No. 3, 2004

Interview with Dr. Alexander Repey,
General Director of LUKOIL- VolgogradNIPImorneft


June 2004 marked the 45th anniversary of the LUKOIL-VolgogradNIPImorneft Research and Design Institute - LUKOIL's principal research and design center for oil and gas development projects.

Q: First, let us take a look back at the Institute's history and early years.

A: The Institute was officially established on June 17, 1959. The country was then interested in tapping the oil reserves of the Volga area, and the new institution was supposed to provide research and engineering support for the increasingly intensive prospecting and exploration efforts in the new oil-bearing region. In the early 1960s, the Institute recruited many young talented researchers, engineers and designers. Geological exploration and oil and gas production potential studies were launched right away to evaluate the hydrocarbon resources of the Volgograd Region, to identify efficient field development approaches, and to apply modern drilling and production methods. For example, the Institute designed a new method of open-hole bed testing during drilling. The method was first applied in Southern Russia and then widely used in various regions of the Soviet Union - in Kyrgyz Republic, the Republic of Kazakhstan, and the Far East.

Q: So the Volgograd Institute then had its specialists working all over the country, didn't it?

A: The Institute, later renamed the Volgograd Oil Industry Research and Development Institute (Volgograd-NIPIneft), did a lot of studies and design projects for the Lower Volga region, an area quite challenging in terms of geological structure, but also performed projects for other regions, such as the republic of Belarus, Ukraine, the Crimea, the Saratov Region, the Urals, Kazakhstan, etc. For example, when the development of Western Siberia was launched, the Institute's researchers and designers worked hard on field development projects in Kogalym, Nefteyugansk, Nizhnevartovsk, and Surgut. Our specialists were directly involved in the discovery and exploration of Tengiz - the giant oil, gas, and condensate field in Kazakhstan. In the 1980s, the Institute was the chief Research and Development center (R&D) designing well construction projects for hydrogen sulfide environments. Many specialists who worked in Volgograd later became prominent oil and gas researchers. It would take too long to try and list all the employees of LUKOIL-VolgogradNIPImorneft who have made major contributions to the discovery and development of fields in the Lower Volga area and other regions in and outside Russia. The most prominent of them are the former Institute Directors Viktor Korneyev, Alexander Gabrielyan, and Vasily Kalinin. Important contributions to the development of the region's oil industry and the Institute itself were also made by Anatoly Zagoruyko, Ivan Yakunin, Vera Mikhalkova, Raisa Mikhailova, and many others.

Q: And then closer cooperation with LUKOIL - one of Russia's leading oil producers - marked a new phase in the Institute's history

A: Like most other industry R&D organizations, the Institute had to live through hard times in the late 1980s and early 1990s. The situation substantially improved in 2000, when three research centers - LUKOIL-Nizhnevolzhskneft, Volgogradnefteproekt, and Volgograd-NIPIneft - were merged into JSC LUKOIL-VolgogradNIPImorneft. The strategic mission set by LUKOIL to the new integrated R&D center was to provide design and engineering support to the development of new major oil and gas fields in Russia's offshore areas.

It would be fair to say that over the past four years, the Institute has grown into an integrated research and design institution capable of providing state-of-the-art R&D support to oil and gas field prospecting and exploration, construction and development, including well design and construction and economic and environmental feasibility studies.

At present, the Institute performs very challenging integrated research, methodological, and design projects in support of oil and gas prospecting and exploration, well construction and operation, efficient reservoir development, environmental protection, oil and gas field facilities design and construction, onshore and offshore field and trunk pipeline construction.

Our specialists are involved in all the phases of oilfield development projects, from prospecting and exploration to production and abandonment. We conduct various assessment, evaluation, and appraisal studies and develop measures to minimize environmental and other risks. In other words, we support all the phases of field development, from identifying exploration targets to delivering early oil to refineries. Over the years, the Institute's work volume has increased by a factor of 10.7, while its personnel has grown by a mere 50%. This major accomplishment has been made possible by the availability of modern software and hardware. The company has made major investments into research and development, and is getting adequate returns.

Q: What is the current status of your cooperation with oil companies?

A: LUKOIL-VolgogradNIPImorneft is a corporate research center, whose R&D projects are indispensable to successful operations. Besides, historically the Volgograd Region has been a major source of skilled specialists for the whole country. In the Lower Volga area, we have pay beds occurring at depths of 600 m to 5 km. We deal with formations of various types and ages, with different reservoir types, containing fluids of great diversity in terms of chemical composition and physical properties.

We have learned to work in challenging environments. This is probably why well construction processes designed by the Institute make it possible to drill in a variety of difficult conditions, such as high temperatures, abnormal high or low reservoirs pressure, loss of circulation, high contents of hydrogen sulfide and carbon dioxide, and permafrost.

But, just as importantly, we now have new prospects opening before us. I mean the discovery of a new oil- and gas-bearing region in the Caspian - a major one, probably the only major discovery of the past decade. In pursuing the "Caspian studies" in 2003, our specialists explored the hydrocarbon bed structure occurrence in the Russian sector of the Caspian. That was the first basic research product of the Institute and the Company that summarized the geological and geophysical data for the Middle and the Northern Caspian and outlined the oil- and gas-bearing areas there. The study provides the first-ever stratification of the Mesozoic-Cenozoic deposits, a detailed tectonic and oil and gas geology regionalization of the area, a realistic assessment of the oil- and gas-bearing potential of the Triassic, Jurassic-Cretaceous, and Paleogene-Neogene formations, and research data in support of further offshore exploration recommendations.

We are planning to continue those studies in 2004, as well as to prepare development plans for the Khvalynskoye, Sarmatskoye and Rakushechnoye oil fields. Also this summer the Institute should complete an investment feasibility study for the Korchagin oil field development project and move on to the next phase of the project - the field facilities construction plan, with detailed construction documentation to be delivered in 2005.

Working for LUKOIL-Nizhnevolzhsk-neft, we focus on the Caspian, especially the Northern Caspian, with plans to move into the Central Caspian and later to the Sea of Azov and the Black Sea. In fact, in 2003 we performed a prelicense oil- and gas-bearing potential assessment of the southern part of the Sea of Azov and the Kerch-Taman offshore area in the Black Sea.

Q: What are the Institute's most significant accomplishments in terms of offshore field developments?

A: The commencement of drilling operations in the D-6 - Kravtsovskoye field in the Baltic Sea. The project was designed by our Institute, and its successful implementation is a major accomplishment. The field is not very large, but the project itself is of special importance to us, and we hope to see good exploration, technological, and economic results. Incidentally, 89% of our research and design work in 2003 was performed for LUKOIL; offshore projects accounted for 36% of the total.

Q: These figures indicate that, apart from offshore projects, you still have a lot of onshore projects, too.

A: That's correct, we do quite a few studies for onshore projects, including those in our own region. There is some exploration under way in the Volga area. Other high-potential areas include the Far North, where LUKOIL has discovered considerable but hard-to-recover oil and gas reserves. Therefore, last year, the Institute developed the geological and hydrodynamical models of the Toraveyskoye, Varandeyskoye, Tedinskoye, and Mezhdurechenskoye oil fields, prepared recommendations on how to enhance well acid treatment performance, and provided oil recovery enhancement techniques for the Toboyskoye, Toraveyskoye, and Myad-seyskoye oil fields currently developed by Naryanmarneftegaz

Q: Presumably, the Institute's projects have prepared it for entering the highly-competitive international market.

A: The international competitiveness of Russian R&D institutions and products is a widely debated subject.

The recent history of the Institute's international projects includes a curious episode. In 1995, our Institute worked on a plan for developing the Pamyatno-Sasovskoye field - the gem of the Volgograd Region - in conjunction with Deminex GmbH (Germany) company. It so happened that the German specialists ran their project calculations later than the Institute, and the results were virtually the same. That certainly enhanced the international prestige of LUKOIL-VolgogradNIPImorneft.

The most significant international project performed by the Institute was the development plan for phase two of Western Qurna-2 - Iraq's largest oil field - prepared for LUKOIL in 1998. Some time later, we did a development master plan for the Khesht field in Iran; that field is about the same size as Pamyatno-Sasovskoye in terms of oil reserves. More recently, on orders from LUKOIL Overseas Holding Ltd. we did a development plan for a concession field in Egypt, providing, among other things, for crude oil delivery via an offshore terminal.

Our current projects include studies on Zykh and Govsany oil fields in Azerbaijan. Our Baku branch in conjunction with the research and design units in Volgograd has performed a geological feasibility study in support of drilling exploratory well No. 1 and an exploration drilling environmental impact assessment for the D-222 block.

May I remind you that back in the 1960s-1970s, specialists of the Volgograd Institute worked quite successfully in Angola, Algeria, India, New Guinea, Syria, Libya, Iran, Iraq, China, Mongolia, Poland, and Hungary. And we hope to extend that list of countries

Q: Success in any activity - research or business - is brought about by people, the human resources involved

A: Yes, absolutely. A major success factor for us is our close-knit team of top-notch professionals. LUKOIL-VolgogradNIPI-morneft currently employs 640 highly-experienced specialists, 52 of them hold candidate's degrees and five have doctor's decrees; 26 of our employees have international qualification certificates.

Since 2002, the Institute has had a permanent partner in offshore field development - ABB Lummus Global BV (Netherlands). They are an engineering company, but they also train and certify our employees involved in joint projects. Also in 2002, our design and survey work was certified according to the international quality standard ISO 90001:1994 and was awarded Bureau Veritas quality certificate No. 105768.

Today, the percentage of candidate's degree holders is even higher than during the maximum-strength period. With a workforce of only one-third of the late 1970s figure, LUKOIL-Volgograd-NIPImorneft now performs ten times as much work due to the implementation of modern technology.

But it is not just physical volume that counts. The successful implementation of projects in the Baltic and the Caspian Seas shows that the Institute's work has been gaining in scale and importance. From local and regional-scale studies, it has risen to nationwide and international important projects.

The Institute's level of performance and expertise is also illustrated by the high oil recovery factors (0.68 to 0.7) in the major oil fields of the Volga area, such as Korobkovskoye, Bakhmetyevskoye, Zhirnovskoye, and Klenovskoye, - figures made possible by the Institute's R&D valuable support.

LUKOIL-VolgogradNIPImorneft keeps working hard to cope with increasingly challenging projects, but we have an excellent team of skilled and competent experts to meet those challenges.

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Oil of Russia, No. 3, 2004
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