Russia plans offshore exploration program, seeks investment

Russia is gearing up for an intensive offshore exploration program to offset a sharp decline in its onshore production of oil and gas and to supply a growing demand for energy in the future. Russian officials are looking to outside oil companies to finance most of that exploration through production-sharing agreements. They claim Russia's continental shelf contains huge oil and gas reserves.
June 23, 2000
4 min read


Sam Fletcher
OGJ Online

Russia is gearing up for an intensive offshore exploration program to offset a sharp decline in its onshore production of oil and gas and to supply a growing demand for energy in the future. Russian officials are looking to outside oil companies to finance most of that exploration through production-sharing agreements. They claim Russia's continental shelf contains huge oil and gas reserves.

"We are open for investment, but do not be late," said one Russian official at the recent World Petroleum Congress in Calgary.

The 20 PSAs already in place represent about $80 billion in investments in Russia over the next 25 years.

Russia's virtually virgin continental shelf was estimated in January 1993 to have in place some 133 billion tonnes of oil equivalent, including recoverable reserves of 15.5 billion tonnes of oil and 84.5 trillion cu m of gas. But last week, Deputy Minister of Fuel and Energy Valery Z. Garipov said Russia's true offshore resource base is at least 20% greater than originally estimated.

Russian reserves estimates
The average density of resources on Russia's entire continental shelf�some 6.2 million sq km total�is an estimated 25,000 tonnes/sq km, he said. So far, less than 1% of that oil and 4.7% of that gas has actually been booked as reserves.

"More than 90% of [Russia's peripheral marine resources] are probable, and commercial development of discovered fields is in the very beginning," Garipov said in a paper presented near the close of the 4-day industry meeting.

Most of Russia's offshore resources�up to 55% of the oil and 93% of the gas�are concentrated along the West Arctic shelf in the Barents and Kara seas.

Developments
Russia's first major offshore oil production began only in July 1999, "on the eve of the new millennium," said Garipov. That production is from the Piltun-Astokh oil field, part of the Sakhalin II project developed by a consortium that included Marathon Oil Co., Shell Sakhalin Holdings BV, Mitsui & Co. Ltd., and Mitsubishi Corp.

Earlier this month, Marathon announced plans to swap its 37.5% operating interest in that project for Shell properties in the North Sea and the Gulf of Mexico, as Sakhalin II switches its emphasis from oil to natural gas development (OGJ Online, June 20, 2000).

So far, Garipov said, "Significant oil accumulations have been revealed in two shelf areas only�near the northeast coast of Sakhalin [Island] and in the east part of the Pechora Sea. Insignificant oil resources have also been discovered on the Baltic Sea near Kaliningrad."

Therefore, he said, "The search for new large oil-bearing regions is the critical goal of the future."

In the first quarter of this year, Russia increased its oil production by 4.4% to 77.7 million tonnes, its best showing since 1990. Gas production increased by 2.7% to 161.5 billion cu m in the same period.

Demand to spur exploration
But Russia's current annual onshore production of 300 million tonnes of oil and 600 billion cu m of gas is not enough to supply that growing market. The country will need additional annual supplies of 3-4 billion tonnes of oil and 6-7 trillion cu m of gas by 2010, and another 8-10 billion tonnes and 12-15 trillion cu m by 2020, said Garipov.

Other Russian officials estimate future oil needs will be even higher�up to 350 million tonnes by 2020 for both its internal market and exports. Russia's producing major oil and gas provinces are in late stages of development, with the usual resultant decrease in production in West Siberia, the Urals, and the Volga area.

So far, only about 1 million km of basic 2D seismic lines have been shot, and a mere 170 wells have been drilled along Russia's massive continental shelf. Most of that activity has been in the Barents Sea, with 400,000 km of 2D seismic and 47 wells, and the Sea of Okhotsk, with more than 300,000 km of seismic and 64 wells.

"The average density of 2D observations on the shelf does not exceed 0.25 km/sq km; 3D studies are being carried out since 1997 only," Garipov said.

"All these data prove the necessity to carry geological exploratory works of a great scope. It is necessary to shoot 5 million running km of 2D seismic lines to get the average density of the shelf seismic coverage equal to 1 km/sq km," he said.

Only five large oil and gas regions along the Russian coast have been explored so far, said Garipov: North Sakhalinsky, Pechoromorsky, East Barents, South Kara, and Obsky-Tazovsky. Kaliningradsky, a "relatively small region," has also been explored, he said.

Thus far, Russian and international companies have identified 430 "promising" shelf areas, have drilled 61 structures, and have discovered 32 oil fields, "including 3 unique and 14 big ones," Garipov said.

Sign up for Oil & Gas Journal Newsletters