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Argillaceous rock has the Russian oil industry in a jam

Argillaceous rock has the Russian oil industry in a jam

19.05.2010 — Analysis

Researchers have proposed that the Russian government begin to actively drill for less-accessible oil reserves. Experts confirm that the technology needed to do this is already available. All that is still needed are some trade preferences and investments, which will pay for themselves with interest over the course of a few years. But some problems related to the financing could arise. As one analyst for RusBusinessNews explained, Russian oil companies will be busy developing the traditional oil fields for at least another twenty years, so they as yet feel no particular urgency to tackle the more difficult deposits. 

Ivan Nesterov, the head of the petroleum geology department at Tyumen State Oil and Gas University, has proposed that the Russian government organize some testing sites to experiment with the new mining technology now being developed in university labs. It was determined several decades ago that in Western Siberia, about 46% of what is called heavy crude oil and about 65% of the potential resources are found in clayey reservoirs. Even back in the 1970's, many companies were developing various techniques to extract hydrocarbons from lower permeability rock. Researchers at Tyumen State University also began working on this problem.

But the results of their experiments are not clear-cut. Victor Petersilye, the deputy director of the Federal State Unitary Enterprise All-Russian Petroleum Geology Research Institute, confirms that there is still no truly effective way to extract this oil. Test drilling further emphasized how ineffective the geological exploration work had been - most of the wells were either dry or low-yield. The workers in the field could not understand why wells drilled in one location would produce oil, but others in another location wouldn't. As one expert put it so vividly, this meant they worked like "prowling cats." The size of the reserves in the Bazhenov Formation (meaning those in clayey reservoirs) is very difficult to estimate, and the oil industry decided to suspend operations in the overwhelming majority of the wells. According to the research data, no more than 28 wells are now under construction, although there are officially 82 wells that are currently producing oil from clayey reservoirs. Victor Petersilye considers it a waste of time to try to force major companies to revive their drilling efforts for this difficult-to-reach oil, since they themselves will begin to develop the Bazhenov Formation resources as soon as it becomes economically viable.

Professor Ivan Nesterov strongly disagrees with the challengers who claim that there are still no truly effective methods to recover this oil. "They don't know how to do it, but I do. The oil-drilling procedures they used were developed for sand reservoirs, which have completely different permeability characteristics. Naturally, after some time the pressure drops and the well stops producing. In order to avoid this, you have to regulate the pressure, but not hydrostatically. What we need is a simpler technology than what is being used today."

The major developers of mineral resources preferred to spend their time producing the so-called active reserves, which do not entail additional costs for research. The wells that had already been drilled were left on their financial statements. As I.Nesterov puts it, these wells are not heavily taxed and they significantly increase the company's capitalization (each well is worth about 100 million rubles).

The Tyumen professor is convinced that the suspended wells can be operated profitably. The first step would be to eliminate their tax obligations. The resulting income from the oil that would be produced by these wells would easily pay for new projects to improve the production technology to recover mineral resources. As I.Nesterov puts it, the production costs to recover oil from clayey reservoirs will be several times lower than costs associated with drilling the more typical type of reservoir rock, and this, he suggests, frightens many people.

Aleksandr Lobusev, the department chair of the Gubkin Russian State University of Oil and Gas, will not try to estimate how much cheaper production costs would be to recover oil from clayey reservoirs as opposed to sand reservoirs, but he is certain that the costs to develop the resources in the Bazhenov Formation could be recouped in a few years. By his estimation, there are between 10 to 12 billion tons of recoverable reserves, and any investment is nothing compared to the original costs to create the necessary infrastructure in Western Siberia. For the most part, it would only be necessary to adapt one part of the well using the techniques that the researchers are proposing. Aleksandr Lobusev confirms that although many questions may still arise as to the effectiveness of the oil recovery, the technological issues have already been solved.

Ivan Nesterov's admonition about the need to develop the less-accessible hydrocarbon reserves is tied to the fact that oil production will continue to decline in the foreseeable future. Experts estimate that by 2030 Russia will produce no more than 50 million tons per year, while Russia's oil requirements will be 500 million tons per year. However, there are sufficient oil reserves in lower-permeability rock to supply Russia for at least the next 200 to 300 years.

There is another reason to set up testing sites - this would create an opportunity to perfect the technology for mining uranium, gold, cobalt, and other metals, which are very important for Western Siberia, where many oil-mining towns are on the verge of being abandoned. One researcher suggests bringing new technology on stream in order to prevent increases in unemployment in Siberian cities and towns.

Meanwhile, experts doubt that the policies of the petroleum companies will change in the near future. Project managers from the NizhnevartovskNIPIneft company claim that their clients will not hire them to recover oil from clayey reservoirs. In their opinion, the situation in the Russian oil industry today is similar to that of the coal industry, where owners recover between 3 and 4 million tons of coking coal every year out of old Soviet mines, which were originally estimated to produce approximately 500,000 tons. In fact, the primitive and outdated mining techniques that are still used because of insufficient financial investment cause horrendous environment damage and many human casualties.

Nor do the high-ranking petroleum officials give much thought to the future: they have a personal interest in making as much money as possible today. This is why experts suggest that no one will invest in new technology while there is still oil to be found in sand reservoirs. This is a particularly Russian trait - like the grasshopper, they merrily play their fiddle and dance, heedless of the hardworking ants harvesting for winter.

Vladimir Terletsky

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