February 7, 2009
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Home / Issue Archive / 2009 / January - December #1 / Finish What You Start - Utilizing Domestic Service Companies for Existing Well Optimization

№ 1 (January - December 2009)

Finish What You Start - Utilizing Domestic Service Companies for Existing Well Optimization

Natalia Nicholaevna Andreeva’s reputation as a prominent expert in the oil and gas industry is based upon an incredible breadth of experience. The current benefactor of her talent is the Gubkin Russian State University of Oil and Gas, where she is a professor.

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Additionally, she somehow manages to simultaneously serve as the Deputy Head of TEKSERT Systems in the Siberian region, and is also a member of the Board of Directors of NizhnevartovskNIPIneft. In fact, Ms. Andreeva spent 17 years at the NizhnevartovskNIPIneft R&D Institute, where she grew from the position of engineer to Deputy Director and ultimately became the Institute’s General Director., 
Natalia Andreeva sat down with Oil&Gas Eurasia to discuss the oil industry, the challenges facing service companies and unveiled some of her plans:
Oil&Gas Eurasia: Who are current players in the service market?
Natalia Andreeva: There are now three groups in the market. The major players are Western companies that came to our market with the help of loans that oil companies received. These include Schlumberger, Baker Hughes, MI Swako, Halliburton, etc. These companies are well equipped as far as technology is concerned; they have all the licenses, certificates, and documented procedures. This was something new for our domestic oil companies. For example, a   spreadsheet with a prescription on the timing for some technical operations, where it says “move the jack lever with your right hand for 30 seconds.” This is where Western service companies were different from us; they introduced the culture of production and quality standards to us. Another thing which surprised us about the western service companies was the fact that they strictly prohibited any rationalization or improvement. There is a documented procedure, with a certificate and that’s it – you cannot depart from the rules.
The service departments of vertically integrated companies make up the second group of players in the market. These service divisions of large companies are also developing, but sometimes they lack investment. Let us look at the market of designing services. There are design institutes within oil companies, such as TatNIPI, SurgutNIPI and many others. Oil companies believe that this is very good. It means savings and readily accessible specialists. But if you compare those with NizhnevartovskNIPI Institute that works on the free market – hunting for orders, always squeezing its time and its business environment – this team is in a “better shape” and earnings are higher there. In my opinion, it is more profitable for an oil company to employ an R&D Institute from the market than to keep one.
The third group of participants in the service market is Russia’s major medium and small companies in various stages of development.
OGE: What difficulties do the service companies face?
N.A.: The lack of legal and regulatory framework is one of the problems. Currently, there are no standards for well servicing; there is no basic standard – for field development, for example, no law on oil. This is very constraining.
Next, I believe that the oil companies have not yet faced the reality of their situation with regard to the way they must work with reserves. There is an idea in the minds of leaders, “Let’s find a field where we can successfully make a fracturing job and immediately get the most of it.” In fact, it is high time to move on to piece work with wells, the way it is done in Tatarstan, for example. They have been exploiting the deposits for so many years and, still, not a single field is closed yet. There is a very large database in Tatneft, they know how to work with it. This brings results. Once all the oil companies learn that, then the service would be more in demand.
The attitude of oil companies to project documents is very formal. The main purpose of a field development project is just to keep the license. Then it is on the shelf and forgotten. No hurry. It is clear that there is a poor control by the owner of the subsoil, which is the state. Regulatory authorities are constantly restructured; they do not have any real leverage, being prone to turnover and sometimes to bribery. It is appropriate here to give an example of how the work is organized in Canada. In Canada, the entire Energy Agency, including supervisors, has a staff of 760 people. The agency was created 70 years ago and it has never been transformed since then; the name has not changed either. The Agency has an extensive database on all deposits, which helps maintain control.
OGE: What can the non-fulfillment of project documents lead to?
N.A.: I know one field with 3,000 wells. First, they suspended 1,500 wells, then it turned out that out of that amount 750 were producing. If you are using all the net of the wells specified in the project, some oil reserves are selected, but then a substantial part may be buried forever. Sometimes a well with 98 percent watercut and only 2 percent of oil should be left to work because it contributes to hydrodynamic flows that enhance oil recovery in general. Non-compliance with the development project is one of the reasons why we have low oil recovery ratio. This is where the state, the owner of the subsoil, must intervene. It should monitor the methods and technology being used by subsoil users and whether there is a neglect of the country’s interests. Up to 40 percent of wells are now idle in Russia, it is way too much.
OGE: There is a global financial and economic crisis raging. Is there a danger that small and medium-sized Russian service companies will be acquired by more powerful Western competitors?
N.A: This very well may be. Some always go bust in a crisis, while others might profit. International Western service companies, unlike the Russian ones, put a far greater portion of the profits in the company development, they have bigger financial capabilities. So, it is possible that Western companies will buy some of the Russian service companies facing difficulties, especially if those smaller companies have interesting technological solutions of their own.
OGE: Please, tell us about your concept of a rating agency for service companies.
N.A.: Our oil service is making a real breakthrough. Service companies were the first to step in the market. Normally, to create a balanced market within 10-15 years is simply impossible – globally, it took decades and even centuries. As a help for the development of this market, we propose the concept of a united national rating agency. Presently, order allocation process is non-transparent, criteria for the procedure vary. The rating agency will be collecting feedback from oil companies on the servicing jobs done and will keep a database. It would make the market more civilized, the order distribution procedure more transparent.

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