PetroKamchatka PLC V.PKP

Q&A on the Komi Region

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Archive
No. 3, 2009

NEW PROSPECTS FOR THE TIMAN-PECHORA PROVINCE
Oil of Russia magazine talks to Vladimir Torlopov, Head of the Republic of Komi
The Republic of Komi makes a weighty contribution to the economy not only of Northern Russia, but also the country as a whole, thanks to its mineral resources, industrial, research and manpower potential. Major factors in the Komi economy are its significant production potential, favorable business climate, the innovative strategy of the leading companies in the region and the successful combination of international and interregional business links. Komi's oil industry has been one of the leading sectors of the region's economy for many decades.
Q: What is your opinion of the state of the oil industry in the Republic of Komi?

 

A: More than half the oil reserves of the Timan-Pechora oil- and gas-bearing province, including on the territory of the Republic of Komi, are classed as hard-to-recover and highly viscous. Even so, their production is a lucrative business. There are over a score of companies operating in our Region. Three companies account for most of the oil produced: JSC LUKOIL-Komi (66%), JSC RN-Severnaya Neft (12%) and JSC Yenisey (8%).
The LUKOIL-Komi group of companies accounts for the greatest increase in production - over 6% a year. This is associated with both new production divisions joining the group and development of new oil fields in Komi (the Pechora, Ust-Tsilma and Izhma districts), as well as with efficient use of EOR technologies.
In the future, development of new hydrocarbon reserves will provide for an increase in oil production in the Republic of Komi.
We hope that the stable trend for oil production to rise over the last six years will not be lost and that more and more oil will be produced every year. We estimate that, by 2013, the Republic of Komi will be producing 15 million tons of oil, but this result can only be achieved if technologies capable of substantially raising recovery ratio are used throughout the industry. This means concentration of the well network, drilling of horizontal and multi-branch wells, sidetracking, injecting polymers and thickened liquids, application of a whole series of physicochemical and thermal treatment methods.
Q: What do you see as the priority problems for the oil and gas sector and the ways to solve them?

 

A: In spite of the positive dynamics, we do encounter problems hampering development of hydrocarbon production. These include a deterioration in the resource base in both quantitative (reduction of reserves) and qualitative (an increasing proportion of hard-to-recover resources) terms; low associated gas use level; and insufficient commercial reserves replacement. We are faced with a very high level of field development, the majority of fields being in the phase of maximum or declining production. In this situation, small fields need to be brought into production as fast as possible.
In the Republic of Komi, remaining oil reserves average 30%, with hard-to-recover resources predominating. For almost half the natural resource users, all the remaining reserves are of this category, so a series of technical problems associated with producing oil with abnormal properties has to be resolved if the crude production level is to be maintained and stabilized. Hence the need for in-depth integrated research, involving a powerful laboratory base and the latest software.
The Republic of Komi has accumulated tremendous experience of research in this area. This applies, above all, to use of thermal bed stimulation methods thanks to which the oil recovery factor went up 9- to 10-fold at the Yaregskoye field and two to three times that on the Permocarbon deposit at the Usinskoye field.
Introduction of effective technologies of thermal bed stimulation from the surface will permit development to be launched of the Lyaelskaya and Vezhavozhskaya areas of the Yaregskoye field, with total aggregate reserves of over 44 million tons. Moreover, there will be no need to build moon pools.
This experiment is unique in that thermal bed stimulation technologies are applied through horizontal holes. The first stage in the pilot development is to be completed by 2010-2011. If success is achieved, this technology will be applied to the entire field area not covered by heavy-oil process development. At the same time, as far as I know, LUKOIL-Komi is prepared to invest $100 million in introducing technology for highly viscous oil compounding at the Yaregskoye field to achieve a substantial production volume increment by 2011.
The main thing for us is to handle matters in such a way as to prevent any sharp drop in production and associated drain from the Republic of Komi's budget. In principle, therefore, hydrocarbon production should not be an end in itself, but merely a means for strengthening the economic potential of our Republic and improving the living standards of its people.
Q: What, in your opinion, should oil companies operating in the region do to prevent a drop in oil production?

 

A: They should stabilize production on commercially developed fields, build up additional reserves and start developing new reservoirs. We believe that LUKOIL-Komi will account for most of production growth because the Company intends to develop promising fields discovered last year. Considering that the oil companies have accumulated considerable experience in hydrocarbon field exploration, construction and development, we can be sure that oil production will continue to grow.
LUKOIL has been operating in Komi since 2001 and has the biggest hydrocarbon resource base in the north-western part of Russia. The Company is also using state-of-the-art technologies to develop fields beyond the Arctic Circle. Moreover, in spite of the financial crisis, LUKOIL-Komi feels quite confident and intend to invest this year more than 24 billion rubles they spent in 2008 in preparing new fields for commercial development. This concerns primarily the promising Bayandyskoye field in the Usinsk District of Komi, where geological exploration and reserves reappraisal are already under way. In addition, this year LUKOIL-Komi will begin active development of the Yuzhno-Yuryakhinskoye, Oshskoye and Pashorskoye fields.
Overall, the current resource base is sufficient to count on maintaining production of liquid hydrocarbons at a level of 14-15 million tons a year until 2020.
Q: There is a lot of talk at the moment about the need for timely replenishment of hydrocarbon reserves. How do things stand in this respect in the Republic of Komi?

 

A: About 50% of the oil and 33% of the gas resources of the European part of Northern Russia are concentrated on the territory of the Republic of Komi, while the reserves of proven oil fields account for roughly 3% of the Russian total. Moreover, there are grounds for hoping that new fields will be discovered within the Timan-Pechora oil- and gas-bearing province.
And although hydrocarbon production in the province began back in the 1930s, and on a primitive basis in the mid-18th century, it may be stated with confidence that there is still a lot of oil left in the Republic of Komi. Category ?+?+?1 proven reserves amount to 1.6 billion tons of oil equivalent.
Out of 145 fields booked on the balance sheet, 83 have total recoverable reserves of 550 million tons of oil equivalent (categories ?+?+?1) and have been handed over for development. Of these, 56 are producing commercially and 27 are in the stage of production test or pilot development.
The oilmen of Komi have a lot of work ahead of them. After all, according to some estimates, the hydrocarbon resources of the Timan-Pechora oil- and gas-bearing province top 180 billion tons  of oil equivalent and it still has to be established how much of this can be realistically recovered.
Q: How do things stand with oil transportation and refining?

 

A: The Ukhta-Yaroslavl pipeline run by the Northern Oil Trunklines company (a Transneft structure) crosses the territory of our region. Another pipeline (Usa-Ukhta) had recently been modernized as the local fields were producing more than it could handle. Transneft efficiently increased the pipeline's capacity from 18.2 to 24.2 million tons a year, which suffices for transporting all the crude we produce here.
As for refining, the Ukhta Refinery (LUKOIL-Ukhtaneftepererabotka) is processing about 4 million tons of crude a year. About 15% of its output is gasoline, while the rest is predominantly diesel fuel and fuel oil.
The Ukhta Refinery fully satisfies our fuel requirements, as well as supplies neighboring regions with petroleum products.
For a long time, the Ukhta Refinery was one of the most rundown in Russia, with a refining depth of only 42%. In 1999, LUKOIL took it over and launched an upgrading program that is still under way. The depth of crude refining has now reached 75%. Currently, its octanizing unit is being equipped with an isomerization unit, which will allow the refinery to produce more EURO-3 and EURO-4 gasoline.
The Ukhta Refinery is processing the Yaregskoye oil into fuel oil (around 1 million tons/y) and into several types of improved bitumen (for roads, roofs, etc.) which are supplied to consumers not only in Komi, but also other parts of the North-Western District and even Moscow.
Naturally, we want to raise the refinery's capacity and the quality of its products. In addition, the Ukhta Refinery should also refine the lighter oil from other fields of the Republic of Komi and we are, of course, pleased that LUKOIL intends to increase its capacity to 8.5 million tons per annum within the next three years.
Another source for increasing Komi's refining assets is construction of new refineries, which some investors intend to do. The time might come when they will take more decisive steps in this direction. In any case, we will only welcome this. After all, the birth of each new facility is to the benefit of the Republic of Komi because it means more jobs, more budget revenues and a higher GDP, so the Government of Komi is always ready for fruitful cooperation with investors.