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The inaugural SPE Russian Oil and Gas Technical Conference attracted top names from the country’s premier companies as well as leading industry professionals from around the world. More than 2,000 attended the 4-day event in Moscow in October, which featured nearly 200 technical presentations as well as an exhibition that showcased major service and operating firms.

Highlighting the conference, which bore the theme “Technology for World Class Resources,” were four panel sessions that examined the current state of the Russian oil and gas industry, case studies of some of the world’s most important fields, academia’s relationship to the industry, and legends in Russian oil and gas.

The opening plenary session, focusing on Russia’s role in the global energy balance, led off with Valery Isaakovich Graifer, Chairman of the Board of Directors of JSC Lukoil and General Director of JSC Ritek OJSC Lukoil. Graifer, who chaired the conference as well, was joined by speakers from leading Russian and non-Russian firms and organizations, including Lukoil, Gazprom, Rosneft, TNK-BP, Transneft, ConocoPhillips, Schlumberger, Halli-burton, and the Russian Federal Energy Agency.

Graifer said it was significant that the SPE conference followed closely behind the recent G8 summit held in Russia, in which world leaders discussed the importance of global energy security. The G8 leaders concluded that energy is the most important force for sustainable development and economic progress, that energy security and the future of the world are inseparable, and that the world will continue to depend heavily on hydrocarbons despite a growing interest in alternative fuels. Russia will play a critical role in ensuring that security, Graifer said, but the country needs additional technology and specialists to help develop its oil and gas industry. This SPE conference is “creating educational wealth” that will benefit not only Russia but the international oil industry as a whole, he said, noting the importance of the participation of the leading companies of Russia and the world in both the technical presentations and the exhibition.

Also helping to open the conference was 2005 SPE President Giovanni Paccaloni, who said the conference represented a milestone in bridging information on technology development with the great Russian oil industry.

SPE’s growth in Russia has been pronounced, he said. The first SPE section was formed in 1995. Now SPE has more than 700 members in Russia, as well as 520 student members. SPE also announced at the conference that it is opening a new office in Moscow to strengthen its presence and its programs in the region.

Robert Dudley, President and Chief Executive Officer of TNK-BP, also emphasized the importance of sharing technology. “Through the exchange of ideas and experiences, we all do our jobs better,” said Dudley, who joined SPE in 1982 and highlighted the Society’s role in technology exchange.

Russia is playing an increasingly important role in the global oil and gas picture, Dudley said, providing 42% of the world’s non-OPEC reserves, and it is now the world’s second-largest oil producer behind Saudi Arabia. Russia supplied most of the world’s consumption growth during the recent demand shock, which helped to stabilize the global economy, he added.

But Russia faces many challenges if it is to continue in that role, Dudley said. Most of its production will continue to come from brownfields in western Siberia, and some of that production is slowing. Russia needs to move into new provinces to ensure its long-term growth and such large-scale projects in frontier areas such as the Arctic offshore are in need of “massive capital,” he said. “But the real challenge is not capital, but technology and skills,” he said, even though engineers always have been in steady supply in Russia.

Graifer opens the first-day plenary session on Russia’s role in the world energy balance.

A Russian Business Model

ConocoPhillips, which has invested more than U.S. $7 billion in Russia in the past 2 years, follows a definite business model when doing business in the country, said Kevin Myers, President of Russian and Caspian Operations for ConocoPhillips. That model includes

• Partnering with a strong Russian company.

• Structuring the transaction to align interests toward finding and developing oil and gas.

• Developing ways to share knowledge and best practices with the partner.

• Pursuing strategic opportunities beneficial to both.

• Developing long-term relationships that will lead to multiple deals.

• Working cooperatively with the Russian government.

ConocoPhillips has two major ventures with Russian partners—a 50/50 joint venture with Rosneft to develop the Polar Lights field near the Arctic Circle and a strategic alliance with Lukoil in which ConocoPhillips owns 19%.

Ashok Belani, Chief Technology Officer with Schlumberger, highlighted Russia’s many contributions to upstream technology development. The electrical submersible pump was invented in Russia, and the industry has benefited from the country’s application of subsurface-imaging and fracturing techniques. Recent applications of key technologies in Russia include

• Fracturing, which has allowed production from complex gas formations and helped eliminate condensate barriers in some wells.

• 3D-seismic reservoir characterization, which has improved output in western Siberia.

• The use of horizontal wells such as in the Sporyshevskoe field, where the drilling of 25 horizontal wells and seven sidetracks increased production 40%.

• Drilling cycle-time improvement in complex wells such as at the Rosneft-Sakhalinmorneftegas field.

Russia’s resource base is “vast but extremely varied,” which poses technological hurdles, Belani said. The remoteness and harshness of Russia’s frontier areas will require innovations such as heliportable wireline units and winterized hydration units. Heavy oil development will require application of steam-assisted gravity drainage and associated technologies, he said. Schlumberger’s presence in Russia is growing; it now has more than 8,000 employees in R&D, engineering, and manufacturing in the country and has built several training and engineering centers in Russia.

David King, Senior Vice President Eastern Hemisphere of Halliburton, agreed that Russia offers “tremendous technology challenges” because of its brownfields, frontier areas, and massive reserves. The oilfield services market is different in Russia from that in the rest of the world, he said. Western service companies have only 15% of the market in Russia, with half of the market going to service divisions within Russian oil companies and the rest to small and medium-sized Russian service providers.

Technology has had a significant impact on the Russia oil and gas industry, King said, including improving drilling rigs, drilling-fluids management, drill-bit optimization, and data management. During the next 5 years, advances in real-time management will clearly benefit the region. Looking 5 to 10 years out, Russia still will be developing its mature areas and will see much more unconventional development in heavy oil and tight gas, he said.

Panelists at the opening plenary session offered a variety of perspectives on Russia’s energy outlook.

World-Class Case Studies

Another plenary session examined the development of some of the world’s largest fields, including the Ghawar field in Saudi Arabia, Prudhoe Bay in Alaska, and the Samotlor field in Russia. Ghawar, the world’s largest field, was discovered in 1948 and came on line in 1951, with output averaging about 5 million BOPD the past 15 years, said AbdulKader Afifi, a senior geological consultant with Saudi Aramco. The Jurassic Arab-D carbonate reservoir has been so productive because of its large area, excellent reservoir quality, prolific source rock, and an extensive anhydrite top seal that prevents leakage. Technological innovation, especially application of maximum-reservoir-contact, smart-completions, and intelligent-field technology, has led to higher productivity, lower drawdown, and longer well life, he said. Smart completions have allowed more control of water production and have prolonged well life, while intelligent field monitoring and control “has allowed us to have much improved reservoir management,” he said.

The world’s third-largest field, Samotlor, has benefited greatly from technology since hitting record low production in 1999. TNK-BP, which operates the field, has boosted output 14% the past 3 years, said Alexander Zhagrin, General Director of TNK-BP. Investment this year is focusing on fracturing operations, drilling of sidetracks, optimization, and drilling of new wells. Such extensive work should allow the field to maintain its current output for another 8 to 10 years, he said.

Alaska’s Prudhoe Bay, North America’s most prolific field, is currently producing just less than 400,000 BOPD, said Pat McGuire, a senior adviser at BP, which operates the field. Since coming on line in the late 1970s, more than 11 billion bbl has been recovered, but the company has added 3 billion bbl in reserves since its discovery. BP has employed two distinct mechanisms to manage the reservoir: waterflooding, including enhanced oil recovery with miscible gas injection, and gravity drainage. Drilling technology has changed significantly over the life of the field, and several techniques have benefited output, including coiled-tubing well work, fracturing of high-permeability sands, horizontal rotary drilling, and coiled-tubing drilling. Most of the drilling at Prudhoe Bay now uses coiled tubing, which allows the drilling of low-cost, high-quality horizontal sidetracks. Most additional reserves at the field have come from using advanced recovery processes, he said.

Academic Perspective

A third plenary, cochaired by Stephen Holditch, Chairman of the Texas A&M Dept. of Petroleum Engineering and holder of the Samuel Roberts Noble Foundation Endowed Chair, and Albert Vladimirove, Rector at Russian State Oil and Gas U., examined the interaction between industry and education, both inside and outside of Russia.

Mikhail Ivanov, Chair of Oil and Gas Geology in the Dept. of Geology at Moscow State U., described a program that gives students hands-on learning experience. The “Training Through Research” project takes selected students on geologic field trips, with papers written on the findings of the exploration and scientific conventions organized around the results. Students are selected through a competition. They then take courses on research topics and methods and take trips to geologic sites. The program has sponsored 16 expeditions so far, and three volumes of papers based on findings on the trips have been published.

John L. Thorogood of CJSC Elvary Neftegaz reviewed past developments in technology. Drilling with casing, he said, has proved successful, but no one really knows why it works. But it is important to try to understand why certain technologies work because without that “spirit of inquiry” the industry may miss out on possible breakthroughs. Most change or technological development has occurred as an act of “extreme desperation on the part of management,” he said. “For things to change, there has to be a trigger.”

The past 30 years are littered with false starts and failures in technology, Thorogood said, but sometimes those failures eventually led to success, and sometimes they failed because the ideas were ahead of their time. Progress toward the future is steady, although “it often is hard to see how you get there,” he said. Although the future will surprise us, what the industry needs tomorrow likely exists today. There are things the industry knows about but has not applied, and there are exciting things that other industries do that the oil and gas industry does not.

Three key technologies of the past 20 years, said Christine Economides of Texas A&M U., are 3D seismic, horizontal wells, and hydraulic fracturing. Horizontal-well technology, for example, has essentially doubled production for Sibneft. Valuable technologies in the future will include those associated with unconventional hydrocarbons, such as heavy oil as well as natural-gas transport. Technology likely will increasingly expand downstream in the direction traditionally covered by chemical engineering, she said.

Technical Sessions

Technical paper presentations at the conference looked at key developments and technological applications in Russia as well as in other parts of the world. In a review of Russia’s importance in the global energy balance and its major companies, it was noted that Russia has 20% of the world’s oil and 30% of its gas. Lukoil accounts for 28% of Russia’s proven reserves and 18% of its production. Since 2001, the company’s resource base has grown by a quarter, with an emphasis on the Caspian shelf and western Siberia. As with many companies operating in Russia, it has developed optimization programs to improve exploration efficiency and reduce costs. Lukoil has particularly improved recovery rates through the use of hydrofracturing.

Gazprom, Russia’s largest gas resource holder, has been growing steadily the past 5 years through the discovery of several new fields and enhanced recovery from existing fields. Several new fields will come on line starting in 2010. Gazprom has adopted a 25-year exploration program that will include developments in the Barents Sea, central Caspian, and Sakhalin. Rosneft is targeting far eastern Siberia for exploration and has several licenses and joint ventures in Sakhalin. Unlike western Siberia with its abundant reserves, eastern Siberia is little explored and geological knowledge is lacking. However, some studies indicate that oil in place in Siberia is significant and is characterized by high-quality crude.

In a session on field production, it was noted that field production monitoring problems in Russia are related not only to procedures and techniques but also to managerial issues. Often there is no department within the company charged with interpreting well-testing and production-logging results. Another presentation looked at enhancing field management in western Siberia by trying to quantify production uncertainties. Other presentations examined frontier areas, such as the Arctic offshore, and what technologies will be of most use in such a harsh environment marked by icebergs, permafrost, and extended periods of darkness.

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