№ 1 (January 2008)
EAGS President on Geophysics in Russia
In early December an International Academic Conference of Geologists and Geophysicists was hold in Tyumen.
The Federal Agency for Subsoil Usage (Rosnedra), the Euro-Asian Geophysical Society (EAGS), the Society of Exploration Geophysicists (SEG), and the American Association of Petroleum Geologists (AAPG) organized this conference and exhibition, the first of its kind of such a scale.
Nikolai Savostyanov, President of the Euro-Asian Geophysical Society, told an OGE reporter about this momentous event and about the prospects of Russian geology and geophysics.
Oil&Gas Eurasia: Nikolai Andreevich, please tell us about the distinctive features of the conference.
Nikolai Savostyanov: The main distinctive feature is that we had previously organized such events with SEG, and these exhibitions and conferences were focused only on geophysics. The current conference, however, focuses on geology and geophysics. The second distinctive feature is that for the first time, a conference this big is held not in Moscow or St. Petersburg, but directly in the work zone, Eastern Siberia.
The topics to be discussed revolve around the problems of Western and Eastern Siberia. They are less global, more attuned to the specific site.
OGE: What is the main focus of the discussions?
Savostyanov: Today, unfortunately, a big problem in the Russian oil and gas industry, particularly in Western Siberia, is the underdevelopment of prospecting and exploration. As the matter stands in Russia, we mine nearly twice as many resources as we discover. This concerns us very much, so we are interested in discussing prospecting and exploration.
Now we are focusing more on the problems of field development, so our primary area of interest is the geological and geophysical modeling of previously discovered deposits.
The second issue is that more than half of geophysical projects are the exploration of wells, so there are also lots of presentations and discussions on geophysical exploration.
Furthermore, many presentations are not so much scholarly as practice-oriented. Most likely, this is due to the fact that several geophysical companies want to gain recognition in the market.
OGE: Why do we focus more on field development than on geological prospecting and exploration?
Savostyanov: There are a number of reasons. The first is that prior to 2002, oil companies with a certain level of profits from oil sales had to invest into prospecting 10 percent of the income from the sales of mineral stock. Later, the oil companies, who wanted to keep the profits for themselves, lobbied legislative amendments through the government and the Duma and in 2002 saw the adoption of a new law abolishing the mineral replacement tax. Today these charges are no longer mandatory, and consequently far fewer resources are invested in prospecting.
In my opinion, we should return to where we stood previously, for today we get enormous profits from oil sales since prices are high.
OGE: What steps should be taken to improve the situation?
Savostyanov: I think that the state has the right to force oil companies to invest in exploration. Besides, it is necessary to steer the oil companies in right direction with various incentives, such as reduction of tax rates, reduction of excise duties, etc.
We have a huge stabilization fund, but we do not invest anything into exploration and we invest only a small amount into reserves prospecting. State spending on exploration should be increased. Under Soviet rule about 9 million meters of deep wells were drilled annually for prospecting and exploration. Today oil companies drill about 1 million meters. Capital invested now and then is comparable. But previously we used 2D seismic surveys, and now we have more expensive 3D seismic surveys.
OGE: In your opinion, what aspects should the state control?
Savostyanov: As for geophysics, information about the resources should be controlled above all. Mineral resources belong to the state, and from a security standpoint, it is entirely inappropriate to give this information to strangers. That would be tantamount to disclosing information about the state’s property. Geophysics is different from, for instance, drilling or well workover, because it relates to security. We must keep our mineral resources under surveillance.
OGE: By the way, what is the experience of, say, the US in this area?
Savostyanov: The office of geology of the US Department of Energy watches what goes on in every private hole: when it is opened, when it is shut down, information on all its deposits. And every company has to report to the state, which is the controlling organ. We have practically none of this type of control anywhere along the road, either in prospecting or in mining.
OGE: What are the distinctive features of the Russian geophysics market?
Savostyanov: Until recently most geophysics companies on the market were Russian. Today their dominance is somewhat challenged by Western companies. I think that in geophysics and seismic surveys, the market share staked out by the West is about 40 percent, and in the logging services market, 25 or 30 percent. This tendency does not suit us, the Russian geophysicists, because the technology level of Russian and Western companies is approximately the same. With rare exceptions, the Western companies do not have competitive advantages or super-technologies. As for logging, the Russian companies are not particularly good at horizontal wells and Schlumberger is much better. For instance, Russian companies do not have appliances such as scanners, which are used for surveying hole walls. But we are mostly on par with the Western companies, and one cannot really say that our technology level has risen with the advent of Western companies. The only thing that still keeps us afloat is low prices.
The situation in the equipment market is somewhat different. In seismic surveys the main equipment suppliers are I/O and Sercel, the companies that supply us with telemetering hardware. In logging, the equipment manufacturers are Russian companies. I can give you one very interesting example: seismic sensors are produced in Russia by a firm which is 100 percent American-owned: OYO-GEO Impulse International.
OGE: What is remarkable about that company?
Savostyanov: When the joint venture was founded, 52 percent belonged to Russians, who provided the premises, machine tools and staff. There was demand for no more than 100,000 seismic sensors then. Today the firm, under American ownership, produces 1.2 million sensors annually, and, having staked out nearly 70 percent of the market, is now nearly a monopoly. The quality level has risen so much that the firm sells internationally nearly 30 percent of what is produces. The firm pays a lot of taxes to the Republic of Bashkortostan, and pays salaries that are nearly four times larger than the average salary in Ufa. Once or twice a year, envoys from the Geospace main office in Houston come to Ufa to check the accounting documents. Seismic sensors are currently in high demand internationally. The more often 3D surveys are used, the higher the demand. The American owners have a good bargain too: they reap hefty profits.
OGE: Can you say which technologies hold the most promise for the industry?
Savostyanov: In the area of logging, several companies, including Russian ones, use original technologies for horizontal well exploration. Several years ago I was told by one of the world’s leading companies that by 2010 pipes will be used for logging instead of wirelines. But I think that in three years they will still be using wirelines. Yet, this is an important trend which holds a lot of promise. It means getting the data not after a while, when you get the pipes from the well, pour in the fluid, read the logs and so on, but getting the data about a formation, its content and properties during the process of drilling. This is called LWD – logging while drilling, or MWD – measurement while drilling.
The second important area of focus in logging today is control over field development, when the well is already cased and the mining is on. It is important to have data about what is behind the drill string. Now we have the method of electrical logging via iron casing. Another similar area of focus is sonic logging via casing. Oil, gas, water and the formation itself have varying compressibility, the phenomenon on which the sonic methods are based. Now these methods have begun to be applied, albeit not very widely. In logging this method allows monitoring the field status during the process of field operation and oil production. Nuclear methods, especially the neutron impulse generator, are traditional for Russia. This works best in saline reservoir waters but can also be applied in fresh water.
OGE: Are these methods still at the trial stage?
Savostyanov: Electrical and sonic logging via casing are at the trial stage, but they are not widely used yet. LWD is already at the stage of industrial application, but it still needs expansion and improvement and has many problems associated with it.
OGE: Are there new technologies for off-shore exploration?
Savostyanov: From a geophysics standpoint, off-shore exploration is quite advanced and has no serious problems apart from in ice environments. Geophysicists do not have problems in open water environments, whether in the Far East, the Barents Sea or even the Kara Sea. I think that the data we collected – a big seismic profile of the entire Northern off-shore – will be presented at the 3-P conference (Polar, Petroleum, Prospects) in 2009 in Moscow.
Initial off-shore data provided by geophysicists show that the area’s geological profile is very similar to that of Western Siberia. With good reason, geologists hope large deposits will be discovered there. It is hard to tell whether these will be oil or gas. In the north, it’s mainly gas. In the Far East off-shore area, it’s mainly oil deposits. Dalmorneftegeophysica in Yuzhno-Sakhalinsk has three high-performance seismic crews, and five seismic crews from Severmorneftegeophysica currently work in Murmansk.
OGE: What would you say about Eastern Siberia?
Savostyanov: This is a hard nut to crack. First, because of the tough orohydrography environment, which, with its snowdrifts, mountains, rivers, the lack of roads, somewhat resembles the north of Canada. Second, there is no infrastructure, the land is uncultivated, and there is no human settlements, either large or small. These need to be built, which requires large investment. Third, there is a purely geological difficulty – vast areas in Eastern Siberia are covered with effusive formation, so called trapps. These formations are practically impermeable to seismic waves, so it is very difficult to get good seismic data. Until now, this problem has not been resolved yet. So, we would like to see clients – the oil companies, turning their attention to the problems of Eastern Siberia as soon as possible.