Interview with Mars Khasanov, CEO of Gazpromneft Science and Technology Center: Our potential is on the par with that of the world majors’

Two years ago Gazprom Neft launched the Technology Development Program to address the existing challenges. Has any of the technological priorities shifted since then?

Technology Strategy is a long-term program which first of all focuses on the development of new reserves categories while the reserves quality is deteriorating. We are faced with several key objectives critical to our technological development in production: recovery of tight and unconventional reserves, efficient development of oil rims, increasing oil recovery factor and build hi-tech wells.

Nine key directions have been outlined in the technological strategy, and they haven’t changed for the past two years. More than 60 technological projects have been launched and their number is expected to rise over one hundred by fall of 2017. We are expecting to harvest over 100 million tons of new reserves by 2015 through innovations, which will result in cost cuts exceeding 90 billion rubles.

As to the priorities, today we focus on the development of low-permeable formations and drilling of high-tech wells.

Are you talking about the Bazhen too?

Not only that. Presently, most of the promising reserves belong to hard-to-recover (HTR) reserves, whose typical behavior is a sudden fall in well production rates. And this is a common picture for both low-perm reservoirs and unconventional reserves of the Bazhen suite, as well as for the oil rims in quite “conventional” reservoirs. Regardless genesis, the only efficient way to manage such deposits is to cheaply and quickly drill high-tech horizontal wells with multi-stage hydraulic fracturing (MSHF). That’s exactly what the Americans did to make the so-called shale revolution.

Thus, we are implementing a range of projects to develop an optimized design of wells to develop tight reserves. The share of multilateral and horizontal wells in the total volume of annual drilling has grown from 44% up to 51% across Gazprom Neft for only one year. That means our every second well is a high-tech one. I’m sure that the enormous experience accumulated by the Company while working with low-perm formations will allow us to select methods for profitable involvement of the Bazhen resources into development.

In what way does the Bazhen case differ from the development of other hard-to-recover reserves?

The absolute permeability of Bazhen rocks is about 0.01 mD*. While permeability of “normal” rocks that also refer to HTR reserves is ca. 1–0.1 mD. Figuratively speaking, it is a dozen, or even a hundred times harder to squeeze oil out of Bazhen.

Thus, along with the development of prospecting technologies to find oil pays in the Bazhen, another issue comes to the fore, that is, looking at ways of increasing the permeability of the formations to stimulate oil inflow into the well. And the Company is definitely the leader in the sector as regards the volume of research carried out by Gazprom Neft. That’s because our fields on the Bazhen were the first in Russia to use the full cycle of shale oil development technology: all the way from geology to enhanced oil recovery methods.

There is another key issue about Bazhen development, which is, creating new elements for hydraulic fracturing (HFC). This is about fracture fluid formulations and improvement of proppant properties, technologies for the HFC control and fracture response assessment. A lot of work has already done by our Company to meet these challenges.

Gazprom Neft’s net profit grew by 82.5% in 2016. Arctic assets have provided the largest contribution to that spectacular result. What role do the technologists play in the development of transpolar fields?

The challenges are concerned with the geology of the fields themselves, not only harsh climatic conditions and difficult logistics. They require special approach to drilling and selection of enhanced recovery methods. At Novy Port, for instance, the wells are successfully drilled that are complex and sometimes quite unique for our Company. For example, a dual multilateral well was built there, each borehole being 1000 m long. It has proved to be twice as productive as horizontal wells of the same length. By the way, Gazprom Neft’ longest horizontal well, which is longer than 2010 meters, has also been drilled at Novy Port. 20-stage frac was completed there recently to boost the well rate.

Morden industry is impossible without large-scale application of IT. How is that trend reflected in your technological strategy?

No doubt, the focus on IT development goes across the entire oil industry. If we talk specifically about our Company, we started our ERA (Electronic Development of Assets) Program to expand the application of IT in exploration and production as far back as 2012. We have created a range of truly unique IT tools since then. “Geomate” or “Geologist’s Workstation”, to name but a few. The tool has integrated ca. 80% of the operations used to analyze G&G data. Also, “Shakhmatka-TechRegime” system has been developed, which allows online monitoring of the oil production flow. Moreover, the system has been implemented across all our businesses, and even sold on the International market, i.e., — a license has recently been bought by one of the oil and gas companies. Together with our partners, we are currently implementing another major project, that is, a software solution for reservoir management. It will allow, based on reservoir simulation models and mathematical algorithms, to find, options optimized from the point of economics and oil recovery factor for the development of Greenfields and Brownfields.

IT is rapidly making its way into the decision-making processes. Are the tools you’ve just mentioned belong to that category?

I have spoken about some of them. If look through a broader lens, our present objective is more than just using individual IT tools. It is essential that we create integrated models of the asset to efficiently manage tight reserves. We need packages that would allow us to design the “formation-well-infrastructure” sequence as an integrated system while minimizing potential risks and improving economics. This is especially important because wrong investment decisions come at a price in such a capital-consuming industry as the oil sector. However, one must have quite detailed geological data to be able to choose from a number of field development options. And one can get such data only after the asset has been completely drilled. Looks like catch-22.

And what’s the way out?

State-of-the-art IT makes thing a bit easier. We have initiated a range of projects to implement cognitive technologies into the integrated modeling and designing, or, in other words, into the decision-making process. The bulk of information than any major company has to handle today is enormous. And, keeping in mind the specific features of our sector, we often have to deal with miscellaneous and poorly structured data, especially when we talk about tight reserves. So, our key objective today is to manage those uncertainties. And, in addition to the mere technologies, it is extremely important to find a correct approach to risk management.

Let’s talk about management. Your Company created a dedicated mechanism to implement the technological development program. Was it worthwhile?

You’re right: the Company has streamlined a technological management system. This is kind of a conveyor belt that allows us to quickly implement the technological initiatives received from various activities, i.e., exploration and development of fields, drilling and production, conceptual engineering, construction and many others. We use our Technological Management System to create an environment for the testing of these technologies and we monitor the results, implement and roll-out successful projects. And, of course, we assess risks. It is worth mentioning that the technological management structure includes all of our production units and subsidiaries without exception. It is exactly the approach, i.e., — where each one provides its contribution and expertise, that allows us claim that the model is efficient.

Technological Management System: is it already a fully operational system or some de-bugging and field trials are still going on?

At present, it is quite a streamlined mechanism but we keep improving it. In particular, our experience has shown that it is essential to develop cross-functional cooperation, especially when we talk about complex technology projects linked with high risks. Thus, the proposed tools appeared to be incompletely tailored to ultimate users at initial stages. Today, specialists in our R&D Center (NTC) and other stakeholders concerned jointly discuss these issues in advance. And, in this case, we actively use the so-called agile management practices, which imply flexible approach to the managing of any kind of projects including permanent interaction among specialists and introducing corrections for best result.

IT-tools are actively involved in Gazprom Neft when working with complex reserves

We are talking about Technology development program. But Gazprom Neft is an oil company whose ultimate target is to produce oil rather than create technologies. Do we maintain the status of a “smart buyer” today?

Sure, in a broad sense the development of oil production technologies is a function of service companies. The major ones spend about a billion dollars annually for research, and we are not going to compete with them. At the same time, we couldn’t remain just a “smart buyer” in a rugged environment. We have become a customer who formulates an objective stimulating its industrial partners to create new high-demand solutions. That is exactly why Gazprom Neft carries out proactive work to substitute imported equipment, goods and services. We cooperate with Russian R&D leaders, not only with manufacturers or service companies. We also participate in various government-sponsored innovative projects. Many such projects have already been implemented. For example, domestic rotary steerable systems have been developed. The testing of Russian drilling muds is underway. Skolkovo community works on HFC simulators which, by the way, will come in handy for us in future to develop Bazhen.

Of course, there is always room for our own R&D efforts as well. At a time when any oil company can buy the technological solutions that appear on the market, a competitive edge is, in the first instance, the availability of knowledge of how to use those technologies at maximum efficiency. That’s why the innovative development and R&D efforts should be aimed at creating such knowledge base. Another important area is to develop tools for decision-making.

How would you assess Gazprom Neft’s current level of technological development?

If we comparing us, or any other Russian oil company to the world majors, we’ll see of course, that we are lagging slightly behind. It is not that we are short of any technologies. We all use the same technologies. We are short of the knowledge that I have already mentioned, that is, technology application criteria. We are short of the experience that can only be gained in the course of decades. We sometimes lack necessary engineering environment.

Nevertheless, Gazprom Neft’s efficiency in managing new technologies for tight reserves, as well as the pace of accommodating the innovations, indicates that our potential is comparable to that of the world leaders’. And I’m sure we are leaders inside Russia. It should be understood that those companies become technology leaders, who derive maximum benefit from those technologies, not those who spend more money purchasing them. This is exactly the concept that we are governed by when forming our technology portfolio.

* Darcy or “D” is a special unit describing the permeability or porous environments which approximately equals 1 µm². It is broadly used in geology, hydrogeology and oil and gas production.

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