Interview by Chief Executive Officer of Gazpromneft Science and Technology Center Mars Khasanov
– Mr. Khasanov, what was the reason why Gazpromneft Science and Technology Center (STC) was established ten years ago, and how did its purpose change over time?
– The STC was created following the patterns of traditional Russian research and design institutes that made estimates of petroleum reserves, recorded them in the state balance sheet, and prepared design documentation for petroleum field development projects. The goals of such institutions also included the development and introduction of new technologies and materials, but often their weak point was their separation from the business. Initially, once the necessary permits and approvals were obtained from the Central Development Commission, the STC used to step aside and the project was further implemented by the upstream guys. Today we work as one team.
We have created a research and design structure that is fully integrated into our production operations.
From Giant to Small Fields
In the recent ten years, even the nature of our project documents has changed. Before, they were not comprehensive enough as they were focused on the underground part – the reservoir model, well patterns and production profile calculation. But decisions on the production volumes, drilling rates, location and design of development wells are strongly influenced by the infrastructure issues, oil prices and transportation costs. Traditionally, research and design institutes pay little attention to these aspects. Therefore, we had to move away from the isolated problem of reservoir studies and look at the field development project as an integrated system: reservoir, well, field construction, transportation, logistics, economics. It has become clear that infrastructure costs have strong effect on our reservoir decisions, and vice versa.
Therefore, we have introduced a new optimization technique. Before, it was arranged in parts with different services being responsible for each of these parts: we dealt with the reservoir, the development engineers and drillers were responsible for the well patterns, and so on.
– Why did it go like this? It would be logical to assume that optimization requires an integrated approach. So why was it only the reservoir that all the attention was paid to?
– To a great extent, it was like this due to the historical reasons. The first of them was that since the middle of the XX century we worked with huge fields, like the Samotlor field (total cumulative production exceeded 2.7 billion tons). It is impossible to implement such a large-scale project at once, so we had to do it gradually, in parts. Ultimately, the engineers were able to build, for example, a central production facility of a certain fixed capacity, and then use it without any disturbances. That is, the size of the asset was a guarantee for the infrastructure utilization. Besides, it is impossible to develop all the reserves of this huge area at once, so we could accumulate the necessary experience in a small area and then replicate it in other areas of the field.
Now our development projects are much smaller in size. These days, 30 million tons, or even less, is considered quite a decent piece of reserves. But it is almost 100 times smaller than the size of petroleum fields that were developed in the middle of the last century! For this reason, all production facilities are now built at once virtually on the entire area of the field. The assets achieve their full design capacity very quickly.
There is no time for training: while we are learning, the reserves will just go away.
There is also another reason: the tools and methods develop in time.
In the past, we just did not have the techniques that we could use. Now we have developed cost estimation models that allow us to make the most efficient investment decisions even at the conceptual engineering stage.
The most important achievement is that Gazprom Neft, with our participation, has created in recent years the entire methodology and all necessary tools for integrated system engineering.
Fundamental Science and Production Operations
– How did the STC structure change against this background?
– Initially, the STC employed about 100 people, and today we have about 1000 employees. Since we are engaged in new technologies and scientific engineering, in addition to the professions traditional for the petroleum industry research centers such as geologists, reservoir engineers, production engineers we need physicists and mathematicians that received classical educated in their specialties. These professionals come from the fundamental sciences that help us form new approaches and algorithms because those used in the XX century are no longer suitable. Besides, one of the tasks being solved by the STC is to create our own digital programs that would allow us to work with big data and machine learning techniques. Today, we are already using three dozens of different digital systems and in short periods of time perform tens of thousands of calculations, determining the best options.
There is a stereotype that the Russian science is weaker than the Western one. It is not so. Specialists from our research centers and universities are able to find answers to the most difficult questions.
– Then how does your immediate involvement in the production segment combine with the tilt towards the fundamental science? Is not there any contradiction here?
– Our specialists work on specific projects, not abstract problems.
At any rate, we cannot afford being engaged in pure science; it is the prerogative of academic centers. In our activities, it all comes down to the formulation of objectives, and our objectives are dictated by operational needs. The problems we face are so complex that it requires new models, optimization methods and software products to solve them.
In doing this, we apply the multi-disciplinary approach. Let us take, for example, a well. A multi-phase fluid flows in it. It means we need hydrodynamics engineers.
Paraffin precipitation and scale build-up is observed – it means we need chemists. We also need specialists in pumps, electrical equipment, and many, many others. For each specific project, we set up dedicated project teams which, if necessary, would include not only our STC engineers and scientists but also people from the specialized Gazprom Neft directorates as well as production business units. Some work is performed by our colleagues from the innovation environment: universities and research centers.
– Which universities do you cooperate most closely with?
– There are more than two dozens of them. These are virtually all of the country's largest universities, industry-specific colleges and research centers. The number of projects is growing; there are many talented scientists in our country. We are gradually involving more and more organizations in our activities.
Today, on the basis of various academic centers we implement about 80 research projects investing about 350 million rubles annually. There is a stereotype that the Russian science is weaker than the Western one. It is not so. Specialists from our research centers and universities are able to find answers to the most difficult questions. We invite them to solve physical, mathematical, chemical and mechanical problems related to our specific technology projects. These are hydraulic fracturing, drilling, infrastructure facilities in difficult climatic conditions, industrial and environmental safety, all kinds of digital technologies to improve business efficiency and optimize the decision-making process when managing an investment project portfolio, and so on. That is, we set specific tasks, and we have already determined the universities that specialize in each particular subject. Besides, every year about 100 students serve internship in our center.
– How do you select universities for cooperation?
– We define the process which we will be working on, then select the physical, chemical and mechanical components – and it becomes clear what scientific teams we should address them to.
– How do you determine it? Do you follow publications and citation index of some specialists, arrange and attend specialized conferences?
– Most of our employees come from the high school. I am a Professor of the higher mathematics department. In other words, we are quite familiar with the universities and the Academy of Sciences in order to confidently navigate in the Russian scientific community.
– What about the international scientific community?
– We use bots that search for keywords in specialized online libraries. It lets us define what expert on the subject most threads lead to. Then we contact this expert, communicate, ask for a small piece of advice, evaluate the result. The dropout rate is very high. Sometimes we encounter people who publish lots of papers but in fact are not experts in their fields.
We also closely monitor activities of scientific consortia. This is a kind of team work which is still poorly developed in our country. Under a scientific consortium approach several specialists form a team to study a certain subject together.
They announce their goals and intentions. For example, oil and gas companies are offered to support the consortium financially if they are interested in the results. The investments are not very high, and all the information obtained from the studies can be used by sponsors.
– What topics did the STC have to seek assistance from foreign experts on?
– We consulted on the issues related to hydraulic fracturing, enhanced oil recovery methods, complications control techniques, seismic data interpretation, and development of geological models. This does not mean that without foreign assistance our work will stand still – we have excellent specialists who are able to perform, without exaggeration, unique technology operations. We just need to have our finger on the pulse, for the exchange of experience in the scientific world is the basis for the overall development.
– As far as I understand, specialists from the countries with the most developed oil and gas industry – the U.S., Norway, U.K. – should be in the highest demand.
– You’re right. Originally, oil science was developed in our country and in the United States. But after the large-scale petroleum production started in the North Sea and the Middle East, other players have emerged as well. Conditions everywhere are different, so it means different experiences too. Today, the most interesting experience is gained in the United States, the Netherlands, Norway and the United Kingdom. In addition to them, China is moving forward rapidly.
– Do you cooperate with the Chinese?
– Yes, we have just started expanding our cooperation with them. The Chinese have actually grown from the Soviet scientific school. Plus they actively accumulate the U.S. experience.
Looking Back in the Past
– We have discussed how you recruit specialists and exchange experience with the colleagues to solve various problems. But somehow we have overlooked the most important thing: what are these problems?
– We have nine programs documented in our Technology Strategy. First, together with other Gazprom Neft specialists, we determined what challenges our company is facing. Then we got an understanding of what technologies are needed to reduce capital and operating expenses, and what steps can improve efficiency of our explorations.
Then we identified a number of “game changers”, that is areas that can completely change the balance of power in the industry. So we could formulate nine strategic directions.
One of them is the geologic exploration.
The quality of reserves is deteriorating. The prospects we outline tend to be less and less pronounced. Reservoir heterogeneity is very high. In this situation, we need to learn to understand in detail the structure of the field even before we start drilling exploration wells. Here, the leading role is played by technologies intended to improve the explorations accuracy.
– Do you involve paleogeologists to meet this objective?
– Of course. We produce oil in places that were the surface 100-300 million years ago. Where we have rivers and mountains today, there could be oceans before. All oil fields are located in places where ancient oceans and rivers used to be. Our work begins with the phase where we aggregate all the information available on the region under exploration and create a model of how it was formed, how the segmentation took place, how rocks were deposited, how oil was accumulated, where it migrated to. Today, we can simulate geomechanical stress patterns by determining what faults were formed and how oil was moving along them. That is, we recreate the processes that lasted for millions of years, to determine with high accuracy where we should look for new areas that are not yet developed.
– You say there are no huge fields left, there are only small ones. Does it mean that there is very little oil left in the world?
– There are no large fields in usual places. But there are some on the shelf. They can occur on land too – in deep horizons. Rather, we need to say that the “easy” oil era has ended. But technologies are improving. Today we are able to produce oil that was impossible to recover 20 years ago. Besides, the issue of the price is very important too. After all, oil production should be not only technically possible but also economically viable. These calculations are one of the areas which our STC is responsible for.
In this context, we can now move to the second item outlined in our Strategy: development of unconventional reserves, which in our country primarily means the Bazhenov Formation.
The Russian “Shale Oil”
The Bazhenov Formation is the real game changer, the Russian “shale oil”. The Formation occupies about 1 million square kilometers, and even according to conservative estimations it contains tens of millions of tons of recoverable oil reserves. But this class of reserves is completely different from those that we are used to work with.
The Bazhenov Formation has been known for a long time. The first experiments to produce oil here were performed back in the 1980s. But up till now there have only been a couple of wells. There are still no working technologies that would allow us to drill the entire area and start producing the Bazhenov oil commercially. We are working to develop such technologies at present.
The basic technologies applied to produce shale oil in the United States are the horizontal wells with multi-stage hydraulic fracturing. But we cannot just move them to the Bazhenov Formation; they need to be adapted there. This is problem number one.
Problem number two – we need to turn the Bazhenov wells into a routine operation. This means the wells need to be drilled quick and without any complications. The feature of the Bazhenov Formation is the same as of the American oil shales: oil occurs in extremely low-permeable rocks, and it is only in the first 1-1.5 years that significant volumes of oil can be recovered from the well. So there is a need for constant drilling to sustain production. But drilling is an expensive operation which plays a leading role in the formation of production costs. The longer you drill a well the more expensive it becomes.
– Okay, but why do we need the Bazhenov if we have conventional fields, offshore reserves, and so on?
– We think years ahead. The Bazhenov Formation is a “storeroom” that the Russian oil and gas industry will use when conventional reservoirs are depleted. The Formation is located in the regions of traditional production where all the necessary infrastructure is already in place. The Bazhenov will let us keep it utilized. By the way, the availability of infrastructure is the most important economic factor.
– What perspective are we talking about?
– Tens of years. Besides, it is not only the Bazhenov Formation where work with low-permeable rocks is being performed. Let us take a look at the Achimov Formation, for example. That is, practice-proven technologies can be applied in different areas. Once a technology is put onstream at the Achimov Formation it can be moved to the Bazhenov Formation.
And let us now touch upon the issue of permeability, i.e. the ability of rocks to let oil pass through. The large oil fields of the West Siberia used to have permeability of 100-200 millidarcy (mD). Today permeability in our traditional reservoirs dropped down to 1-0.5 mD. In the Achimov Formation we have 0.1 mD, and in the Bazhenov Formation – 0.01-0.001 mD.
– Which is the next direction?
– Electronic asset development. We have been developing our own information technologies since 2012 when the today’s digitalization boom did not start yet but we were getting ready for it.
We aim to create our own methods and software products for data collection and analysis, engineering calculations, preparation and making investment decisions, project portfolio management.
Our company generates the highest potential profit or incurs the highest loss as early as at the concept stage when the decision on whether the project should be implemented is made and the optimum implementation ways are chosen. Up to 50% of the efficiency falls on this stage.
When the infrastructure is already built you can optimize it too but it will save not more than 10% of your costs. This is why the software products we focus on are designed for the development of concepts and generation of integrated “reservoir-well-infrastructure” models.
– Who is responsible for this development?
– The engineering techniques incorporated into the software products are developed by the STC. Sometimes we invite specialists from our innovative environment. For example, the software shell is usually developed by Gazprom Neft’s specialized subsidiary Information Technology Service Company. We are also engaged in the development of software products for management of oil fields at the operation stage – electronic field. But this is the area where the vast majority of companies that offer various digital solutions for the oil and gas industry work in. In our opinion, we should focus on the earlier stages of the field life. I would like to repeat again that the highest efficiency is achieved at the field development concept stage.
Drilling is the Key
– Which is the next direction?
– It is the development of under-gas-cap oil reservoirs (oil rims), that is oil-bearing parts of gas fields. In recent decades, the number of pure oil fields that have been put into operation is very little. The majority of newly commissioned fields are oil-gas or oil-gas-condensate fields. A demonstrative example is the Novoportovskoe field on the Yamal Peninsula.
Using conventional vertical wells to develop such fields is not the best choice.
The multistage hydraulic fracturing method cannot be applied here either since it may cause breakthroughs of gas or water from adjacent horizons. And the subsequent pressure drop would make the oil production absolutely hopeless.
– So how can this problem be solved?
– We build wells of complex design. This is the so-called “fish-bone” design where many sidetracks are drilled from one horizontal hole to reach small reservoirs that are totally unprofitable to drill separately from the surface. In words, it sounds quite simple but imagine that being at a depth of 2-3 km, without seeing the object, determining the position of the drill only by indirect indicators, you have to drill a horizontal well constantly withstanding the force of gravity. And by doing this, you should stay within the boundaries of the reservoir, which often do not exceed 2-3 m, for several kilometers.
It is like hitting a coin with a needle fixed on a wire several tens of meters long.
Today, Gazprom Neft can drill a well of any design known in the global oil and gas industry. But more than that, we need high drilling rates.
As you can see, we are faced with the drilling issue again. The drilling technologies have been assigned into a separate work area. This also applies to the construction of wells in low permeable reservoirs and reservoirs consisting of unstable rocks.
Today, when developing complex fields, drilling accounts for about 70% of capital expenditures. And the main factor that drilling costs depend on is time. The quicker and better you drill a well the less money you would spend. But there is a technology limit to the well drilling time that cannot be reduced so far. Therefore, we are interested in the integral efficiency indicator which is the cost of a well divided by its flow rate.
So to reduce the per-ton drilling cost we need to increase the flow rate. Today it is increased through the introduction of more efficient drilling technologies. Instead of vertical wells, horizontal wells are now used, including horizontal wells with complex design. Such wells are more expensive to drill but their productivity is much higher which means their per-ton cost is lower.
Surfactants can increase oil recovery factor by 13-14%. If we use surfactant-polymer flooding in all our assets, incremental oil production will exceed 170 million tons
Plus 14% Recovery
– What work is being carried out at your conventional fields?
– For those our fields that are close to depletion we develop oil recovery enhancement methods. It is not a secret that no one in the world can recover all the oil that occurs in the reservoir. Today we recover 40% at best. This is our actual recovery factor. How can we increase it? One of the ways is to use surfactants.
By the beginning of the current year Gazprom Neft together with Salym Petroleum Development, the Tyumen State University and Norchem Group of Companies synthesized 11 new surfactants that can replace foreign analogues.
Many people believed that the use of surfactants would not bring any result. But we have conducted a number of successful experiments including a pilot project at the Salym group of fields. Today we are getting ready for field trials at the Kholmogorskoe field. Even now it is clear that surfactants can increase oil recovery factor by 13-14%.
According to our estimations, the surfactant-polymer flooding at the Kholmogorskoe field alone will give the company an additional production of more than 30 million tons of oil. And if we use this method in all our assets, incremental oil production will exceed 170 million tons.
At present we continue to optimize the composition of our cocktails trying to make it as efficient as possible, but inexpensive.
The potential demand for surfactants from the Russian oil and gas industry is estimated at several million tons per year, and to meet this demand new factories need to be built. This means new jobs and significant investments in the Russian economy.
But in order to launch such large-scale production, the participation from the government is required, including tax incentives, which will guarantee the return of invested money.
The next direction in our Technology Strategy is the development of carbonate and fractured reservoirs. The share of world oil reserves in carbonate reservoirs is increasing. More and more new fields are discovered in carbonate rocks. The main problem here is the low permeability and low sweep efficiency (low recovery factor). The problems are solved by high-tech wells and hydraulic fracturing. We cooperate with oil companies that have experience in developing such reserves as well as with the French Institute of Petroleum (IFP).
In this direction, it is important to gather the necessary number of pilot projects where we can elaborate our know-hows.
Another strategic direction of our activity is the development of infrastructure. We have many remote fields in difficult climatic conditions.
We need to apply a modular approach that allows us to gradually increase the capacity of such expensive facilities as, for example, a central production facility. The need to carry out operations in the permafrost and extremely low temperature conditions makes us develop expertise in the field of soil science, permafrost, new materials and so on.