U.S.S.R. PINS BIG HOPES ON GAS RESOURCES

July 16, 1990
John L. Kennedy Editor Natural gas is today's and tomorrow's bright spot in the U.S.S.R.'s energy picture. Boosting gas production will be easier than halting declining oil production, but even natural gas growth faces political and technological challenges. Corrosive wellstreams require special equipment and operating techniques. And in areas where new supplies will come from-western Siberia, for one-there is growing local resistance to development of oil and gas resources.

John L. Kennedy
Editor

Natural gas is today's and tomorrow's bright spot in the U.S.S.R.'s energy picture.

Boosting gas production will be easier than halting declining oil production, but even natural gas growth faces political and technological challenges.

Corrosive wellstreams require special equipment and operating techniques. And in areas where new supplies will come from-western Siberia, for one-there is growing local resistance to development of oil and gas resources.

Environmental problems are acute in the U.S.S.R. In the last 5 years, the expense for environmental protection has doubled, Soviet officials say. And the cost will grow even faster in the future.

"The 'greens' have reached us," a Soviet spokesman said. This growing concern about improving the environment will have its effect on oil and gas supply.

OVERCOMING HURDLES

There have already been "some bloody battles" for the right to explore, one Soviet official said.

And public opinion was "100% against" building a complex to handle high hydrogen sulfide gas from Astrakhan fields.

Most wells there were drilled without problems, but the area is densely populated and a gas handling problem would be very serious.

Despite these hurdles, natural gas production and use will grow rapidly in the next decade, says Nikolai Belyi, chief geologist for the U.S.S.R.'s Gas Association, successor to the Ministry of Gas Industry.

Natural gas accounts for 40% of the Soviet Union's primary energy production, and it's the only segment that has shown healthy growth in recent years.

Gas exports have increased by 20 times during the past 15 years.

Gas production will continue to grow in the 1990s, Belyi told a group of U.S. independents and representatives of international firms in Moscow.

Production will reach more than 1 trillion cu m/year by the mid-1990s. Estimated 1990 production will be 828 billion cu m, up from 727 billion cu m in 1987 and 587 billion cu m in 1984.

Currently, western Siberia accounts for 58.5% of the Soviet Union's gas production, European regions provide 21.2%, and central Asian and Khazakstan contribute 19.2%. The remaining 1.1% is from other areas.

INCREASING GAS DEMAND

Increased exports will not be the only growing market for natural gas, Belyi predicts.

He expects stricter rules covering the operation of nuclear power plants in the Soviet Union. That will limit the amount of electrical power from this source, and natural gas will take up some of the slack in power generation.

About 1,150 gas fields have been discovered to date in the U.S.S.R.

Many await development, some because of special equipment needs. For example, an estimated 13% of the gas resource contains significant amounts of H2S, in some cases concentrations of more than 20%.

Gas with more than 3% ethane is considered a prime source of petrochemical feedstocks, and new plants are expected to be built to handle new supplies. More than 40% of the gas in western Siberia exceeds this ethane content, Soviet specialists say.

In addition to today's reserves, there is a vast undeveloped gas resource in the remote areas of western Siberia alone.

And there is potential in eastern Siberia. Those prospects are inferior to those of western Siberia, the Soviets say, and they are even farther from Soviet markets than western Siberia regions.

Development of eastern Siberia's gas resources will be costly, and it may be an opportunity for joint ventures between the Soviets and firms from the U.S., Japan, and China, Belyi says. Because the region is closer to Japan than to big Soviet markets, a Soviet/Japanese venture may make sense.

Today's fields will be the source of most gas until 2010, Belyi predicts. Exploration is still under way, but field development has higher priority.

WESTERN SIBERIA

Gas resources in western Siberia are enormous. But they also are 2,000-3,000 km from markets. More than 70% of the development investment in western Siberia is for main pipelines, Belyi says. Twenty pipelines from the area were finished during the past year.

Huge Urengoi field now has about 1,200 wells producing about 250 billion cu m/year (8.83 tcf/year) from the Upper Cretaceous. Another 750 wells in the Lower Cretaceous contribute 21 billion cu m/year (0.74 tcf/year) of gas and 6 million tons/year (120,000 b/d) of condensate.

Besides being remote, the climate is severe, and ground water is lacking. Construction costs are 2-2 1/2 times higher than in the European part of the country. And new technology will be needed to develop more reserves in the region.

Recently, equipment modules weighing 300-1,000 tons for Yamburg gas field were built under factory conditions 1,500 km from the field and moved by a water route to the area during the summer.

OPERATING PROBLEMS

Western Siberia's operations face a challenge in a rising volume of gas containing significant amounts of H2S. That trend will require a change in design and operating techniques, Belyi predicts.

The Soviets expect to place large volumes of Yamal Peninsula gas on stream in 1994 or 1995. Development drilling is under way, and preparations are being made to lay a pipeline from Yamal to the Central U.S.S.R.

Difficult geology and permafrost are characteristic of the area. To prevent permafrost melting, development drilling involves grouping directional wells in clusters of up to 20.

Much of the development experience gained in Yamburg will be used in Yamal, Soviet specialists say.

There is some oil in a few Yamal fields, too. Ten years ago, a lot of oil was expected in the northern Yamal Peninsula area, but not much has been found. Belyi still thinks the oil potential in the region is significant, but for the time being it is much more economic to develop oil farther south.

The arctic offshore is "very prospective" Belyi says. Some Yamal fields extend offshore, but development will be very expensive and likely will not begin until after 2000.

There is oil in Urengoi, too-maybe 1 billion tons in place, 200 million tons recoverable. But it is distributed in many horizons, some of which are only 3 m thick at depths of 3,100-3,500 m.

GAS ASSOCIATION

The Gas Association, the new organization responsible for Soviet gas development, has a smaller staff than its predecessor, the Ministry of Gas Industry, and is now not as closely tied to the government.

The association is responsible for gas activity in the U.S.S.R., including field development, transportation, equipment manufacturing, and facilities construction.

It conducts a small amount of exploration-about 230,000 m/year of exploratory drilling at present-but most exploration for gas as well as oil is under control of the Ministry of Geology.

Belyi says the Gas Association is interested in joint ventures involving, among other things, geophysical surveys and field development under high temperature and pressure conditions.

Compensation for the joint venture could be in the form of gas. Belyi concedes that limits the flexibility in forming joint ventures. But if a company had an affiliate in western Europe "it would be an advantage."

It's possible, says another Soviet spokesman, that if gas were delivered to Moscow from a field operated by a joint venture, for example, the joint venture partner could take an equal volume of gas at the German border. Because deliveries to Europe are made by the state, the western joint venture partner would have to develop its own market.

He expects terms for foreign firms wanting to get involved in developing Soviet gas to be "quite favorable."

However, the last word belongs to the board of the Gas Association.

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