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Home / Issue Archive / 2006 / October #10 / Big Oil and Big Research

№ 10 (October 2006)

Big Oil and Big Research

Mars Khasanov, Director of Science at Rosneft, replies to questions from Rosneft Magazine

Today, oil production is becoming more and more high tech. The more remote and inaccessible the new oil fields, the more money and effort oil companies must spend on research and development and advanced technology application. So oil producers must develop their own research and engineering capabilities. Rosneft can rightly consider itself one of the undisputed leaders in this field. In the following interview, reprinted with permission from Rosneft Magazine (No. 2, July-September 2006) Rosneft’s director of science, Mars Khasanov, discusses these issues.

Rosneft Magazine: Mr. Khasanov, what is the role of scientific and technical research at Rosneft? How does Rosneft differ in comparison to other Russian oil and gas companies?

Mars Khasanov: Rosneft has unique assets and projects in its portfolio, such as field development in Eastern Siberia, offshore in the Far East and in the Timano-Pechora basin. All these regions are characterized by severe climatic and complicated geological conditions. Successful implementation of these projects has become feasible only because of the high quality research and technical capabilities we have at Rosneft.

Engineering and research activity is a top priority at the company, but of course that does not apply only to us. Reserves complication and depletion mean that all oil companies have to make major efforts to ensure their technical and technological development. Today, all oil companies have access to leading-edge technology. The internationalization of experience and knowledge, as well as the presence of a large number of high-technology service companies, help spread the application of research and technical achievements across the oil industry.

So, I believe that Rosneft’s main strength is in its more active relationship to technology itself. Basically, the company does not buy technology, but develops and masters it. For instance, in order to conduct hydraulic fracturing, we do, of course, contract service companies. But actual well selection, operations design, feasibility analysis and technology adjustment – all of that is handled by our own specialists. To illustrate the results we obtain through such an approach, let’s look at just one example. If we compare the production rates of wells drilled by Rosneft with those of new wells at other companies, we see that Rosneft has significantly higher figures – in fact, the rates are several times higher in many cases.

We aim to be at the very cutting edge of technological progress and therefore test all the latest developments and ideas. In order to guarantee the success of innovations at the company, we created the New Technologies System (NTS), which is run by study teams. NTS focuses on the areas of greatest importance to the company, including reservoir study and modelling, complex reservoirs development, well drilling and completion, water management and information technology. The NTS study groups consist of multidisciplinary teams of 15 to 20 specialists from various Rosneft departments, operating units and Corporate Research and Project Institutes. The study teams carry out their research in the form of projects and are run by managers from the Corporate Scientific and Technical Center (CSTC).

The NTS covers the complete innovation cycle – from the birth or import of the concept to the wide implementation of the technology based on that idea.

The Technology Bank is constantly updated and acts as a storehouse of innovations. It contains the Technological Matrices – simple and clear templates which define where and how this or that new technology can be applied.

In other words, the company has created an innovative environment open to everything that is new and advanced, absorbing innovative ideas that can be adjusted and successfully implemented. The balance between our own developments and adaptations of imported technology as well as the selection of areas where we want to go in our own research, is a strategic target for the company’s future development. We managed to achieve a balance which was used as the basis for developing a technological leadership program at Rosneft.

Rosneft Magazine: What is the structure of research and engineering at Rosneft?

Mars Khasanov: The technological side of the company includes the Corporate Scientific and Technical Center (CSTC), which is incorporated into Rosneft headquarters, and three Research and Project Institutes (Centers) in Krasnodar, Ufa and on Sakhalin Island which are managed by CSTC. The location of these institutes allows us to cover all the regions where Rosneft operates – both now and in the future.

Rosneft Magazine: How many people work in research at the company? Who are these specialists?

Mars Khasanov: At CSTC we have 120 people, and in total about 1,500 people are associated with research projects at the company. The age distribution of the specialists is optimal. Young and technically knowledgeable specialists from 25 to 35 are supported by the expertise and skills of older colleagues with extensive professional experience. Many employees have scientific research degrees – we have 90 PhDs and 12 doctors of science.

The engineering and research sector of the company is a self-learning organization with effective centralized management compatible with the wide application of the project-based approach.

Rosneft Magazine: How and according to what criteria does the company select its research and technical personnel?

Mars Khasanov: We have very rigorous criteria for selecting scientific and technical personnel. We demand from our employees a systematic knowledge of petroleum science and excellence in mathematics and physics. The company has developed knowledge matrices which define the required skills and proficiency level of our specialists. We carry out assessments of prospective employees according to their intelligence, openness to new ideas and commitment to self-development.

The entire industry is experiencing an acute shortage of highly-skilled staff, and under these conditions ordinary recruiting methods are ineffective. Rosneft has therefore developed a wide-ranging program of cooperation with leading Russian universities, including Moscow State University, the Moscow Physics & Technical Institute, the Gubkin Russian State University, Ufa Petroleum University, Moscow State Institute of International Relations (MGIMO) and others. Within this cooperation program, the best students are provided with specialized training to prepare them for future work at various Rosneft divisions and departments. The students play an active role in CSTC projects and participate in all corporate training programs. And then, after completing the two-year Master’s degree, they are fully equipped to do valuable work for the company.

Rosneft Magazine: Which spheres do CSTC and its divisions concentrate on?

Mars Khasanov: The Corporate Research and Project Sector covers the whole range of knowledge through the entire cycle from exploration to production as well as future technology system analysis and our internal research and development studies. Functionally, there are separate divisions for geophysics, regional geology, reservoir engineering, well operations and oil and gas processing technology, etc. All these different areas are unified into one process of reservoir development management. The system of oil field development (see diagram) is created in a unified information space which allows us to optimize communications and resources, implement prompt decisions and create interdisc iplinary and multidisciplinary teams.

Rosneft Magazine: What are the main directions of CSTC research at the moment? Who decides on which areas the company’s researchers should concentrate their main efforts?

Mars Khasanov: To achieve maximum effectiveness we decided to concentrate our efforts on issues whose solutions bring the biggest effects to the company. A broad analysis conducted by CSTC allowed us to select 11 main areas related to major and crucial subjects such as reservoir study and modelling, well completion and maximum well performance, oil production increase and associated gas utilization.

Short and long-term research topics are selected for every area using a centralized electronic system for applications collection. This system uses criteria selection and ranking tools, expert appraisal and brainstorming.

Rosneft Magazine: Mr. Khasanov, how is the link between science and field operations, between theory and practice, organized in a company as large as Rosneft?

Mars Khasanov: The link between theory and practice is the crux of the matter! And its effective solution has been one of the company’s main achievements! The Corporate Research and Project Sector is fully integrated into operations. The research institutes not only design reservoir development and construction, but also provide project support through to implementation and subsequent monitoring of oil production.

New ideas and new technologies are applied in the framework of the New Technologies System (NTS), which I have already mentioned. The starting point here is the key task, which dictates technology selection. Then, under the NTS study team management, pilot projects are developed and implemented. The specific technology is constantly adjusted and updated during the project study to ensure its wide-range application. At the same time, we also motivate personnel and provide them with training. This innovative process occurs under NTS management, but we invite specialists from both within and outside the company.

Rosneft Magazine: Can you measure the economic effect of corporate research and technical activity?

Mars Khasanov: Measuring the precise economic benefits from scientific and technical research with any accuracy is virtually impossible. And it is certainly impossible to do that with any accuracy in financial terms and say how many roubles you’ve actually made. That is partly because it is very difficult to estimate the effect of any subsequent applications and the further development of the technology, as well as synergies from implementation. But of course we do an economic analysis of the technology implementation in every project. In fact, we rank the implemented measures according to their technical and economic indicators. As a rule, we make a conservative estimate, and the actual results are often better.

Rosneft Magazine: Could you give us any examples of specific studies whose results have led to production increases, improved efficiency or reduced costs?

Mars Khasanov: Let me describe only the most impressive cases. The average increment of well production resulting from changes in hydraulic fracturing design was 20 tons per day for the carryover wellstock from Purneftegaz at the end of 2005. Horizontal well drilling at the Komsomolsk field allowed us to increase the average daily field production, because existing vertical wells produced 20 tons/day, while with horizontal wells we obtained 130 tons/day. These are examples of oil fields in commercial production. At the Vankor field, we managed to increase the main indicators as early as the FDP design stage. The application of horizontal well drilling has enabled us to reduce the number of wells by over two-thirds while increasing initial rates by more than six times. The application of smart well systems in the under-gas zones – and that’s 30 percent of the total stock – allows us to produce an additional 14 mln tons of oil. And we also managed to reduce drilling costs at the Vankor field by 40 percent.

An important indicator of reservoir development efficiency is the increased oil recovery. In the new Priobskoye FDP, we have been able to increase oil recovery from 0.28 to 0.34 by optimising water flooding and changing the drilling strategy. At the Vankor field, oil recovery increased from 0.35 to 0.42.

Rosneft Magazine: Have the researchers at Rosneft achieved any breakthroughs that have surpassed anything done internationally?

Mars Khasanov: Yes, the company has a whole series of such breakthroughs under its belt. In particular, CSTC has developed and patented an integrated spectral-velocity technology of reservoir properties forecast in the inter-well space using seismic and well data.

The Total Production Management (TPM) electronic system for well and reservoir management is another unique development by the company’s engineering and research departments. This system includes all the data about reservoir properties and well performance. The TPM software allows our experts and managers at all levels to analyze reservoir development conditions and make joint decisions on oil production increases and well performance optimization.

Rosneft Magazine: What is the structure of Rosneft’s regional research centers and what is the main thrust of their activity? Do they specialize in any particular areas?

Mars Khasanov: Rosneft’s engineering and research institutes are fairly large centers staffed by 400 to 700 people and equipped with research laboratories. As I mentioned before, all our institutes are integrated into the production process and conduct studies on everything from reserves prospecting and exploration to geological and dynamic modelling, from reservoir development design to the design of field construction and project implementation follow-up. Basically, all three institutes work on similar topics, although they do specialize in certain areas. The Krasnodar institute, for example, has broad experience in highly viscous oils, while the Ufa center has developed practically all Rosneft’s computer technology. CSTC performs as a system integrator of all research, technical and project work. In fact, all the science and research at Rosneft functions as a single organism, which enables us to be highly flexible in allocating human and other resources as needed.

Rosneft’s strategy for corporate research is to achieve the high, but attainable goal of establishing Rosneft as a world leader in advanced technology, operational safety and business efficiency. The company should achieve core competencies in hard-to-develop reserves recovery, including offshore projects.

Achieving these goals can be reached by fulfilling three important conditions laid down by the management strategist and thinker Jim Collins. If you follow his philosophy of the leap outlined in his book “Good to Great”, you simply cannot turn a good organization into a great one if you don’t fulfil these three conditions:

First – complete “science to production” integration.

Second – understanding and developing core competences which determine the present and future competitive advantages of a company.

Third – corporate spirit, by which we mean the full commitment of all employees, good teamwork, professionalism and responsibility for the final result.

This concept is clearly explained by the diagram.

Rosneft Magazine: Does CSTC maintain links with the research divisions of other oil and gas companies in Russia and abroad?

Mars Khasanov: Yes, we work in cooperation with our competitors as well as with companies in allied industries. This is largely a result of the fact that in the Soviet Union science was integrated, and the culture of cooperation and exchange has been retained to provide a good basis for modern research.

Our partners include companies such as LUKOIL, BP, ExxonMobil, and Gazprom.

In general, scientific cooperation with them is within the framework of our joint projects when we have to solve specific tasks of reservoir development. We are cooperating with LUKOIL on offshore developments in the Sea of Azov, for example, and with Gazprom on developing offshore Arctic areas. We also have joint offshore Sakhalin projects with ExxonMobil and BP.

Rosneft Magazine: Which Russian and international research and development centers do you work with?

Mars Khasanov: We cooperate with many leading research and development centers, including the Oil Engineering Department of Stanford University, the University of Tulsa, the Colorado School of Mines (USA), Heriot-Watt University in Scotland, the University of Calgary in Canada, the French Petroleum Institute and the University of Stavanger. We are interested in the whole spectrum of reservoir development knowledge and new technology implementation, as well as innovation management expertise. The most pressing research at the moment is associated gas utilization. With regard to prospective research, the main question is how to develop so-called unconventional and hard-to-develop oil reserves. This includes offshore oil fields and reservoirs with highly viscous oils, etc. The proportion of such reserves in the company’s assets is increasing constantly.

Rosneft is also a member of international consortia on multiphase flow studies, emerging modelling techniques and reservoir studies, complications prevention in production and artificial lift. Thus, in creating the Total Production Management system, for example, we used algorithms of multiphase flow calculations which were developed under a consortium at the University of Tulsa. This method is currently the most accurate and universal and allows any well design, from vertical to horizontal ones. Experts from Rosneft were the first in the world to use this advanced technique to carry out actual production calculations for the entire company. Implementing similar advanced developments demands close cooperation between specialists from the company and outside engineering and research centers, both in Russia and abroad.

Rosneft Magazine: CSTC is responsible for Rosneft’s training programs. How are these programs developed and how they are structured? What professional training systems exist at the company?

Mars Khasanov: We develop corporate training programmes together with Rosneft’s HR department. The training programs are prepared by CSTC employees based on their knowledge base, which is created during the process of constant monitoring, adjustment and transformation of global best practice.

The professional training program is based on matrices of technical competences developed by CSTC in accordance with the company’s objectives of innovative development. Training courses are prepared and outside professors and experts invited in from some of the world’s leading research centers, with which Rosneft cooperates closely. We have developed over 50 training courses in all fields, from geology to geophysics, reservoir development and modelling.

Another important form of knowledge sharing is the system of knowledge accumulation and distribution developed by CSTC. The system includes different forms and ways of knowledge sharing, including an e-library, a corporate research and technical bulletin with all the latest ideas from Rosneft employees, publication of the Petroleum Engineering Library series and conducting thematic conferences. For example, we hold conferences on IT, reservoir development and seismic exploration.

Human resources – that is the main value of the company. And we take advantage of all the possibilities available for the professional growth of our employees and the maximum application of their abilities.

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