No. 1, 2008

Prospects for the development of hydrocarbon reserves of the Russian continental shelf

Russia’s continental shelf accounts for a substantial proportion of its initial total hydrocarbon resources: 33% of natural gas, over 22% of condensate, and 12% of oil. Although the continental shelves of the Russian Far East and Arctic remain poorly explored compared with their promising analogs abroad, it is already perfectly safe to claim that they are the main reserve of Russia’s petroleum industry.

Dormant stock

The Arctic seas contain over 80% of the Russian continental shelves’ initial total hydrocarbon resources. In the south of the country, the fields of the Russian sector of the Caspian Sea hold a big promise.

While on the subject of geological prospecting off Russia’s shores in 2005-2007, it is worth mentioning here that the overall geological structure of the country’s continental shelf has been ascertained, the main gas-bearing reservoirs brought out, their boundaries outlined, the total capacity of the sedimentary mantle determined, and the initial recoverable hydrocarbon resources evaluated; the latter’s average density has been found to constitute 20,000 to 25,000 tons per km².

The volume of shelf prospecting operations has been increased substantially over the past few years owing to a rise in funding. In 2004, the budget allocations for oil and gas prospecting amounted to 316 million rubles; in 2005, to over 560 million; and in 2006, to over 904 million rubles. Subsoil users’ investments in those years constituted 2.6 billion, 9.5 billion and 17.7 billion rubles, respectively.

Over the period under review, exploratory drilling was conducted on 61 sites, with over 220 wells sunk. In 2005-2006, the extent of 2D seismic prospecting carried out under government contracts constituted 40,500 linear km overall; of gravity and magnetic prospecting, to 23,300 linear km; and of gashydrochemical survey and continuous seismoacoustic profiling, to 8,000 linear km each. Seismic research revealed 450 local geological features over 100 of which were prepared for deep drilling.

These efforts were highlighted by the discovery of a large oil- and gas-bearing province in the Western Arctic shelf. Three major oil accumulation areas were detected there: the Central Barents and South Kara pools (both abounding in gas condensate) and the Pechora Bay pool (containing oil and gas condensate). Thirteen fields were discovered, three of them unique and seven, large.

From Chukotka to Azov

In the Barents Sea, on the basis of the findings of the seismic survey conducted the cis-Novaya Zemlya area, the structural geometry of the Admiralteysky bank made up of Triassic, Permic, Carbonic and Devonian deposits was ascertained and the structure of Krestovoye, Eastern Krestovoye and other elevations detailed.

Well No.7 drilled into the Shtokman field has added over 430 billion m³ to the estimated C1+C2 category reserves, which implies that the field’s potential is much larger than previously thought.

The findings of new geophysical investigations, land-sea composition profiles, revised and reinterpreted retrospective data have made it possible to detect (and map) in the south of the Kara Sea, in its inlets and bays, promising gas-bearing formations – selfcontained or offshore extensions of land features and fields – with localized gas resources (D1) of up to 1 trillion m³.

In the Laptev Sea, integrated geological and geophysical investigations helped ascertain the structure of 20 promising formations, 12 of which were detected in 2006. The explored elevations’ combined area is in excess of 14,000 km², and their estimated resources (D2) constitute about 1.5 billion tons of oil equivalent.

In the Bering Sea, a 5,000-km seismic survey was accompanied by the drilling of the first 3.2 km-deep offshore well in Central license area. Although the well produced neither fluid nor gas, it furnished ample geological information vital to the understanding of the situation and to the subsequent forecasting of the oil- and gas-bearing capacity of the Anadyr Region in the Russian section of the Bering Sea. By now, the prospecting front has shifted to the seaboard (the Tumansky promising area) where a nearly 300-km 2D seismic survey was carried out and where a new exploratory well is to be drilled.

A large body of geological prospecting was accomplished in the Sea of Okhotsk, including integrated gravity and magnetic survey, the processing of regional profiles, over 7,000 km of 3D seismic survey on a regional and local scale in promising regions of Western Kamchatka and the North Sakhalin shelf. More exploratory wells were drilled there.

Drilling was done in five promising areas of the Sea of Okhotsk. As a result, a new oil and gas field was discovered on the Pela-Leich block of the Kaygansko-Vasyukansky section, the resources of which are estimated at 50-80 million tons of oil equivalent (C1+C2+C3-D1 l), 35 to 48 million tons of oil included.

An oil and gas seepage detected on another formation of the same section (Udachnaya) indicates the presence of a noncommercial field with recoverable reserves of less than 3 to 5 million tons of oil equivalent.

The foregoing signals the need for a detailed interpretation of seismic survey findings with a view to determining the collector basin development zones and establishing specific local prospects.

In the Russian section of the Caspian, seismic survey has been carried out in very shallow waters and exploratory drilling done in Karayskaya and Yuzhno-Rakushechnaya promising areas. In the former area, no positive results were obtained, but in the latter one, a new large oil and gas field was discovered and named after the well-known oilman Vladimir Filanovsky. The field was stripped in chalk deposits, two test sections of which yielded inflows of oil (at rates of 842 and 749 tons a day) and gas (59,800 and 64,900 m³ per day). At a preliminary estimate, the occurrence may contain recoverable reserves in amounts of at least 90-100 million tons of C1+C2 oil equivalent; it is one of major discoveries made in Russia of late.

Three-dimensional seismic survey has been launched in a number of license areas of the Russian part of the Azov-Black sea basin. Its findings may prompt deep exploratory drilling to be started in 2008-2009.

As to prospects for the further exploration and development of hydrocarbon resources of Russia’s continental shelf, the Program for the Reproduction of the Mineral Resources Base for the Period Up to 2020 approved by the RF Government in 2005 provides for the allocation, in 2007, of 1,209 billion rubles from the federal budget to geological prospecting operations on the shelf. Subsoil users are to invest about 33.3 billion rubles.

Altogether, the government plans to allocate over 30 billion rubles to prospecting for the shelf’s resources in the period ending in 2020. Subsoil users’ investments in the project are to add up to about 300 billion rubles.

As a result of realization of the Program for the Reproduction of the Mineral Resources Base for the Period Ending in 2020, the shelf’s recoverable reserves amounting to 8 billion tons of oil equivalent (up to 0.3 billion tons of oil and up to 0.6 trillion m³ of gas by the years 2007-2010, and 2.5 billion tons of oil and 4.7 trillion m³ of gas by the years 2011-2020, respectively) will be ready for commercial development by then.

Moreover, the resources of oil and natural gas are expected to increase, thanks to newly discovered fields, to 9 billion tons and 16.5 trillion m³, respectively. At an expert estimate, the continental shelf’s oil and gas output may increase 10-fold, at the very least, by the year 2020 to account for 25-30% of the national total.

The shelf is in need of new laws

The continental shelf situation is not without its problems, however. An overly bureaucratic licensing process and slackness of the oil reserves search and evaluation effort make one doubt the feasibility of the 2020 target. Getting things off the ground without delay requires, besides a radical improvement in the regulatory and legal framework, first, the resumption of prospecting work, test well drilling, above all; and, second, the buildup of a national strategic oil and gas reserve in the more promising parts of the continental shelf.

As to laws governing subsoil users’ activities on the continental shelf, relevant legal provisions will be found in the Law on the Subsoil which, however, remains to be geared to the specifics of offshore oilfield exploration and development.

Besides the Law on the Subsoil, there exists a special Federal Law on the Continental Shelf of the Russian Federation. As distinct from its foreign analogs, though, it applies not only to subsoil use relations but to other offshore activities as well, such as the study and utilization of marine life, marine research, etc.

Russian laws currently in force still fall short of embracing the entire complex of legal relationships in the sphere of continental shelf subsoil use and, therefore, stand in need of improvement.

Amendments are to be made to the Law on the Subsoil, and the issue of combined licenses to develop shelf areas must be allowed. The Natural Resources Ministry of the Russian Federation has already developed the draft law and the amendments in question. The shelf areas’ geological exploration period must be prolonged to 7-9 years. The Ministry has supported the RF State Duma deputies’ legislative initiative. As a result, the draft law providing for the lengthening of the subsoil use period to 7 years has been adopted in the first reading.

It is necessary to introduce a competitive selection procedure in the event of two and more claims being filed. Such amendments to current legislation are coming soon. They will go to stimulate shelf exploration and development and, in the long run, to increase the nation’s resource base.

As it draws up national policy in the sphere of continental shelf subsoil exploration, prospecting and development, the RF Natural Resources Ministry is aware of the fact that the country’s resource potential is today the only reserve of hydrocarbons to be inherited by generations to come and a guarantee of the nation’s energy security.