No. 4, 2009

LUKOIL is actively developing fields on Russia’s continental shelf and beyond

The continental shelf accounts for over a third of global raw hydrocarbons production.  In Russia, with its huge reserves of oil and gas on land, less than 1% of oil is currently produced in offshore fields.  Even so, over the next decade, a real upsurge in shelf oil fields development is expected in Russia.  For LUKOIL - the Russian economy's leader - development of the country's continental shelf is a major strategic goal for the near and more distant future. 

Big oil in the Baltics

The Baltic region is of special importance for LUKOIL: it was here that, in 2004, the Company brought its first offshore field - the Kravtsovskoye (D-6) - on line.  In July this year, LUKOIL celebrated the fifth anniversary of its Baltic oil business.  So far, a total of over 3.6 million tons have already been produced.

The oil is produced at the fixed offshore ice-resistant platform mounted on two support jackets.  One houses the drilling and production complex; the other, set up in the sea back in the 1980s, accommodates a residential module with a helipad.  The field's well output is delivered with the help of multiphase pumps along an underwater pipeline to the shore oil collection station at the village of Romanovo and further, after treatment, to the Izhevskoye oil terminal complex for loading on to tankers.

During preparations for development of the Kravtsovskoye field, the building metal structure plant of LUKOIL-Kaliningradmorneft in the Kaliningrad Region manufactured the support jacket, the piles for securing it to the seabed, and the drilling, process, power and residential modules.  During erection of the support jacket on the shore, a patented technology was used involving large-block vertical assembly of metal structures with minimum use of assembly units made of pipes.  The optimized construction of the support jacket made it possible to reduce labour input and the need for construction area by 30%, to cut costs by $20 million and to reduce the time schedule of welding and installation jobs by 5-6 months.

During the preparations for manufacture of the metal structures for the Krav-tsovskaya fixed offshore ice-resistant platform at the plant, the wharf was reconstructed and a new assembly workshop, fitted out with the latest equipment, was constructed.  The plant's personnel were certified in accordance with the requirements of the Russian supervisory authorities and international certification authorities.

The launch of the finished modules of the platform on to barges for transportation at sea was carried out by specialists of the Mammoet Company and their installation at sea by the Seaway Heavy Lifting, using the derrick barge Stanislav Yudin with a lifting capacity of 2,500 tons.

In addition to the Kravtsovskoye field, several promising oil-bearing structures have been identified on the Baltic continental shelf.  Given positive drilling results from prospecting and exploratory wells, they will allow the Company to maintain the level of oil production in the Baltic region by bringing these on line.

LUKOIL's bridgehead for Caspian oil

LUKOIL initiated large-scale geological and geophysical survey work on the Caspian Sea back in 1995.  So far, eight major multihorizon fields and 16 promising structures have been located.  In 2008, two fields were discovered: the Tsentralnoye and the Western Raku-shechnoye, with commercial oil reserves of over 100 million tons.

The aggregate recoverable reserves of oil in the Caspian Sea fields exceed 1 billion tons of equivalent fuel.  The main recoverable reserves of oil in the North Caspian are concentrated at the V. Filanovsky field (170 million tons), which is the biggest among the proved fields discovered in our country in the last twenty years, whereas the main reserves of gas are to be found at the Khvalynskoye field (322 billion m³).

The scale of discovered resources testifies that a new oil and gas bearing province has been discovered in the Russian part of the Caspian Sea.  Within its bounds, LUKOIL has, over a short period of time, created a major hydrocarbon resource base for launching oil and gas production in this region of strategic importance to Russia.

The Company estimates that, by 2020, an oil and condensate production level of over 16 million tons a year will be attained at the fields on the Caspian Sea and it is planned, by as early as 2015, to reach a production level of over 10 million tons a year at the fields in the North Caspian.  The maximum production of gas in the offshore parts of the Caspian will be 17.5 billion m³ a year.

Work to develop the hydrocarbon resources of the Caspian Sea is being conducted by LUKOIL jointly with Gazprom (the Tsentralnoye field), Rosneft (the North Caspian license sector) and KazMunayGaz (the Khvalynskoye and Tsentralnoye fields, the Tyub-Karagan and Jambay structures on Kazakhstan's shelf).

Already this year, it is planned to launch oil production at the Yu. Korchagin field, and later, in 2014, at the V. Filanovsky field and subsequently, production of gas at the Khvalynskoye and Sarmatskoye fields.

So far, two ice-resistant stationary platforms (IRSP), linked by a bridge, have been set up on the Yu. Korchagin field: IRSP 1, with drilling and process complexes, and IRSP 2 with a residential module for 105 people. Some 58 km away from IRSP 1, in the ice-free zone, an offshore transshipping complex (OTC) has been erected, including a single point mooring and a floating oil storage with a deadweight of 28,000 tons.  The oil will reach the OTC by an underwater pipeline stretching 58 km.  The output of the Yu. Korchagin field (oil with condensate) in a volume of up to 2.5 million tons a year will be transported by an underwater pipeline to the floating oil storage, whence it will be taken by a shuttle tanker to the port of Makhachkala and then transported by the Baku-Novorossiysk oil pipeline.

The second field that it is planned to bring on line (in 2014) is the V. Filanovsky field. The difficult natural and climatic conditions in the region - extensive shallows and winter ice - are serious technical challenges the LUKOIL specialists will have to overcome in the very near future.

According to the preliminary plan, in 2012, construction will be launched, in 5-10 meter-deep sea, of the first hydro-engineering structures for drilling, producing and treating seam output.  These will consist of a central process, utilities and quarters platform (CPUQ), two IRSPs, two residential platforms, a riser block and a facilities block.

The oil from the V. Filanovsky field, in the amount of up to 8 million tons a year, will be transported by an underwater pipeline to the head onshore facilities at the Komsomolskaya Booster Station (Republic of Kalmykia) and further to the Volgograd Refinery and into the Caspian Pipeline Consortium system.

The gas from the fields in the North Caspian in a volume of up to 6 billion m³ a year will go to the Stavrolen petrochemical complex (Budyonnovsk, the Stavropol Territory).

LUKOIL's biggest gas condensate field in the Caspian Sea - the Khvalynskoye field - was discovered in 2000.  The field is located in the middle of the northern part of the Caspian Sea, 260 km from Astrakhan, where the sea is 25-30 meters deep.  The total commercial reserves of C1+C2 category hydrocarbons at the Khvalynskoye field have been estimated at 322.3 billion m³ of natural gas, 11.1 million tons of condensate and 36.3 million tons of oil.  The output from the field contains up to 0.63 mass percent of hydrogen sulphide.

In accordance with agreements between Russia and Kazakhstan, LUKOIL and KazMunayGaz have been granted the right to make joint use of the border subsoil sector within which the Khvalynskoye field is located.  Work to develop it is now being conducted on a parity basis through the JV Caspian Oil and Gas Company.

The project for developing the Khvalynskoye field envisages construction of a CPUQ, a fixed offshore platform for drilling and operation of wells, a platform with a compressor module, a platform with a residential module, two drilling platform facilities, infield pipelines and external transport pipelines, as well as head onshore facilities.

The maximum annual production of gas is estimated at 8.2 billion m³.  For transporting gas in a postcritical state to the CPUQ, its partial treatment is envisaged - drying to separate condensate,

treatment of the condensate according to the conditions of transportation by tanker and pumping into the floating oil storage.  Shuttle tankers will be used to take the condensate to shore.

First, the fixed offshore platform, CPUQ and platform with the residential module will be started up.  The compressor platform will be started up somewhat later (roughly five years after production is launched), when the well-head pressure drops, so a booster compressor station will be needed.

The plan is to establish the offshore oil and gas field hydro-engineering structures at the Khvalynskoye field on truss-type legs.  This was decided to be the most suitable from the feasibility point of view, given the lack of ice. Gas from the Khvalynskoye field will be taken by a 206 km pipeline to the shore in the Republic of Kalmykia and from there, by a 39 km land pipeline, to shore facilities.  The gas, once cleansed of the hydrogen sulphide and brought to a commercial condition, will enter the Gazprom pipeline system.

LUKOIL is conducting geological prospecting work in the Azov Sea jointly with Rosneft.  Although the work was launched in 2003, some progress has already been achieved.  For instance, the Novoye field has been discovered in the Azov Sea, as have five promising hydrocarbon structures.

The preliminary documents have now been drawn up for comprehensive development of the license sector, while geological prospecting is continuing.

LUKOIL Overseas Holding stakes offshore fields

The Company's  subsidiary LUKOIL Overseas Holding is implementing a joint project to develop offshore oil and gas fields on the continental shelf of the Kazakhstan sector of the Caspian Sea and in West Africa.

In Kazakhstan, together with KazMunayGaz, LUKOIL is conducting geological exploration of the Tyub-Karagan and Jambai structures.  If the prospecting work proves successful, to use fixed offshore platforms will be used to develop the Tyub-Karagan structures and artificial non-retained islands to produce oil at the Jambay structure.

In West Africa, off the coast of Cote d'Ivoire and Ghana, LUKOIL holds stakes in three license blocks.  Discovery of several fields in close proximity to the LUKOIL license blocks is indicative of a high probability of

industrial reserves of hydrocarbons being discovered in these three blocks.

A characteristic feature of the African projects - promising offshore hydrocarbon structures located at a depth of 1,500 - 3,000 meters - significantly complicates their development and puts up the costs substantially, too.

It is planned to develop these deepwater structures using floating production storage and offloading (FPSO) units complete with process facilities to treat the output, which will be linked to seabed well-head complexes by flexible pipelines.

When working on the continental shelf in all seas, the Company pays particular attention to protection of the environment, as confirmed by strict environmental expert reviews.  For example, the "zero discharge" principle is observed at the oil-producing platforms.

LUKOIL's exploration work in the Baltic, Caspian and Azov seas testifies to the Company's growing potential.  The recognized leader in oil production on land has demonstrated that it can also implement large-scale and highly efficient projects offshore. LUKOIL's experience in realizing the above offshore projects will allow it in the future to expand considerably the geography of its operations on the shelf both in Russia and beyond.