kharasaveiskoe Antipautinskaya The Pechora Sea Dolginskoe Aderpautinskaya Prirazlomnoe Kamennomysskoe -more Varandei-more Ob and Taz bays Factors Needed for Continued Growth of the Russian Oil Industry • Technology evolution of the upstream of the entire Russian oil industry (from the best examples of Yukos, Sibneft, TNK-BP) • Competitive, clear and transparent licensing rules that would open the Barents Sea and Timan-Pechora, East Siberia and the Russian Arctic offshore for exploration and production • Construction of major pipelines to Murmansk and the Far East How much money will the growth cost? • Extrapolating from today’s performance of the best operators it will take about $12 bln per year • Total CAPEX 2003 Yukos, Sibneft and Slavneft was about $2 bln • However the development of Eastern Siberia will require larger investments Why is it relatively inexpensive? • New strategy for field development • Fewer wells and better wells (stimulations and horizontals) • Well targets defined by advanced reservoir modeling • Produce every well up to its full potential Sibneft Upstream overview of operations -Production licenses -Interests - Oil and gas basins Comparison of Oil Rates 10000 1000 100 tons/day 10 1 Typical Non Stimulated Stimulated Horizontal Technical Theoretical Western damaged well well with well limit limit Siberian well multiple stimulated Well completions well with multiple completions From J.M. Mach comes from 2.4% of wells (all HW) 90000 85000 23.5% of Sibneft oil production 80000 75000 70000 Oli Production,65000 tons/day 60000 55000 50000 45000 40000 1.00 Horizontal Well Stock Oil Production from vertical wells 3.00 1-st Horizontal Total Oil Production 5.00 7.00 9.00 11.00 01.01 03.01 05.01 07.01 Q v = 18 tons/day Q h = 218 tons/day 09.01 11.01 01.02 03.02 05.02 07.02 09.02 11.02 01.03 03.03 05.03 200 180 07.03 160 140 120 09.03 100 80 60 11.03 40 20 0 Horizontall Well Stock Typical Vertical Well Development - Actual Horizontal Well Development – In Place Resource Triangle • Few of high quality k > 1000 md • Most (all) found developed and produced k > 100 md • Abundance of lower k > 10 md quality • Need modern technology k > 1 md and good oil prices to k > 0.1 md develop Fracturing in Sibneft • About 1150 producers fractured after 1999 are producing now • Daily production is about or 240 thousand bopd, 37% of Sibneft production • 83% of stimulated wells produce from less that 5 md reservoirs, and 35% produce from less than 1 md reservoirs. Ratio of productivity improvement Jd post frac /Jd pre frac 350 100% 90% 300 80% 250 Frequency 70% Cumulative % 60% 200 50% 150 40% frequency 100 30% 20% 50 10% 0 0% 12345678910 Jd post frac /Jd pre frac Percentage of daily production and average production rate 10000 2.7 21.2 1000 37.4 2.1 100 Average oil production rate, bopd oil rate, production Average 10 36.6 vertical fractured horizontal horizontal horizontal sidetracs fractured Well type vertical fractured horizontal sidetracs horizontal horizontal fractured The Production Activation Index • he Production Activation Index, TIp, is an indicator of the required investment to add one new barrel of oil in daily production in a given petroleum province. • or example, a typical West Texas well that may cost F $500,000 but produces only 50 STB/d has an activation index equal to $10,000/STB/d. • Excellent infrastructure and work force, good and non- corrupted management practices reduce the activation index. j n 1 1 (⎛ 1− d ⎞ ) k I365p = P * * CFAT *+ [ ∑⎜ ]⎟ /(+ 1i ) ( 1+i( ) 1− d j )=2(⎝ 1+ i ⎠ ) From M. Economides and C. Ehlig-Economides Relationship between activation index and equilibrium oil price 50 Venezuela WS 40 GOM VU W. PBS Deep 30 25% CFAT 15% 40% ES E. WS 20 Saudi Arabia W. Texas 10 GOM W. Africa Equilibrium Oil Price, $/Barrel 0 1000 3000 5000 7000 9000 11000 13000 Production Activation Index, $/BOPD Comparison between activation indexes in different areas US GOM Conventional 12 W. Africa Shallow Water Venezuela East 10 North Kuweit Venezuela West 8 Saudi Aramco Western Siberia Russia Iraq 6 Eastern Siberia, Russia US GOM Deep Water 4 West Texas Pechora and Barents Sea, Russia 2 Volga-Urals Russia Activation index, thousand $/BOPD 0 Natural Gas Production Crowth Summary • Russia is capable of increasing its oil production to 12 mln bbls per day over the next 7 to 10 years. • This will require about 12 bln $ per year in oilfield CAPEX. • The Russian resource base is much larger than it is commonly believed, at least over 150 bln bbls of oil (not just BOE).