Russian Drilling Programs Poised to Best 2012 Highs

By Lada Ponomareva, March 5, 2013

efforts with international companies, having signed agreements with Italian Eni, Norwegian Statoil and American ExxonMobil on the joint development of the Russian continental shelf.
Bashneft also emerged onto the international market in 2012, receiving development rights to its first project outside of Russia: the Block-12 project in Iraq. The Iraqi Ministry of Oil granted exploration and development rights to the Russian company at a compensation rate of $5 per barrel of oil equivalent. According to Aleksandr Korsik, president of the Russian company, Bashneft plans to "establish a $120 million E&P program, carry out 2D seismic on a 2,000 square kilometer area, and drill at least one well" within 5 years, with a possibility for a maximum of two 2-year extensions. To commence development of the field, Bashneft must make a commercial discovery of at least 300 million tons. In a sense, the company got lucky with the deal: Block-12 is part of an unexplored region in Iraq's Western Desert, where the potential for oil is projected to be highest.

LUKOIL oil production volumes, which have consistently declined over the past few years, were stabilized last year. By the end of 2012, total oil production decreased by only 1 percent to 89.9 million tons (84.2 million tons in Russia and 5.6 million tons abroad), compared to a 5 percent decline in 2011. According to company information, a significant increase in drilling and volumes attained from well bore intervention helped to slow the trend in production decline. To improve drilling performance, the company has applied gas and water-gas EOR methods, polymer flooding, technologies associated with multi-variant well completions, and increased maximum contact with the reservoir. According to general estimates, LUKOIL's investments increased by 40 percent last year to $13.7 billion.

LUKOIL discovered 18 new pools in five fields last year in the Perm, Tatarstan, and Volgograd regions in Russia, and also in Uzbekistan. The company also began production at seven new fields. Overall, LUKOIL increased its reservs by 137 million tons of oil equivalent in 2012 through new field discoveries, and oil and gas production volumes last year reached over 114 million tons of oil equivalent, surpassing last year's production numbers by 1.4 million tons. Production volumes are expected to increase even more in 2014, as the company has started developing the Zapadnaya Kurna-2 field and expects commercial operations to begin next year.

Surgutneftegas operations results are also optimistic, as the company succeeded in stabilizing oil production last year at 61.4 million tons, leading to a 1 percent higher growth rate than in 2011. The company is actively developing its drilling activity, continuously increasing drilling acreage. Last year Surgutneftegas drilled 4.887 million meters using its own equipment (exploratory drilling amounted to 200,000 meters). Drilling in 2012 expanded by 11.7 percent compared to 2010 and 3.5 percent compared to 2011 (exploratory drilling by 13.6 percent and 7.5 percent respectively).

Another notable industry event was Gazprom Neft's announcement on the start of drilling operations at the company's first shale oil well. The company plans