No. 4, 2011


Oil of Russia magazine talks to Xenia Baumgarten, General Director of the National Oil Consortium

National Oil Consortium was formed in October 2008 from five of Russia's largest companies - Gazprom Neft, LUKOIL, Rosneft, TNK-BP, and Surgutneftegaz. The leaders of the Russian oil industry joined in this alliance in order to develop cooperation in the energy sector between the Russian Federation and the countries of Latin America. In April 2010, a contract was singed on the establishment of a joint venture called PetroMiranda created between the National Oil Consortium and CVP (a subsidiary of the PDVSA State Oil Company) for developing the Junin-6 field located in the heavy crude oil belt of the Orinoco River. Within the framework of the project, the joint venture will be engaged in both the exploration and production of hydrocarbons, as well as selling them in the international markets.

Q: How are the roles of the participants in the National Oil Consortium (NOC) being distributed today?

A: All the decisions in the NOC are made collectively since all the participants in the consortium have the same share - 20%. This is a unique experience of cooperation for Russian companies that are normally rivals. LUKOIL, Gazprom Neft, Rosneft, TNK-BP, and Surgutneftegaz have joined efforts to implement this large-scale complex project and are successfully working for the common good.

The NOC charter envisages rotation of the general director every two years. At present, this position is occupied by a representative of LUKOIL. As for carrying out technical work at the Junin-6 block, a decision was made to appoint one of the NOC's participating companies as the Project leader. This role is being performed by Gazprom Neft.

However, all the participating companies are involved in performing expert reviews of the technical project documentation. Many decisions are based on the results of the work of LUKOIL specialists.

Q. Please could you tell us something about the prospects for the Junin-6 block located in the Orinoco oil belt in Venezuela. What are the latest plans of PetroMiranda, the joint venture of PDSVA and NOC?

A: Drilling may possibly start this year. There are plans to drill about 50 stratigraphical and horizontal wells by 2013, economic and geological models will be built which will allow the participants to make a final decision about investments. In compliance with the contract terms, the first production of oil is planned for 2014, while an upgrading plant (a facility for bringing the quality of the heavy oil produced up to merchantable standards) will be put into operation in 2017. The Junin-6 block, which occupies an area of 447.85 km2, is extremely promising. After reaching a production level of 450,000 barrels of oil a day (26 million tons a year), this production level will be retained until the contract runs out (in 25 years with the possibility of extending it for another 15 years) thanks to the substantial reserves of oil. The geological reserves of the Junin-6 block amount to 52.6 billion barrels of oil.

Venezuela proposed to begin production earlier by starting with small amounts. The consortium partners are looking into this possibility.

The Junin-6 project is technologically complex and requires the use of modern processes designed for heavy and super heavy crude oil production. At some point, it will be necessary to use so-called secondary EOR methods in order to maintain the production level.

Q: How optimistic are the results of LUKOIL's work on estimating the reserves of Venezuela's Junin-3 block?

A: LUKOIL, as represented by LUKOIL Overseas, has fully performed its contract obligations to explore the Junin-3 block located in Anzoátegui State. During the exploration, a joint working group, along with employees of the Venezuelan Institute of Oil Technology (Intevep), carried out a set of scientific studies and experiments. Nine stratigraphical wells have been drilled on the block, covering an area of around 680 km2, which helped to specify the amount of reserves of heavy and super heavy crude oil. These reserves were later certified by Ryder Scott, an independent engineering company, and approved by the Venezuelan Ministry of Energy and Oil. Correspondingly, the Venezuelan Ministry of Energy and Oil and PDVSA will independently determine the prospects for further operation of the block. The LUKOIL Overseas Venezuelan office has stopped functioning and a representative office of NOC has been established on its base in Caracas.

Q: LUKOIL has significant experience in developing heavy oil fields in Russia. Does the National Oil Consortium intend to make use of this experience in Venezuela?

A: The NOC is turning to its participating companies for expertise and experience not only in technical, but also in managerial matters.

At the initial stage, oil production at the field will be carried out in the traditional "cold" way, without steam treatment of the pay bed. In contrast to the heavy crude oil of Timan-Pechora, the oil of the Junin-6 block is not as viscous and, at similar fields, it is capable of reaching the mouth of the well without being heated. We still have to study the properties of the oil at the field.

At the first stage of implementing the project we will also study the most cost-effective secondary recovery methods. We still need to gain a better understanding of how applicable the steam treatment method is. According to preliminary assessments, the density of the Junin-6 oil is 8o API. Upon oil quality upgrading, its density will be close to 42o API.

Q: Which countries does the NOC see as sales markets for this oil?

A: Primarily the United States. After drilling a test well and actually obtaining some oil, we will be able to analyze the properties of the Junin-6 oil and carry out tests to improve its quality. Then we will be able to determine which refineries to send this oil to.

Q: Many oil and gas fields of LUKOIL and the other Russian participants in the consortium are supplied with electricity they generate themselves, using as a rule associated petroleum gas (APG). Does NOC have plans to generate electricity for the balance-by-plant needs?

A: The content of APG in Junin-6 pay beds is minimum. Nevertheless, oil coke will be one of the byproducts of oil quality upgrading. At present, we are studying and carefully calculating the possibility of generating our own electricity using oil coke. Environment friendly technologies are used at the power stations that operate on this type of fuel. Everything will depend on the economic expediency of building such capacities. Whatever the case, we will find a sales channel for this product.

Q: Before joining NOC, LUKOIL rendered charity assistance to medical and children's institutions in Venezuela. In addition to carrying out production activity, is NOC participating in any charity projects?

A: Indeed, as early as 2005, LUKOIL presented the Venezuelan Ministry of Public Health with nine speedboats fitted with radio stations, modern medical equipment and supplies for working as ambulances in the delta of the Orinoco River where the Warao Indians live. Medical aid can be rendered right on board, the boats also take patients from the regional medical stations to large hospitals. And in the Cementerio district of Caracas, the Company modernized the Eusebia Balsa nursery-kindergarten to accommodate 90 children.

As for NOC, we also fully recognize our social responsibility and plan to participate in similar programs through PetroMiranda. At present, before oil production at Junin-6 has started, we are looking into the real requirements and needs of the people living in various settlements in our region of activity. Based on the information gathered, social assistance programs are being drawn up. We will be able to talk about full-scale charity work when the project enters the actual production phase.

Q: What impressions has Venezuela made on you and other Russian specialists? What is the country's attitude to Russian oil producers in particular?

A: Venezuela is a country with amazingly beautiful and rich natural conditions and very friendly people. The local mentality is in some ways similar to the Russian. From the very first days of our activity in Venezuela, the people treated the Russians well. The Venezuelans have already become used to LUKOIL's business-like and constructive style of cooperation and this has prompted further development of partnership with the Russian oil business as a whole, now within the framework of NOC. Different cultures and different languages are not an obstacle to cooperation, particularly since the Russian specialists delegated by the mother companies have shown their high professionalism and proved themselves well, while they also have superb command of Spanish and continue to improve their skills in this sphere.

Q. What other Latin American countries are of interest to the National Oil Consortium?

A: We have been looking at the possibility of working in Cuba and Nicaragua, but we have not yet found interesting targets of investment there. Nevertheless, the search for projects in Latin America is continuing. Junin-6 has every chance of becoming a catalyst for NOC's further multi-faceted cooperation not only with Venezuela, but also with other Latin American countries.  - Vladimir Akramovsky

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Oil of Russia, No. 4, 2011
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