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Gazprom Neft takes the lead in Russian hard-to-recover oil

More-challenging reserves are expected to account for an increasing share of the country’s production over the coming decades

Russian producers are under pressure to offset decline at many of the country’s largest Soviet-era fields. Gazprom Neft, Russia’s fourth-biggest oil producer, is alive to the dual solutions to the challenge.

Operators have sought to resolve the problem by advancing new projects in frontier Arctic regions, but the remoteness of these fields and a lack of infrastructure drive up development costs considerably. They have also looked at existing fields in areas where much of the necessary infrastructure is already in place, but exploiting more challenging reservoirs.

Look north

Gazprom Neft operates several fields in Russia’s far north that are expected to drive its growth over the next decade. While the oil price crash has led to numerous R&D investments being shelved, the company has not-so-quietly continued its study work at Bazhenov, one of the world’s largest shale oil formations.

Russia has long hoped to replicate the success of the US in developing shale oil, but a lack of technology, among other factors, has held development back. Its producers looked to partner with leading western oil companies to advance Bazhenov projects, only for these ventures to collapse after 2014 sanctions prevented IOCs from taking part in unconventional oil and gas projects in Russia.

Since then, Gazprom Neft has been working to develop the necessary technologies and expertise on its own. At the forefront, the company is honing its skills in the use of hydraulic fracturing and other unconventional extraction techniques.

“The main goal now is to reduce the unit cost of wells by means of a technology breakthrough and further development of the Russian market, which will enable commercial extraction of oil from Bazhenov” Vashkevich, Gazprom Neft

The firm’s efforts have yielded results. It managed to reduce estimated production costs at Bazhenov to RUB16,000/t (c.$30.40/bl) by the end of last year, Alexei Vashkevich, director for technology development, tells Petroleum Economist. This is almost half the projected cost when work on the project first began in 2017.

Under current market conditions, this is still a considerably high price once transport and other expenses are accounted for. A cost as low as RUB8,500/t will be needed to make the project viable, Vashkevich says, but this milestone is expected to be reached as early as next year.

“The main goal now is to reduce the unit cost of wells by means of a technology breakthrough and further development of the Russian market, which will enable commercial extraction of oil from Bazhenov,” says Vashkevich.

Gazprom Neft said in early June that commercial production of Bazhenov’s oil would start in 2025. It is targeting reservoirs at the Salymsky-3 and 5 blocks, in Russia’s oil heartland of Khanty-Mansiysk, in western Siberia. In-place unconventional reserves at the sites are estimated at 500mn t (3.7bn bl).

Plans to expand the scope of Bazhenov’s development, and the timeframe for exploiting the resource, will likely be reassessed depending on how quickly the global economy stabilises, Vashkevich cautions. But Gazprom Neft hopes to eventually produce up to 7mn t/yr (140,000bl/d) from the project. Unconventional reserves are expected to account for 10pc of the company’s total liquids output by 2030.

Tackling hard-to-recover

Another cornerstone of the firm’s growth strategy is developing the Achimov layer, one of Russia’s most challenging horizons. Like Bazhenov, it is found throughout much of the western Siberian oil and gas area. Gazprom Neft said back in December it aimed to produce 14mn t oe from Achimov in 2020 versus 12mn t oe in 2019.

The firm’s work in this area is focused on the Yamburg gas field in northern Siberia, operated by its parent group Gazprom. The deep oil reservoirs it is targeting are characterised by low permeability and high pressure. But Vashkevich estimates that, with the right technologies, production could reach as high as 8mn t/yr (160,000 bl/d). Gazprom Neft is looking to develop Achimov layers at other fields in the Nadym-Pur-Taz region of western Siberia with similar characteristics.

Gazprom Neft also wants to exploit conventional but hard-to-recover reserves at other brownfield sites. It formed a joint venture in late June with rival producers Lukoil and Tatneft to develop difficult resources in the Orenburg region, in Russia’s Volga-Urals basin. And it struck a further deal this month with Russian firm Zarubezhneft to drill for hard-to-recover resources in Khanty-Mansiysk.

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