1.3. Strategy for developing the oil and gas potential of Russia’s Continental shelf
«Previous Next» Back to report
The general situation in Russia can be characterised as a decrease in the explored oil and gas reserves and their lowered rate of production. The amount of geological surveying does not provide reproduction of the raw material base of the oil and gas industry. Development of only the most accessible and profitable deposits and reserves is taking place.21
According to Gazprom Russia’s gas production capacity will rise after 2010 because of the opening of the deposits on the Yamal Peninsula, in the shelf of the Arctic seas, in the Bays of Obsk and Tazov, in Eastern Siberia and in the Far East. The Yamal Peninsula is a strategic region for gas producing companies. It is one of the most promising oil and gas-bearing regions of Western Siberia. Twenty-six deposits are explored on the Yamal Peninsula, containing surveyed gas reserves holding 10.4 trillion cubic meters, - technically recoverable condensate reserves of 250.5 million tonnes, and technically recoverable oil reserves of 291.8 million tonnes.22
“Russia’s energy strategy for the period up to 2020”, affirmed by Order (number 1234-r) of the Government of the Russian Federation dated August 28, 2003, specifies development of the oil and gas extraction complex in Northwest Russia; the formation of new petroleum regions, an inter-regional transport system for energy carriers, and the role of oil and gas development in resolution of socio-economic problems.
Surveying and exploration in the following areas are determined as priorities by Gazprom:23
• The Barents Sea; the region around the Shtokman field, the completion of prospecting and preparation of gas reserves at the Ludlov and Ledov fields, along with the exploration of the large-scale Fersmanovskaya and Demidovskaya structures.
• The Pechora Sea; the south-eastern shelf (the region containing the Prirazlomnoe and Dolgin fields) where the preliminary exploration of fields, and the emergence of structures adjacent to fields is planned.
• The Kara Sea; in the waters of the Bays of Obsk and Tazov, as well as the Priyamal shelf.
For your information:
Drilling
- to make wells, to bore, to force open a well, the sinking of boreholes, types: core, percussion, roller-bit,
- an underground working process, principally a circular cross-section of the subsoil to allow study of the geological structure, as well as prospecting, exploration and the extraction of mineral resources. Exploratory drilling
- drilling wells with the aim of exploring mineral resource sites and undertaking engineering and geological surveys. A widely used term in the oil and gas industry for deep wells intended for exploration of mineral resources on open fields, study of the geological profile in regions where little investigative work has been carried out, or to obtain geophysical variables. Depending on their purpose, all exploratory drilling wells are subdivided into the categories indicated below.
The following areas are to be developed subsequent;
the water areas of the inland fields in Kharasav and Kruzenshtern (giant in terms of reserves), the large Rusanov and Leningrad gas fields, and the prospective structures in the Nyarmey, Skuratov and Zapadno Sharapov coastal regions. The proposed realistic timeframe for conducting exploratory work at the Rusanov and Leningrad fields is 2015-2020. In total, it is believed that there will be an actual increase to 7 trillion cubic metres of gas based on the number of sites on the Priyamal shelf where drilling is planned to take place.24
At the present time, the All-Russian Petroleum Scientific-Research Geological Exploration Institute within Russia’s Ministry of Natural Resources is developing a “programme concerned with the integrated study and development of oil and gas reserves and resources in the north-west region”, including a strategy for developing geological survey work, on the basis of energy strategy regulations.25
For your information:
Underwater mining - the development of mineral resources from the beds of rivers, lakes, seas and oceans. Underwater mining uses open (dredges and hydraulic dredgers) and underground (underground working and boreholes) methods. the extraction of useful components from the sea water (the physico-chemical separation of salts and chemical elements) is dependent upon underwater mining.
The programme makes provisions for the regeneration of the oil and gas base which enables stable production in the event of the region’s active development and offers a strategic backup by providing energy security for both separate entities within the Russian Federation, and for the north-west region as a whole.26
Annual gas production, in accordance with Gazprom’s plans is projected to increase 10 billion cubic metres after 2010, increase 36 billion cubic metres in 2020, provided that the Shtokman field is developed, and possibly increase 60-90 billion cubic metres thereafter. According to statements made by Gazprom, the timeframe for developing the Shtokman field is primarily determined by the demand for gas and the resolution of the investment question.27
For your information:
Gazprom accounts for 85.5% of Russia’s gas production and one fifth of global gas production. Gas production volumes are as follows:
In 2000: 523.2 billion cubic metres
In 2001: 512 billion cubic metres
In 2002: 521.9 billion cubic metres
In 2003: 540.2 billion cubic metres
In 2004 545.1 billion cubic metres
In 2005: 547.9 billion cubic metres
It is the intention of the Gazprom state company to increase the volume of gas production to 550-560 billion cubic metres by 2010 and to 580-590 billion cubic metres by 2020, this figure rising to 610-630 billion cubic metres by the year 2030.
Using a more intensive development model for gas fields on the shelf of the Barents Sea, it is proposed that within as little as three years following development of the field, it will be possible to enter into the first stage of development with annual gas production volumes of up to 40 billion cubic metres, with a planned increase thereafter over the course of the next 6 years to 90-130 billion cubic metres (using the Shtokman field as a basis).28
Here’s a thought...
In the period after 2010, plans are to ensure the forecasted gas production volumes through development of fields on the Yamal Peninsula, offshore fields the Arctic seas, in the waters of the Bays of Obsk and Tazov, in Eastern Siberia and the Far East. The Yamal Peninsula is one of the company’s strategic gas production regions. It is one of the most promising gas-bearing regions in West Siberia. Within the peninsula, 26 fields have been explored up, the gas reserves amount to 10.4 trillion cubic metres, recoverable condensate reserves equal 250.5 million tonnes and recoverable oil reserves are 291.8 million tonnes.
With the involvement in opening up fields located a relatively short distance from the shore of the Pechora Sea (the Prirazlomnoe, Varandey Sea, Medynskoye Sea, Dolgin fields and others), the growth in production volumes according to the moderate and optimistic models envisaged by the “Energy strategy” is deemed possible by 2017 - 2020, with levels of extraction between 50 and 60 million tonnes per annum accordingly (taking into account exploration and involvement of new fields). This will require an increase in excess of 900 million tonnes of oil reserves on dry land, and more than 250 million tonnes on the adjoining part of the Pechora Sea. These developments will require geological survey totalling USD 5.5 billion on dry land and in excess of USD 0.5 billion offshore. A large part of the expenditure for regenerating reserves on land must be covered at the expense of the subsoil users.29
For your information.
The Russian companies are utilizing 30-35% of the resources in each field, the rest 65-70% are being left. This development is contrary to the rest of the world. For example, in the US in the period 1990-2000 the average coefficient rose from 0,35 to 0,41. In Russia in the same period it sank from 0,39 to 0,3130). Source. The Press office Ministry of Resources Russia.
However, oil and gas extraction in Russia in recent years has largely increased using infrastructure established previously. In this connection, the majority of companies are increasing oil and gas extraction primarily by renewing the production-related and technical potential of fields brought on line previously in regions which have already been developed. The essential increase in production volumes will require investment in both prospecting and infrastructure creation. As regards the Shtokman field, this infrastructure will be unique.
In 2006, a new State strategy with regard to the development of the Russian shelf was actively discussed. One of the aspects of this strategy will be renunciation of the Law “on production sharing agreements” and the orientation towards Russia developing her resources herself. Gazprom, Rosneft and Zarubezhneft have been planning to establish a new State company for offshore development in the Russian Arctic. Bureaucrats started to talk of the possibility of creating a structure along these lines for the first time in the beginning of 2005. The Ministry of Natural Resources and the Industrial Energy Ministry repeatedly declared that it would not be possible to implement shelf-related projects without foreign investment, because it was difficult for Russian holding companies to compete with their foreign counterparts in carrying out auctions and bids on the Russian shelf. At that time, Minister Yury Trutnev proposed the creation of a special State company and its inclusion among the foreign consortia aiming to develop the shelf.
In 2007, however, it became clear that the all offshore licences to the fields on the Arctic shelf and on the shelf of the Far East of Russia, will be given to two state companies, Rosneft and Gazprom. It was also decided that participation in the development will be decided by competitions, not auctions. All these fields will receive tax benefits from the state, and the participation of foreign state companies will be decided individually31. According to data from the Ministry of Natural Resources, offshore oil and gas recoverable resources in Russia are in excess of 100 billion tonnes. The ministry states that in 2020-2030, these recoverable resources which will become the base for extracting oil and gas in Russia. The main theme has become a discussion of the possibilities afforded the State in terms of consolidating their own resources for developing these riches.32
This controversy together with the new politics of renationalization of the oil and gas resources is also a hot topic in Russia’s relation to the European Union.
For your information.
The European Energy Charter was adopted by EU States in the Hague December 17, 1991. The purpose was to develop an efficient energy market throughout Europe. The parties which are signatories to the Charter must undertake activities to ensure co-ordination of their energy policies, collaboration and exchange of opinions. Access to energy resources and their development must be made easier for interested operator developers. Foreign investment must be stimulated and protected.
According to agreements between Russia and EU, European investors are to have the same access to the Russian energy market that Russian companies have to Europe’s market, as well as the ability to export any gas and oil they produce in Russia. However, Federal Law No. 177 “regarding gas exports” assigns to Gazprom (or its wholly owned subsidiary) the exclusive right to export all forms of gas from all Russian fields. “This law sums up the controversy regarding ratification of the Energy Charter and the transit protocol - There is no sense in it continuing”, argues Oleg Zhilin, Vice-President of the Russian Gas Committee.[1] Thus, “Russia will not waive Gazprom’s monopoly to transport gas but will ensure that independent producers have access”, declared V. Putin. These questions will further intensify the contradictions in the energy sphere between Russia and the EU. In October 2006 during an EU-summit in Finland Russia rejected the proposed energy charter.
Footnotes:
[21] Russia’s energy strategy for the period up to 2020. Disposals and sanctions by the Russian Federation Number 1234-, August 28 2003 Back
[22] http://www.gazprom.ru/articles/article20015.shtml (2006 year) Back
[23] IMPLEMENTATION OF THE EXPLORATORY WORK PROGRAMME BY THE gazprom ON THE ARCTIC SHELF OF THE RUSSIAN FEDERATION, Alexander N. TIMONIN, the “All-Russian scientific research institute concerned with natural gases and gas technology” limited liability company. Valentin A. KHOLODILOV, “Gazflot” state company. RAO/CIS OFFSHORE 2005 Back (11.10.2005)
[24] “OIL AND GAS RESOURCES IN RUSSIA’S NORTH-WEST REGION AND THE FUTURE PROSPECTS FOR ITS DEVELOPMENT”, M.D. Belonin, O.M. Prishchepa (All-Union scientific research and geological exploration institute) Back
[25]“OIL AND GAS RESOURCES IN RUSSIA’S NORTH-WEST REGION AND THE FUTURE PROSPECTS FOR ITS DEVELOPMENT”, M.D. Belonin, O.M. Prishchepa (All-Union scientific research and geological exploration institute) Back
[26] “OIL AND GAS RESOURCES IN RUSSIA’S NORTH-WEST REGION AND THE FUTURE PROSPECTS FOR ITS DEVELOPMENT”, M.D. Belonin, O.M. Prishchepa (All-Union scientific research and geological exploration institute) Back
[27] “OIL AND GAS RESOURCES IN RUSSIA’S NORTH-WEST REGION AND THE FUTURE PROSPECTS FOR ITS DEVELOPMENT”, M.D. Belonin, O.M. Prishchepa (All-Union scientific research and geological exploration institute) Back
[28] “OIL AND GAS RESOURCES IN RUSSIA’S NORTH-WEST REGION AND THE FUTURE PROSPECTS FOR ITS DEVELOPMENT”, M.D. Belonin, O.M. Prishchepa (All-Union scientific research and geological exploration institute) Back
[29] “OIL AND GAS RESOURCES IN RUSSIA’S NORTH-WEST REGION AND THE FUTURE PROSPECTS FOR ITS DEVELOPMENT”, M.D. Belonin, O.M. Prishchepa (All-Union scientific research and geological exploration institute) Back
[30] http://www.priroda.ru/news/detail.php?ID=7637> (2006 year) Back
[31] The Shelf is being divided between the state companies / gazprom and Rosneft gain tax exceptions http://www.kommersant.ru/doc.html?path=/daily/2007/095m/14939923.htm (2006 year) Back
[32] http://www.kommersant.ru/doc-y.html?docId=729120&issueId=30274 (2006 year) Back
