The “Shale revolution” as a stimulus for developing tight reserves

By Elena Zhuk, January 12, 2015

The U.S. “shale revolution” over the last few years has nudged Russia’s major oil producers to pay attention to their own hard-to-recover reserves and unconventional hydrocarbon resources, eventually stimulating a stronger exploration and production effort. The stakes were also placed on Western technologies’ transfer within the framework of new joint ventures.

The EU and U.S. sanctions prohibiting transfer of technology and equipment to Russian petroleum companies, as well as services required to explore and produce shale oil, have already affected the implementation of joint projects. In early October, Gazprom Neft CEO Alexander Dyukov told journalists about Shell’s decision to suspend operations in its JV with Gazprom Neft, Khanty-Mansiysk Oil Union, which had been involved in new projects to explore and develop shale oil reserves on the territory of the Khanty-Mansiysk Autonomous District (KhMAD). Shell is also studying the possibility to continue operations with Gazprom Neft in another joint venture, Salym Petroleum Development, which is developing the Salym group of oil fields in the same region.

Two other projects had been scrapped even before the start of their implementation. Total put on hold its cooperation with LUKOIL in their joint venture that sought to develop Bazhenov formations in West Siberia. In May, the companies signed an agreement to create a JV for seismic exploration, evaluation and survey of the blocks holding hydrocarbons from the Bazhenov formation and underlying low-permeable formations. It had been planned to carry out a pilot project at the Galyanovsky license block (the license held by RITEK, a LUKOIL-owned company), and also at Vostochno-Kovensky, Tashinsky and Lyaminsky-3 license blocks (the license held by Total); spreading over an area of 2,700 square kilometers.

ExxonMobil, which had set up a JV with Rosneft to develop Achimov deposits and Bazhenov formation in KhMAD, also walked away from the project.

Seeking Alternatives

In some areas, Russian hydrocarbon producers perform independent surveys of Bazhenov formations, without participation of Western partners.

Thus, Gazprom Neft is carrying out a project at the Palyanovskaya area of the Krasnoleninskoye field in KhMAD. In 2013-2014, the company has drilled five directional wells there, performed hydraulic fracturing on four of them, and in early October it spudded the first horizontal well to explore the Bazhenov complex. In 2014-2015 it plans to drill four more wells, steadily increasing the length of the horizontal sections and the number of fracking stages. The company’s second project aims to develop reserves of the Bazhenov-Abalak formation at the Yuzhno-Priobskoye field, four directional prospecting and appraisal wells will be drilled in 2014-2015 to determine the reservoir’s potential and verify its geological model.

According to Dyukov, technologies are available in Russia for development of hard-to-recover and unconventional reserves; and the lack of certain equipment and materials doesn’t mean that Gazprom Neft isn’t able to work on the Bazhenov formation and low permeability reservoirs, and doesn’t change the situation substantially, though it does affect the process efficiency. “The availability of these elements enables them (Western companies – OGE) to be more efficient by 5-7 percent, but their