Exploring the Future | |||
Exploration is the lifeblood of any big oil company. And as the global demand for hydrocarbons continues to grow, the search continues on a daily basis.
Consumers of products made of hydrocarbons – be it a plastic cup, a tank of gasoline or sexy fishnet stockings – rarely think of the origins of the goods that they are so used to. If asked, they would probably point at oil or natural gas as the original material, and everyone knows that these are pumped from deep in the earth. But before there is anything to pump, the reserves have to be located.
“If geologists do not find an oil field, there is nothing to develop, nothing to process, nothing to transport and nothing to sell. Finding resources is where it all begins,” says Sergei Ostapenko, TNK-BP Vice President for Exploration.
Over the past five years, TNK-BP has drilled about 197 wells with an average success rate of 70 percent. Globally the chances of a basin working are worse than 50/50. Meanwhile, in the first eight months of 2008, TNK-BP’s success rate in striking commercial oil at new wells has reached 77 percent.
Since TNK-BP’s creation, some 1.8 barrels of new resources have been added to the company’s portfolio at a cost of $0.50 to $0.60 per bbl. In addition, 1.4 billion barrels of new resource potential has been added through seismic and studies.
Key facts about TNK-BP’s exploration and appraisal
In 2003-2008
- 70% — average exploration success rate
- $1.2 bn — invested in exploration and appraisal
- 1.4 bn bbls — of new resources added through exploration and appraisal
- 197 — exploration wells drilled
“All this has been achieved through the implementation of technology like the use of sparse 3D seismic to better image complex traps and geology, geoscience skills development through innovative workshops, involvement of renowned global experts and the integration of geological and seismic data using state-of-the-art workstation and visualization technology,” says Chris Einchomb, TNK-BP’s Vice President for Exploration between 2006 and August 2008.
Ostapenko also noted that a key input into the company’s exploration success has been investment in people through building a large-scale, three-tier exploration team.
“There are 40 people in my department in Moscow now. When I worked at TNK, I had six,” Ostapenko says, adding that those 40 are just a smaller part of the entire exploration structure.
Since 2003, TNK-BP’s exploration activity has been focused on building up a portfolio aligned with the company’s growth strategy. The funds allocated for exploration have rocketed from about $50 million in 2003 to over $300 million in 2007. In 2008, the figure will reach about $400 million, or over 10 percent of the company’s total budget. Looking forward, the exploration strategy will be focused on sustaining and upgrading the existing portfolio and delivering high-value satellites to existing fields to help with managing base decline. Also in the plans is enhancing greenfield projects by identifying follow-up production hubs and developing longer-term bluefield projects to ensure the future of the company well into the next decade.
“Our company produces about 70 million tons of crude oil a year, or 350 million tons over the past five years. This means that during the past five years we have effectively fully pumped out a very, very large oilfield. … And production of 70 million tons per year means that we pump out a medium-size field by Russian standards, or a pretty large one by international standards,” Ostapenko says.
Contrary to the images of 19th- and early 20th-century geologists who ventured far into the unknown in search for signs of mineral reserves that may be hidden down below, contemporary exploration is much closer to complex science, which incorporates geology, physics and even finance, as oil not only has to be physically present, but the cost of its production has to make commercial sense.
Over the past five years, TNK-BP has built a three-tier structure to manage its exploration activities, which currently employs about 200 people.
The central department is based in Moscow and handles general management and the company’s so-called bluefield projects — the frontier exploration areas located far from existing production centers.
Another 90 people are, according to Ostapenko, “the brain” of TNK-BP’s exploration activities. Concentrated at Tyumen Scientific Oil Centre, these experts are in charge of the vast scientific work of studying potential hydrocarbon-bearing areas and pinpointing the places to drill.
According to Ostapenko, the creation of Tyumen Scientific Oil Centre five years ago has concentrated the scientific power behind the search for new oil.
“Before the creation of TNK-BP, TNK on its own also worked quite successfully, but there was no dedicated facility,” Ostapenko says.
Each business unit also has its own exploration team, which controls exploration activities on the ground.
“It is truly hard to find something that you cannot see. One needs to be able to imagine things. One needs to be really creative. Exploration is really as close as you can get in the oil industry to pure science,” Ostapenko says.
Exploration starts with the integration of surface geology, often done by pioneering geologists early in the last century, extrapolated into the subsurface either through seismic data or parametric wells drilled to understand the subsurface geology. All this is done to identify a trap, where oil would be accumulating.
A standard theory suggests that oil appears as a result of a long geological process during which clays rich with organic materials begin to sink as result tectonic shifts. As the clays sink they begin to heat up and this is when the oil is born. However, for an oilfield to appear, the oil must find its way into a trap that will allow it to accumulate.
“The job of our staff at Tyumen Scientific Oil Centre is to analyze whether these clays have heated to the needed temperature, how much of those clays were there, and how much oil they have produced. They also look at potential traps in order to establish whether these structures were created in time to accumulate and hold the oil,” Ostapenko says.
Once a trap has been identified, drilling begins and can take anywhere between a few weeks and a year, depending on the geology, depth and complexity of the subsurface. An exploration well in
Russia will typically take two to four months to complete. For a trap to be successful it must have a good reservoir and seals and be situated on a migration route for hydrocarbons generated deep in the basin.
Russia is unique in the world since it has reservoirs that range in age from a few million years old, like those located offshore near Sakhalin Island in the Far East, to a billion years old, such as the reservoirs in East Siberia. Geologists in TNK-BP have the opportunity to work on sandstone clastic reservoirs as well as carbonate reefs and platform reservoirs.
“And if we speak about the former Soviet Union, the geological variety is unprecedented. Most of our staff have worked not only in Russia, but all across the former Soviet Union. They are very experienced and they are hard to surprise,” Ostapenko says.
Once hydrocarbons have been discovered, geologists and geophysicists turn their attention to appraisal. More intensive work begins on understanding the extent and nature of the discovery by shooting 3D seismic and drilling more appraisal wells. The number of appraisal wells depends on the complexity of the subsurface geology, which is often faulted. Reservoirs often vary over the area either in thickness or physical properties. Understanding these variations in the subsurface is critical to creating the optimum development plan. One of the key issues to address in the appraisal stage is the reservoir’s deliverability – the rate at which a well will flow at during production, and how much oil can be produced by a single development well. Once all this information is gathered and integrated, full field production can begin.
Apart from presenting geologists with some of the most varied geology, Russia is also simply one of the largest global exploration opportunities, easily comparable with the Middle East. Current industry estimates put Russia’s resource potential at 5—7 billion tons of oil and
| TNK-BP exploration areas |
 |
The TNK-BP exploration portfolio is divided into three specific categories:
- Brownfields: Exploration conducted close to existing fields and infrastructure in West Siberia and Orenburg, aimed at sustaining reserves in existing field and providing new production opportunities.
- Greenfields: Exploration in new project areas like Bolshekhetsky and Uvat, where full-scale development has yet to be implemented. Exploration here is aimed at appraising existing discoveries and finding new fields to enhance project economics.
- Bluefields: Exploration studies aimed at screening and accessing new frontier exploration areas, remote from existing producing centres, like Astrakhan and Timan-Pechora.
Given that many of the TNK-BP projects are focused on old oilfields that have been in production for decades, further exploration of brownfield projects – developing short-term production opportunities close to existing fields – has been a high priority.
Since 2003, TNK-BP’s experts have discovered over 500 mln bbls of 2P (Proved and Probable) reserves in key production areas like Orenburg, Business Unit East and Samotlor.
The discovery of new satellites in Samotlor is helping to maintain the giant field and ensure its long-term future. Since Samotlor was discovered in the 1960s, work was initially focused on drilling wells in the core of the field and exploiting proven reservoir systems. This led to the rapid increase in production from the field. As the field reached plateau and started to decline, work focused on improving the recovery through sidetracking or re-completing existing wells, to tap oil left behind by the original well, injecting water to maintain pressure and sweep or “push” more oil towards producing wells. New wells were drilled into in the field to exploit small closures where oil had been left behind. Currently, TNK-BP is in the middle of an ambitious program to cover the Samotlor field with 3D, a program lasting many years and covering over 3,000 sq km of seismic acquisition. Early results from this data have identified untested closures adjacent to the main field that are now being tested by exploration and then appraisal wells and are revealing new satellites that can be tied directly in to Samotlor’s existing production infrastructure.
Discoveries in Orenburg have demonstrated the value of exploration in areas that are considered mature with little growth potential. Since 2003, a number of large-scale 3D seismic surveys have been acquired over mature fields and delivered not only field extensions, which are now being exploited through sidetracks and new development wells, but untested satellites. In 2006—07, TNK-BP had a 100 percent success record in drilling satellites in Orenburg and has now developed a track record of reducing the cycle time from discovery to development to under six months. In 2008, exploration activity (reserve additions in 2007—2008) resulted in incremental production of about 500,000 tons at satellites to Sorochinsko-Nikolski and Ananyevskoye fields.
In 2006, an important discovery was made in a satellite to the Bakhilovsky field in Business Unit East. Typical Bakhilovsky wells flow at 10—20 tons per day, but the new Jurassic discovery had the potential to free flow at over 150 tons per day. Utilising both production and exploration skills, the BU East team were able to develop a revised development and exploration plan in 2007 and 2008 and are now drilling additional appraisal and new development wells and transforming this mature area. Additional incremental production added through exploration and appraisal in 2007—2008 will reach about 300,000 tons.
| Åxploration and appraisal success rate |
 |
Adjacent to the Bakhilovsky field is another mature asset – the Verkhne Kolikyegansky (VKY) field. Regional geological analysis between the two fields highlighted the potential for new satellites with Jurassic targets. In late 2007, two of these were successfully drilled, and initial test results indicate similar results to the Bakhilovsky wells. A campaign is underway to drill up to five wells per year to exploit this new trend, demonstrating that exploration can truly transform mature assets.
Venturing into greenfield projects, TNK-BP’s biggest exploration success has been in creating the Uvat and Bolskhetsky projects. To date over 2 billion barrels of 3P, or proved, probable and possible resources, have been discovered in these projects. Uvat was an existing area for TNK-BP, but the potential of relatively untested Jurassic reservoirs was poorly understood. Through the acquisition of extensive 2D and 3D seismic surveys and careful selection of wells, the region has unlocked over 1 billion barrels of resource potential that is now being developed with full-field development at the Urna and Ust-Tegus fields. The construction of a pipeline connecting the fields with the main Transneft export system is scheduled for late 2008 – early 2009. This will allow launch of commercial crude production in the Eastern Hub of the Uvat project. Exploration continues in Central Uvat, and new discoveries are being made that will sustain the project beyond the next decade.
The Bolshekhetsky licenses were acquired through acquisitions and auctions between 2004 and 2007. The area is remote and over 500 km from the nearest pipeline but holds enormous oil and gas potential. Extensive appraisal drilling has created a resource base of over 1 billion boe in two main fields, Suzun and Tagul, and in 2008 a multi-year drilling and seismic campaign has begun to understand and test the broader resource potential of the region. With pilot production beginning at Suzun in 2009, exploration success will be critical to determining the economic viability of this region beyond 2010.
| Exploration and appraisal spend, reserve additions |
 |
But the long-term future of TNK-BP requires the company also to develop completely new projects which would take the oil major beyond its existing portfolio. These are called bluefields.
In 2006 and 2007, TNK-BP accessed two new areas, Astrakhan and Timan Pechora, where it previously had not owned licenses. Both basins are proven hydrocarbon provinces with significant production. Using its competitive advantage, gained through regional analysis and innovative ideas on future opportunities, TNK-BP was able to access these areas at very low cost. Access comes with its challenges. TNK-BP owns no infrastructure or operating centres and, in the case of Astrakhan, there are environmental challenges given the fragile nature of the Volga delta. To meet these challenges, TNK-BP is conducting environmental impact assessment studies, accessing existing data and ultimately shooting new seismic data in 2009 to reduce technical risks. Once the oil company has all this data, its geologists and geophysicists will determine whether these high-risk ventures will deliver future projects and progress to drilling and developing new fields in the next decade.
The efforts made to build a strong exploration arm within TNK-BP are fundamental to its future, success and sustainability. With an impressive track record since 2003 and a world—class portfolio, TNK-BP is committed to maintaining a program that is capable of adding
“If there is no continuing exploration effort, if people do not constantly look for new fields, no company, regardless of its wealth, would be able to survive,” Ostapenko says.
Exploring the Future (1.16 MB)