Russian oil output yet to peak, say drillers

Russia’s top oil firm Rosneft said new drilling technologies have spurred output growth despite high levels of reserve depletion.

“New wells in Samaraneftegaz and Udmurtneft have been more productive than we originally planned. We are drilling faster and the flow rates have increased,” Peter O’Brien, Rosneft’s vice president for finance, told Reuters.

BP’s venture, TNK-BP, Russia’s No.3 firm working on some of the country’s most mature fields, also said new technology is being tested to increase output and cut costs.

“In many cases our technology pilots involve partnerships with service companies with the goal being to access new or untapped reserves, optimise lifting costs and accelerate production,” said Chief Operating Officer Bill Schrader.

The bigger game-changer for drilling and services firms’ business in Russia, however, is the development push on deposits in East Siberia, the Arctic and the offshore Caspian.

“We compete in the high-value, high cost segment of the oil services market. It is very small at the moment but East Siberia is about to change that,” said Halle Aslaksen, Vice President of Smith International in Russia.

“In East Siberia the wells are deeper and more challenging so to get the same amount of oil for the same price as the wells drilled in Western Siberia, you have to drill a lot smarter. And that means you need high-quality, efficient Western equipment,” he said.

Smith, which oil services giant Schlumberger is set to acquire later this year, expects to see 30 percent annual growth in Russia because of new opportunities in East Siberia and the Yamal Peninsula in the Arctic.

Companies say East Siberia’s remote geography also plays a big role in producers’ willingness to pay higher rates than in West Siberia for rigs, well equipment and drilling services.

“Western Siberia has hundreds of the same rig models, so if one breaks down, you’ve got another sitting idle nearby to rob for parts. In East Siberia, you’ve got to have good equipment, that is not negotiable,” said Jon Van De Sand, Smith’s regional manager.

Baker Hughes, the world’s No. 3 oil service firm, has Russia as one of the world’s top high-growth regions through 2013 and expects East Siberia’s share in its Russian revenues to rise to 30 percent from single digits now.

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