"We know where we are to go to"

Interview with Mars Khasanov, CEO of Gazpromneft Science and Technology Center

Sibneft Online

—The company has in place a long-term development strategy, while an innovative development program was adopted two years ago. Does the new technology portfolio system enjoy 'the same status'?

—I would say that it is a follow-up to the company's development strategy and innovative development strategy. It is a response to new challenges confronting us as we are breaking into new regions and working with extremely complicated reserves. Where existing field development plans for most of old fields date to back the Soviet era, new projects require their specific field development plans to be made today. Everything needs to be done on our own which is more than an improvement on what our predecessors did before us. And it is an uphill task to bring back to life the operational experience gained in Western Siberia, the Timan-Pechora Basin, and the Volga region in what are currently the most prolific provinces in the industry – Eastern Siberia, and the Arctic.

Does it mean that the company's technological advance is primarily driven by new projects?

— Not only. It so happened that when starting in on new projects, we encountered the risk of falling production at our existing assets, many of which are already in the fourth stage of development. And it is where the latest technologies come in that makes it possible, first, to enhance recovery in drilled acreage keeping wells operating at their maximum potential and second, to spud in those areas that were classified as commercially non-viable. After all, hundreds of millions of tons of oil that can and should be extracted are confined to thin low-permeability formations and highly watercut areas.

—The new principles currently approved at the company, are primarily principles guiding our technological development, that is, reference is made to the development of relevant guidelines?

 —With a changing working environment, we are constantly compelled to modify our conceptual vision: our destination point is that every person should be the engine of innovation and that a high-tech atmosphere is created. While in 2012 when the innovative development program was coming on board, it had generally speaking only individual visionaries working on separate technological areas, conversely, currently a powerful pool of human resources is being formed to deal with technologies. However, once again, we emphasized and highlighted technological challenges that are rated to be the most critical. It is what underlies the new principles of building the technology portfolio —yet more thoroughly prioritizing, and discriminating between technological challenges and technological issues that can be addressed in our day-to-day activities. — Setting up a new technology development system implies some dramatic structural changes... —Yes. In every function of the Upstream there are going to be deputy heads who will be forming the company's technology development plans, and technology project portfolio. These deputy heads for technology development will make up a technological committee within the company that will essentially be the core of the overall system. Decisions to launch all technology projects will be made at the very top and once the green light is given all work will be done at and by the technological committees. This new system will provide a framework under which multi-discipline teams, project-specific working groups and steering committees will be organized.

—In shaping this system are we taking advantage of someone else's model, tapping the market experience or making use of our expertise?

— We got a sense that the task of developing technologies should be entrusted to dedicated personnel at the time when we were following through with the innovative development program, and the technology strategy that exists as part of an updated strategy of the company's development. A shortfall in resources proved to be a big issue. Therefore we hired consulting firm Bain having requisite methodology, and management solutions that had managed to organize active communication between personnel at Gazprom Neft. The outcome was that we acquired a shared concept of the technology development principles and the best portfolio management structure. And it is the most important thing. —It means that a real mechanism is in the making ... —Which is fueled by willpower. It is an essential point. Having is a mechanism and no willpower will get you nowhere.

—Did you study how it works with the world leaders?

—Of course, we did. In different ways. There is yet another strength of Bain — a capability to involve world-class experts. So we got what was the best offer in the market, but you should clearly see that there are no absolutely identical oil companies.

—How does the technology portfolio get filled in?

—First we drew up a long list of technological challenges, and then prioritized them according to our capability to develop these technologies and a potential effect to be gained if we found ways of taking on those challenges. That's how a portfolio comprising 10 technological areas was formed. Each technological area is a set of technology projects with one area closing down and new ones springing up. It is all based on field development plans for our assets that will become part of a business unit development strategy.

 —It means the process is bottom-top?

—A message goes down and a response comes up to meet. Messages are what is dictated by the company's strategy and technology development plans are formed by professionals at business units in conjunction with the corporate center's staff. This is a document specifying, for example, that we should develop unconventional oil reserves to maintain production on an even keel. It is impractical with the use of the existing technologies but there is 100 mmt of oil at stake. If we learn how to drill wells of specified configurations, costs and rates, we will be able to produce on target. —Are we still looking for technological ways of addressing issues guided by the smart buyer principle that is stated in the innovation program? —As a matter of fact, we are currently 'fast followers' rather than 'smart buyers' according to the commonly used terminology. It means that we learned to apply 'right the first time' technologies developed by others and to adapt them to our requirements, which delivers less mature solutions and as a result – more innovative ones. We are already catching onto ideas and assist our service companies, equipment manufacturers and software vendors in developing and commercializing them. While in some areas we have the status of a selective leader. It applies, e.g., to oil rim engineering, conceptual engineering and software engineering.

—Could you give a fair assessment where we are technologically at present based on the current Russian market situation?

—If you looked at the situation prior to the sanctions being applied, you would see that nearly all technological solutions in the key areas of drilling, engineering and civil construction were available both in the West and Russia. Everyone basically employs one and the same technologies. But the competitive advantage is defined by the skill of leveraging these technologies to maximum use and with maximum efficiency. It appears to me that in this respect, our company is one of those on the cutting edge of technology in Russia and without any reservation I could say that we will be the most technologically advanced in two or three years, because we know where we are to go to.

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