Lukoil has made the first commercial discovery of oil in the Russian sector of the Caspian Sea.
Upon announcing the strike, the giant Russian oil company outlined a tentative development plan for the field, a move that immediately alters the delicate balance of geopolitics governing exports of Caspian oil.
Discovery, development details
Lukoil used the Astra jack up rig to drill the well on the Khvalynskoye structure on the Severny license 170 km off Russia's Astrakhan oblast.
The well was drilled to 4,200 m TD and encountered seven hydrocarbon-bearing horizons.
Plans call for completing and flow-testing the well soon.
"Now we are confident that there is oil in the Russian Caspian," said Lukoil Pres. Vagit Alekperov, who visited the site Mar. 23. "We must make every effort to produce itellipseRussia via Lukoil became another energy power in the region and obtained substantial hydrocarbon reserves in the CaspianellipseI believe the discovery is of great importance to the country both economically and geopolitically."
Lukoil estimates reserves at about 300 million tonnes of oil equivalent. Other reports indicated the presence of natural gas and condensate as well as crude oil.
In all, Lukoil plans to drill eight exploratory, appraisal, and delineation wells on the 8,000 sq km Severny license area. Development drilling is expected to begin in 2001 and could ultimately total about 200 wells. Production is projected to start up in 2002 and peak at 15 million tonnes/year by 2005. At least one fixed platform is planned for initial development, with an as-yet undetermined number of additional platforms for future development.
Lukoil pegged potential Russian government revenues at $10 billion from the field development.
For other activity in the Caspian, the Russian oil company said it plans to use the Shelf 7 jack up, now being built at the coastal city of Astrakhan. It will be able to operate in 800 m of water and drill to 8,000 m. The Astra jack up is rated to 45 m of water and 5,000 m.
Geopolitical puzzle
While Russia has aggressively pursued the export of Caspian crude oil via territory under its control, the option favored by the US has been via Baku, Azerbaijan, to Ceyhan, Turkey-thus avoiding both Russia and Iran (see related item, Newsletter). That export option has focused heavily on the massive finds in the Azeri sector of the Caspian. In addition, crude oil is being shipped to market from Kazakhstan's supergiant Tengiz oil field, operated by a group led by a unit of Chevron Corp. The Caspian Pipeline Consortium, in turn, was formed by Tengiz interest-holders and others to develop a major export pipeline for Tengiz crude production, expected to ultimately peak at 700,000 b/d. The CPC pipeline is under construction, with Black Sea tanker exports of Tengiz crude expected to start up in October 2001 from a new terminal at Novorossiisk.
Lukoil is a major participant in development of Tengiz, the Azeri offshore oil fields, and the CPC pipeline. The company also is active in exploration for oil and gas off Astrakhan and in the Caspian off the Dagestan Republic.
According to Russian daily Izvestia, early production from Lukoil's northern Caspian find is to be shipped by tanker to Lukoil's Volgograd refinery, currently running at well below capacity. With subsequent ramp-ups in production, the oil would delivered via the port of Makhachkala and then transshipped through a recently completed spur to the Baku-Novorossiisk pipeline or via the CPC export line-both options for export that bypass embattled Chechnya and other, non-Russian routes to the Black Sea.
Whichever route Lukoil utilizes to ship the new find's crude, the discovery of major new oil reserves in the Russian Caspian gives Moscow a stronger bargaining position in the export route debate.