AAPG - Exploration Country Focus: Russia
Exploration Country Focus: Russia
John Dolson, EMD Councilor, European Region, Exploration Advisor, TNK-BP, Moscow, Russia
Historical Perspective
Figure 1. Night satellite image showing location of Russian oil and gas reserves. Big is the word. Big oil. Big Country. Big Challenges -- remoteRussia can best be described as big: big reserves, big challenges, big country (Figure 1). It contains some of the largest and most prolific basins in the world (Figure 2). However, the distances are vast, with over 12 time zones and many stranded fields hundreds or even thousands of kilometers from infrastructure. Established reserves and yet to find estimates show the importance of this country to world energy supplies (Figure 3).
Russia has been exploring and developing oil fields since the late 1840’s and often dispute the claim that Drake’s 1859 well in Pennsylvania, was the world’s first oil well. Some records suggested the first well as was actually drilled 12 years earlier in Baku, Azerbaijan. Ironically, but importantly, the science of exploration developed largely independent of the west over the next century.
Hence, Russian geoscientists have a deservedly high regard for their science and historically not just a small amount of distrust of western specialists and technologies.
Figure 2. Russia contains some of the physically largest basins in the world, including the giant West Siberian basin with 450+ BBOE reserves. Circle sizes are proportional to MMBOE reserves. Green circles indicate oil, orange condensate and red gas fields.Following World War II, Russia went on a search for a secure energy future. Exploration teams were charged with finding oil, and it was reserves that mattered, not economics. Different development departments were challenged to bring the reserves online, many of which were in inhospitable arctic locations or thousands of miles from any infrastructure.
The finding rate (Figure 4) was astonishing. Standard rules for exploration required 4 wells on every structure: one crestal, two flank and one basinal to ensure nothing was left behind. With large simple structures to explore, a phenomenal success rate was established. By the late 1980s, however, many large features had been found, but more importantly, all sources of funding and governmental structure collapsed. So the creaming curve flattened and has remained low today, with many companies focusing on infrastructure upgrades, restoring declining production and step-out, low risk exploration.
Figure 3. Estimated proven reserves and yet to find for Russia compared to other major petroleum-rich countries.
Stranded Fields
The Soviet system encouraged the development of highly specialized and separate organizations. Drilling departments, exploration, development and other groups did not interact and had separate goals and missions. Geophysicists worked in centers away from geologists, major research centers were established in multiple institutes and responsibilities carved up by area. Entire towns and Universities were created over large fields and it is not uncommon to find geologists today who come from a family with a 70 year or greater past of parents, grandparents, cousins and brothers and sisters all working in the same basin and for the same companies.
This inefficient structure of vertically organized disciplines and departments resulted in large numbers of discovered fields that have never been fully studied or brought online (Figure 5). Explorers did a great job of finding things, often in remote locations like East Siberia and often in unusual accumulations (like glacial pre-Cambrian sediments sourced from pre-Cambrian source rocks, also in East Siberia).
Figure 4. Russian post WWII exploration history. Success breeds complacency and a sense of “why change?” The flattening of the creaming curve in 1989 is as much due to funding collapse as it is to difficult geology and lack of new “running room”.
As a result, with the collapse of the soviet oil industry in 1989, many companies have focused their money on infrastructure development and bringing these stranded fields online. Thousands of shareholders were created in the early 1990’s as state companies were dissolved. Entrepreneurial investors quickly bought up shares from impoverished staff and grew truly giant companies from the remnants of the old system.
TNK-BP, for instance, has over 60,000 employees assembled from over 600 smaller companies. Infrastructure problems in all companies are significant, with oil spills, leaks from pipelines, aging refineries, stranded accumulations and centralization of control of pipelines in state hands causing a focus on development and not exploration. Companies continue to consolidate into large groups and the state has clearly stated its desire to regain a strong control of its resources. Today, the state-run behemoths of Rosneft and Gazprom have signifcant resources and political clout. Gazprom alone controls 17% of the world’s proven gas resources.
Figure 5. Over 270 TCF of gas alone is stranded in known discoveries in the West Siberian basin. Hundreds of smaller pools still await development or access to pipelines. Circle size varies by recoverable MMBOE.Anyone trying to work here successfully needs to learn one simple rule: respect your Russian peers. Despite what today are considered historically outdated exploration techniques, the simple fact remains that the Russian oil industry succeeded without help from the west. One of the ironies all technical people face is that past success using old methods will often lead to a sense of complacency. Older Russian oil-finders in all companies, and particularly within the University system, have been incredibly successful finding oil. Westerner’s who ignore this do so at their peril, for the prevailing attitude is “I have found more oil and gas than you so why are you telling me to do it differently?” Or, as another friend of mine pointed out “they were asked to find oil and they did. They just weren’t asked to find it economically”.
Most of the expatriates I know in Russia who have failed and returned home disgruntled with the difficult work environment simply forgot to pay homage to the past, point out the future is more difficult and that today, making money is just as important as finding accumulations.
Figure 6. Production by company. Over 150 small companies remain with production under 10,000 BOPD. Bringing stranded fields online and improving production in existing fields has largely consumed the Russian oil industry in the last decade.