NEW VENTURES SHAPE UP FOR RUSSIAN PROJECTS

The foreign presence in the Soviet oil industry is destined to grow as a result of ventures by Canadian, British, and French companies. Gulf Canada Resources Ltd., Calgary, last week disclosed the government of the Russian republic has granted approvals necessary to enable Gulf Canada and British Gas plc's KomiArcticOil joint venture to begin production operations immediately. The approvals follow the registration of KomiArcticOil by the Minister of Finance of the Russian Federation in

Dec. 23, 1991

5 min read

The foreign presence in the Soviet oil industry is destined to grow as a result of ventures by Canadian, British, and French companies.

Gulf Canada Resources Ltd., Calgary, last week disclosed the government of the Russian republic has granted approvals necessary to enable Gulf Canada and British Gas plc's KomiArcticOil joint venture to begin production operations immediately.

The approvals follow the registration of KomiArcticOil by the Minister of Finance of the Russian Federation in November, at which time it became a legally constituted independent company in Russia.

Canadian Fracmaster Ltd., also of Calgary, disclosed it plans to spend $75-100 million on three new joint venture production deals in the Russian republic in 1992.

The company, which stimulates wells in western Siberia in return for a share of production, already has two Russian joint ventures in operation. The Royal Dutch/Shell Group is a partner in one deal signed in 1989. PanCanadian Petroleum Ltd., Calgary, is a partner in a 1990 joint venture.

Total, Paris, signed a production sharing agreement with Russia's Ukhtaneftegasgeologia (UNGG) to develop and produce three oil fields in the Timan Pechora basin. The three fields, in permafrost areas, have recoverable reserves of 300 million bbl:

Production could begin early next year, rising to 45,000 b/d by 1993.

KOMIARCTICOIL

Gulf Canada said the KomiArcticOil joint venture is the result of more than 2 years of technical evaluation and negotiation. It combines massive oil reserves and Russian experience with western technology and expertise in enhanced oil recovery, arctic operations, and environmental science.

Gulf Canada and British Gas each hold a 25% interest in the venture, and the Russians have a 50% interest.

The project at first will focus on two fields in the Komi republic in northern Russia.

Vozey and Upper Vozey fields lie north of the Arctic Circle, about 1,500 km northeast of Moscow and 100 km north of Usinsk, a regional oil center.

The venture will conduct phased development of the recently discovered Upper Vozey field. Joint venture partners will immediately share in all production from about 43 wells completed or being drilled. More drilling will define the ultimate extent of the field.

KomiArcticOil also will increase production from the older Vozey field, using EOR techniques. A demonstration project will test the viability of full scale EOR throughout the rest of the field. Joint venture partners will share incremental production from this project.

Combined volumes attributable to the joint venture are expected to grow to 20,000 b/d during the first phase. Total investment by the joint venture during this 2-3 year period will be about $200 million.

At the time of registration, the Council of Ministers of the Russian republic issued a decree supporting the aims and objectives of the joint venture.

Gulf Canada said KomiArcticoil is one of the first oil and gas joint ventures to receive such a high level approval from the Russian republic and the largest oil and gas joint venture registered by the Russian government.

A full time staff, including about 50 Canadians, was assembled before final approvals were received. Canadian employees are in the main KomiArcticOil offices in Usinsk, with one full time employee in Moscow. As the project becomes operational, current staff will be augmented by personnel from Gulf Canada and British Gas.

CANADIAN FRACMASTER

Canadian Fracmaster's new joint ventures are near its present projects in oil fields about 1,429 miles east of Moscow. Fracmaster has a 49% interest in each of the new projects with the balance held by state owned companies. Fracmaster has not acquired western partners for its share.

The joint venture with Royal Dutch is producing about 20,000 b/d. The project with Pan-Canadian is scheduled to go on stream in January and produce 50,000 b/d within 3 years.

Each of the new projects has production targets of 50,000 b/d.

A spokesman for Fracmaster said now is a good time to invest in the Soviet Union despite political uncertainty there.

"When things are moving like this, you have to take advantage of it. That's how you get the best deals ... You have to be able to change as the politics change over there," said Doug Ramsay, Fracmaster's sales and marketing vice-president.

Ramsay said investors who delay action may be left behind. He noted Fracmaster's operations are in the Russian republic, led by Boris Yeltsin who favors development and western investment.

TOTAL CONTRACT

Total's production sharing contract is the second cooperation agreement signed between the company and Russia this year. Last September the company reached agreement to boost recovery from Romashkino field.

First production from the Timan Pechora fields will come from a well already drilled by the Russians. This will be linked by a 37 mile pipeline to existing production facilities.

Total said the production sharing contract is the result of several months of talks following an initial agreement signed in December 1990 that laid down the main lines of cooperation.

The production sharing contract has been approved by the Komi republic, where the fields are located, and now requires ratification by Russian federal authorities.

UNGG is sponsored by the Ministry of Ecology and Natural Resources and the Russian state committee for geology and energy resources.