Technology leadership is the key development factor

— Several years ago, Gazprom Neft set an ambitious strategic goal to increase production and reserves. Did not you have to make changes to these plans due to the changed macroeconomic environment?

— No, in accordance with our current strategy covering the period up to 2020 we still plan to increase our production to at least 100 million tons of oil and gas and maintain this level until 2025. We also adhere to our goal of having PRMS 1P (Proved) reserves for at least 15 years of production and replacing annually not less than 100% of our 2P (Proved plus Probable) reserves. Time has shown that our goals are quite realistic. To reach the 100 million TOE plateau by 2020, we need to annually increase production by about 4% while in recent years this number has been exceeding 8%. This is a very high growth rate not only for Russia but for the global oil industry as a whole.

— Nevertheless, when implementing its recent biggest projects — the Novy Port and Messoyakha — your company had to withstand some pressure. Did it have any effect on the success of these projects?

— Indeed, many of the key investment decisions on these projects were made in 2014-2015, in the period when the foreign economic situation deteriorated. Then we had to aggressively optimize our operations by postponing commissioning of our support facilities while making sure we meet deadlines for the assets that were directly related to oil production and efficiency of the projects. This allowed us to bring these projects to full-scale commercial production last year. In 2017, production from the Novoportovskoe and Vostochno-Messoyakhskoe fields will exceed 8.5 million tons of oil. This is a very significant contribution to our company’s overall production.

— That is, by and large, the sanctions had no effect on Gazprom Neft’s upstream projects?

— They have not affected our total production volume, that is for sure. You should understand that sanctions affect only certain areas of our work. For instance, we faced negative impact from the sanctions during construction of the Arctic Oil Export Terminal for the Novoportovskoe field: one of the important suppliers withdrew from the contract, and we had to find a substitute which did have some effect on the terminal commissioning deadline. However, for the project as a whole it was not critical, we just had to use our provisional oil shipment setup for a little longer, so the production schedule was not affected. On the other hand, we gained valuable experience that helped us realize that nobody is indispensable, and that any apparently unique technical solution may have a feasible alternative.

— To a greater extent, perhaps, the sanctions affected your company’s projects involving development of shale oil reserves of the Bazhenov Formation?

— Yes, initially we had plans to start developing the Bazhenov Formation jointly with one of western oil companies. But ultimately we’re undertaking this project all by ourselves. By the way, recently it has been given the status of a national project because of all these innovative technologies that we develop and implement on Bazhenov.

— What technologies are you talking about?

— Our experience of working with the Bazhenov Formation that we gained in the Palyanovskoe and Vyngayakhinskoe fields has enabled us to come up with a clear expert understanding: you cannot successfully develop such reserves without the efficient application of technologies intended to create artificial permeability in the reservoir. That is, in case of the Bazhenov Formation is important not just to drill a well to access the reservoir but at the same time solve the problem of stimulating the inflow and creating artificial fracture zones. This requires sophisticated well completion technologies involving multi-stage hydraulic fracturing (MSHF). So today our task is to make these technologies affordable and efficient. Yet, the issue of having cost efficient drilling technologies is particularly acute not only for unconventional reserves but for all other assets with low permeability reservoirs and difficult geology. And one of the key milestones on the way to reducing well drilling costs is to work on new elements the hydraulic fracturing technologies. This involves new hydrofrac fluid formulations, proppants with improved properties, and hydrofrac efficiency control and assessment technologies including a hydraulic fracturing simulator for the Bazhenov Formation; a prototype of this simulator has been developed by our company in cooperation with the Moscow Institute of Physics and Technology.




Today we are seeking access to all solutions available to oil companies at the global level. Together with the technology leaders of the industry we form long-term programs aimed at equitable cooperation




— Introducing new technologies is expensive. How do you search and make decisions on the need to use any new technology?

— Our company has introduced an Upstream Technology Strategy. Its objective is to ensure that all technologies developed in our company meet the needs of our assets as much as possible. The Upstream Technology Strategy consists of 9 long-term programs including more than 60 projects. The choice of projects and, respectively, further search for suitable technologies are based on prioritization and comprehensive analysis of all production challenges faced by our subsidiaries. It is important to understand: when making decisions of whether we need this or that technology we, first and foremost, are focused on real production tasks, be they up-to-the-minute or long-term. As an example, let us take the Messoyakha project. As we tried to develop this field, it became clear that we had underestimated its geological complexity, and even horizontal wells might be inefficient. But we were able to quickly find a solution. It was the fishbone well design which means horizontal wells with multiple offsets that resemble a fish skeleton. Last year we have successfully drilled several of these wells, and this year are going to replicate them.

— What partners does your company invite when solving technology-related problems?

— We work both with foreign and Russian companies that operate both in the oilfield services and scientific research areas. Today, we don't want to be limited only to technology solutions that are present only on the Russian market. We are looking for access to all solutions that, in principle, exist in the global oil industry. But we are not talking about buying ready-made solutions because in any case they will need to be adapted to geological conditions of our fields. So, in fact, together with the petroleum industry technology leaders we are shaping up long-term programs aimed at creating new solutions, establishing equitable cooperation. By the way, it should be noted that the sanctions have turned into an efficient incentive for Russian oilfield services companies to improve their technology basis. Their competitiveness in the high-tech services segment is steadily growing. In particular, we are already seeing rapid development of Russian horizontal well drilling technologies which, in general, are not inferior to Western analogs and sometimes even surpass them.

— Speaking of Gazprom Neft’s long-term production assets development strategy, how would you call it: extensive or intensive?

— I think, a combined one. We put onstream several major fields, in particular, Messoyakha and Novy Port and will use the developed infrastructure of these fields to increase production for many years. Besides, thanks to the implementation of our Upstream Technology Strategy and the use of new technologies we bring into production additional reserves at our old fields. All these aspects characterize the intensive development path. The Bazhenov Formation stands apart: is a fundamentally new type of reserves, but we will start their development in the regions of traditional production, at brown fields with existing infrastructure. In addition to these, we also have interests outside the Gazprom Neft perimeter. The easiest way to do it is through cooperation with Gazprom that involves development of under-gas-cap oil reservoirs (untapped reserves of liquid hydrocarbons in gas fields). Besides, we look at fundamentally new growth opportunities and are going to expand our explorations, including an aggressive offshore exploration program; we also investigate new international assets that we may joint some time in the future.

— What foreign countries are most interesting for your company?

— Today the key region where Gazprom Neft is developing its operations outside Russia remains the Middle East. We make lots of efforts to expand our business in the region of presence Iraq where Gazprom Neft is the operator of a major project Badra, and also work in the Iraqi Kurdistan. In addition to these, we look at new options in Iran. Last December we signed a Memorandum of Understanding with the National Iranian Oil Company under which we have started prospecting and explorations of two onshore blocks.

— How competitive is your company on the foreign markets?

— It depends on the market. In the Middle East, for example, Gazprom Neft has obvious competitive advantages: successful experience of operations in the region and significant technology potential. And our practice of entering projects abroad shows that cooperation is preferable to competition both in terms sharing risks (that are traditionally high for overseas projects), and exchanging competencies. For instance, in the Badra field we have been successfully cooperating with Korean KOGAS, Malaysian Petronas and Turkish TPAO. In Iran, our company is also considering operations in a consortium of partners. When expanding overseas, our goal is through reliance on technology competencies to establish ourselves as a partner that the global leaders will be willing to cooperate with on a mutually beneficial basis.

— What, in your opinion, is the most serious growth driver for your company?

— There are several of them. A very important driver is the technology development where we have made substantial investments, the widespread use of digital technologies, the organizational effectiveness. We are making a strong emphasis on training our personnel to ensure their continuous professional growth. The oil industry today is lacking skilled staff: petroleum technologies are developing faster than new knowledge comes in the universities and become available to students. That is why Gazprom Neft is actively cooperating with a number of universities, creating our own faculties and education programs. These projects are also considered serious investments that will give their effect in the future and contribute to the growth of our company.

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