No. 3, 2012


Oil of Russia magazine talks to Vyacheslav Gayzer, Head of the Republic of Komi

THE REPUBLIC OF KOMI IS ONE OF THE LEADING REGIONS in the country, enjoying a high rating in terms of per capita gross regional product (GRP), retail trade turnover, per capita personal income, average monthly salary, and tax revenue into the Russian budget system. Furthermore, for many years, the fuel and energy complex has been and still is the driver of the region's economy.

Q: How was the foundation of the republic's oil and gas complex first laid?

A: The Republic of Komi is one of the first northern regions in which subsoil resources began to be exploited after the 1917 revolution. The Ukhta expedition, which explored the Ukhta River in 1929, not only discovered deposits of oil and began developing them, but also paved the way to the industrial exploitation of other natural resources. Production went slowly; the turning point came at the beginning of the 1960s when the discovery of the Zapadno-Tebukskoye, Usinskoye, and Vuktylskoye fields made it possible to talk about the large oil supplies the country was waiting for. In the mid-1970s, new oil- and gas-producing centers were founded in the north of the republic and a pipeline system was built.

The peak of development and heyday of the region's oil industry came in the 1980s, when, after the north of the Timan-Pechora province had been explored, a maximum level of oil production of 19.2 million tons was reached. In the mid-1990s, there was a drop in volume, while in the past five years "black gold" production has been on the rise once more.

More than 150 raw hydrocarbon fields have been discovered in the republic during this time, and both the production and the refining branches, as well as the transportation of raw hydrocarbons, have grown and developed. The level of development of the oil and gas complex is determined by the evolution of business, management, and technological progress, as well as of the region's economy as a whole.

Q: What trends are characteristic of oil production at the present stage?

A: According to the estimates of economists, in 2010, the Republic of Komi ranked 8th in terms of oil, including gas condensate, production among Russia's 31 oil-producing regions, and 7th (among 28) in terms of gas production. We are proud to be among the country's top ten oil producers, whereby this high result has been achieved by years of hard work. For example, the period between 2000 and 2008 was characterized by steady "black gold" production growth, mainly ensured by the annual launching of small fields (during these eight years more than 30 fields went into production) and by the new supplies of hydrocarbons gleaned from drilling development wells at the fields being exploited.

In the crisis year of 2009, the amount of oil produced decreased and not one new field was brought into development. But as early as 2010, Kosyuneft began test exploitation of wells at the new Yuzhno-Sotchemyusky field. And other companies also stepped up their work.

As of the beginning of this year, 71 organizations with official permission to exploit the subsurface are registered in the Republic of Komi. They hold 215 licenses for carrying out geological survey, prospecting, exploration, and production of raw hydrocarbons.

Oil supplies have been recorded at 155 fields and, in 2011, production was carried out at 75 of them. Moreover, enterprises of the Republic of Komi are developing 12 fields in the Nenets Autonomous Area.

The Usinsky district is the republic's oil-producing center; its share in the total volume of oil produced amounts to 63% (8.4 million tons), in second place is the Pechorsky district with 16.3% (2.2 million tons), and 1.2 million tons (8.9%) are produced in the Sosnogorsky district.

In 2011, 13.36 million tons of oil with gas condensate were produced in Komi. Compared to 2010, the production of "black gold" has risen by 2.5%.

Twenty nongovernmental companies are producing raw hydrocarbons in the republic. Three production enterprises, LUKOIL-Komi (more than 70% of oil), RN-Severnaya Neft (8.3%), and Yenisey (more than 21.6%), account for the main oil production volumes.

Most of the oil fields being developed in Komi have a high degree of depletion, so exploiting new fields and tapping new oil deposits at fields already being developed are the main ways to maintain and expand oil production in the republic.

The new fields brought into development will make it possible to produce oil at the level reached before 2012. In favorable conditions, production could be raised by another 2‒3 million tons. Furthermore, the drop in production must be compensated for with new supplies, otherwise, by 2015, the republic could be faced with an oil production slump. But I do not think this will happen. There is potential for developing the region's raw mineral base. Investments are also being made in geological exploration work.

Q: How much gas is produced in the republic?

A: The Vuktylsky district is the center of the gas industry. The republic's main gas-producing enterprise, Gazprom Pererabotka, produced 2,395.63 million m3 of natural gas in 2011, which corresponds to the production volumes set forth in the project design documents, although it is 5% lower than the volume produced last year.

In 2011, 2,421.01 million m3 of non-associated gas were produced at the fields of the Republic of Komi, which is 4.5% less than in 2010.

The drop in production of non-associated gas is due to the depletion of supplies at the mature fields (now being converted into gas storage facilities) of the Vuktylsky district, which account for more than 80% of all the gas produced in the republic.

I think that the drop in gas production is a temporary phenomenon that will be arrested when new deposits come into development. Large gas supplies might be discovered in the north of the republic.

Q: To what extent does the refining of raw hydrocarbons meet the republic's demands?

A: LUKOIL is still the oil refining leader in the region. The Ukhtinsky refinery is one of the oldest enterprises of the oil refining branch (it began operating in 1934). The company has carried out fundamental modernization of the oil refining capacities of the Ukhtinsky oil refinery, thus raising the refining depth from 42 to 82.5%. This plant has a potential output capacity of 4.5 million tons a year, while, depending on the market conditions, it refines around 4 million tons a year, fully meeting the republic's demands, and also delivers petroleum products to neighboring regions. Gasolines and diesel fuel are produced, including products that meet EN 590 specifications, jet fuel, marine fuel, gasoil, fuel oil, and bitumen.

Since the beginning of 2012, LUKOIL-Ukhtaneftepererabotka has shifted exclusively to producing gasoline with a high octane rating that meets Euro-3 and 4 specifications (Premium Euro-95 and Regular Euro-92). The plant is no longer producing Normal-80 gasoline, instead it is producing more raw hydrocarbons for manufacturing ethylene.

In August 2011, a competitor appeared to challenge LUKOIL's supremacy in the industry. Yenisey put an oil- and-gas refining complex into operation with a production capacity of 1 million tons of crude oil a year. In 2011, Yenisey's mini refinery refined 509,800 tons of crude oil for manufacturing gasoline, diesel fuel, and fuel oil. The new complex made it possible to increase the production of raw hydrocarbon refining products in the Republic of Komi and produce fuel that meets European standards.

The Sosnogorsky gas refinery, which is part of Gazprom Pererabotka, is engaged in gas refining in the region. In 2011, the natural gas refining volumes decreased compared with 2010 by 6.6% (2,368.8 million m3), while the volumes of unstabilized and stabilized condensates dropped by 13% (189,000 tons) and 25% (29,560 tons), respectively.

The drop in natural gas and unstabilized condensate refining was caused by the decrease in their production due to the natural depletion of supplies. There was also a drop in production of stabilized condensate (by 3.9%), commercial residue and liquefied gas (by 3.7% and 5.7%, respectively), and gasoline (by 1.1%). The output of carbon black rose 1.5-fold.

Q: How are oil and gas transported today?

A: Today, the oil produced in the Republic of Komi is exported and delivered to Russian oil refineries in the south via the Usa-Ukhta-Yaroslavl main oil pipelines of 406 km and 1,136 km in length and with a throughput capacity of 24.2 million tons and 20.3 million tons a year, respectively.

A major interfield Kharyaga-Usinsk oil pipeline operates in the north of the Timan-Pechora province. It is 147 km in length and currently transports water cut gas-saturated oil from the fields located in the south of the Nenetsk Autonomous Area, Arkhangelsk Region, and Usinsky district of the Republic of Komi.

Gazprom Transgaz Ukhta is mainly engaged in transporting Tyumen gas. The pipelines operated by Gazprom transgaz Ukhta are more than 9,000 km in length, 3,930.7 km of the main gas pipelines of which (40%) pass through the Republic of Komi.

In 2011, 125.0 million tons of oil and gas were transported, which is 3.2% more than the index for 2010 (including, 101.9 million tons of gas and 23.1 million tons of oil), while the export of oil dropped by 7.4% and amounted to 10% of the oil produced the same year. It was exported to six far abroad countries and to one neighboring country.

Compared to 2010, the export of petroleum products in 2011 increased 57-fold. This shows that modern infrastructure has been created in the republic and transportation problems are being resolved at a high technological level.

Q: What investment projects are being implemented today in the oil and gas complex?

A: Just as before, the implementation of investment projects is aimed at strengthening the position of the oil and gas complex in the republic. These projects primarily include production testing at the Bayandysky oil field (LUKOIL-Komi), construction of production facilities at the Sredne-Makarikhinsky oil field (RN-Severnaya Neft), reconstruction of the refining capacities of LUKOIL Ukhtaneftepererabotka, and comprehensive exploitation of the Yaregsky oil titanium field and oil- and gas-refining complex with a production capacity of 1 million tons of crude oil a year (second phase, Yenisey).

The main vectors in development of pipeline transport envisage creating conditions for uninterrupted supply of the main raw hydrocarbon consumers with oil and gas; modernization of the existing pipeline network; raising the reliability of the existing pipeline system; and implementing prospective pipeline construction projects.

A major project in pipeline transport - building the Bovanenkovo-Ukhta-Torzhok major gas pipeline system -is of high priority. Implementing this project will make it possible to draw small gas fields into development in the republic, which will lead in the future to the development of gas production on the western slopes of the Polar and Nether-Polar Urals, as well as make it possible to create new jobs in the Republic of Komi.

Q: How would you describe the prospects for development of the republic's oil and gas complex?

A: Development of the oil and gas complex of the Republic of Komi is aimed at ensuring sustainable growth of oil and gas production based on the rational, comprehensive, and efficient use of the raw hydrocarbon fields and raising the competitiveness of the complex's products by rationalization of its technological and commercial structure.

Rational and efficient use of oil fields based on the elaboration and application of advanced technology, as well as raising the efficiency of associated petroleum gas use are the priority areas in development of the oil and gas industry of the Republic of Komi.

Cooperation between the Republic of Komi government and the leading companies of the oil and gas complex with respect to economic development, environmental safety, social responsibility, and infrastructure enhancement is the main way to bring the set tasks to fruition. Furthermore, particular attention is being given to increasing the amount of investments drawn into the development of the oil and gas complex, including assistance to small and medium business.

The priority areas in the development of the oil and gas industry of the Republic of Komi today are as follows:

  • comprehensive development of fields for producing oil and associated gas;
  • rational and efficient use of oil fields based on the elaboration and application of advanced technology;
  • increased efficiency of the use of associated petroleum gas;
  • reproduction of the raw mineral base of the oil and gas complex ensuring compensation for raw hydrocarbon depletion with the necessary increase in supplies;
  • ensuring environmental safety when developing and exploiting oil and gas fields; guaranteeing sustainable production growth by increasing raw hydrocarbon refining depth; applying new advanced technology; improving the qualitative and environmental specifications of commercial products; and raising the competitiveness of manufactured products;
  • ensuring the republic's participation in building the Bovanenkovo-Ukhta-Torzhok major gas pipeline system.

I would like to draw attention once more to the fact that the prospects for developing the oil and gas complex, which today occupies a leading place in the republic's economy and has an influence on its socioeconomic development, depend on the amount of funds spent to replenish raw material supplies.

The conclusion is obvious: increasing oil and gas production directly depends on putting new more productive fields and deposits into development. Launching highly productive gas condensate fields will make it possible to meet the region's gas needs. Without intensive development of geological exploration, efficient use of the republic's potential subsurface resources is unrealistic.

We will continue to strive to raise the volumes of oil and gas production, but not at any cost, rather on a professional basis, taking into consideration scientific and technical progress and using advanced experience so that subsurface users can take advantage of the most up-to-date technology.

I am convinced that today we have high resource potential-mainly human, intellectual, scientific, and cultural,- efficient state and municipal management, civil peace, and interethnic consent, all of which forms an enduring foundation for the successful development of the Republic of Komi in the 21st century.     - Nikolay Stepanchenko

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