NIS Pursues Exploration in the Balkans, Reports Improved Refining Results

By Elena Zhuk, November 12, 2013

Having completed the first stage of a major processing upgrade in 2012, Serbia-based Naftna Industrija Srbije (NIS) is now also stepping up its upstream activities. 

NIS has planned to launch a full-scale exploration campaign not only in Serbia, but also in other Balkan countries – Romania, Hungary, Bosnia and Herzegovina. In line with this strategy, the company targets the Pannonian Basin intending to keep annual reserves growth rate ahead of production increase figures. This year, its reserves are expected to grow 19 percent, and should eventually reach 20 percent over the next two years, compared with about 1 percent growth in 2009 when Gazprom Neft acquired 51 percent of the company, NIS general manager Kirill Kravchenko told journalists in mid-September.

In June, NIS started to drill a wildcat well at the Algyo field in the Mako concession block in Hungary. Next year, the company will begin exploration drilling at a host of other sites in the same area. In Bosnia and Herzegovina, NIS completed 2D seismic survey, interpreted the data and is now drilling the first of the selected high-priority exploration wells. In Romania, NIS is drilling a well in the Jimbolia block, and has started 3D seismic survey in the EX-2 block. In Serbia, it has completed 3D surveying of Itebej and Kikinda, commenced work in Coka and Milosevo areas, drilled two exploration wells (using Slim Hole technology) and prepared a portfolio of sites for wildcat and exploration drilling in 2014.

Asked by OGE about the results of the exploration drilling campaign in Serbia and on the concession blocks in other countries, Kravchenko replied that they would be revealed by the end of fall. Despite the fact that the success rate in exploration projects usually fails to top 30 percent, NIS is optimistic about the positive outcome of its campaign considering that is runs a number of projects in the region.

Tax System Spurs Upstream Development

NIS regards the E&P sector as a development driver. Compared to Russia, upstream and downstream taxation in Serbia is “flipped,” meaning that refining operations in Serbia are much less lucrative than in Russia, while in E&P projects the situation is the exact opposite, explained Kravchenko.

Such legal framework facilitated NIS investments in the development of R&D for upstream. The company set up the Center for Unconventional Resources, responsible for selection, adaptation and testing the methods of developing unconventional resources and for streamlining such methods into commercially viable technologies. 

The Center also researches high-viscosity oil: an exploration well has already been drilled at the Gai field, confirming reserves of heavy oil with viscosity of up to 2,000 mPa*s. Experiments are also being conducted to improve production efficiency by using horizontal well technology. 

The Center’s other points of interest are low-permeability reservoirs and oil shales. As part of its detailed exploration campaign on tight reservoirs of Pannonian and Baden complexes, NIS and Halliburton are jointly drilling a VPO-1 horizontal exploration well. On parallel tracks, well stimulation programs are being put together using horizontal wells. 

Jointly