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Describe how the last 12 months have been for Salym Petroleum Development and what your forecast is for the next 12 months?

The last 12 months were very successful for Salym Petroleum Development. Most importantly, we delivered a very strong performance in the area of 'Health, Safety, Security and Environment' (HSSE). We had no significant injuries or environmental damage. We significantly increased our efforts in the areas of Road Safety and Contractor HSSE Management. Examples in these areas are the progress we are making with Defensive driving training, In-Vehicle-Monitoring-Systems (IVMS) installation, and the development of Advanced HSSE competences of our key staff.

Furthermore, we continued to increase our oil production. In 2007 we produced 4.26 mln tonnes - more than doubling production compared with 2006 - and were recognized as the most dynamically developing company with annual oil production up to 5 mln tonnes. In 2008 we further increased, to an annual production of 6.3 mln tonnes.

In 2008, we also continued successful performance in our drilling operations. In September Salym Petroleum Development set a new drilling record of 5.6 days. It's a success for Salym Petroleum Development and the Russian oil and gas industry on the whole, as we believe that the average drilling time for similar wells under similar geotechnical conditions today in Western Siberia is 18 to 20 days.

In November we signed a new 5 year social contract with the government of Khanty-Mansi Autonomous Okrug, covering the period 2009-2013. This social partnership agreement between Salym Petroleum Development and Khanty-Mansi Autonomous Okrug covers a total investment of $15 mln and provides the framework for Salym Petroleum Development's contribution to sustainable development of the Okrug, Nefteyugansk District and Salym village. The agreement specifies the budget limits and specific areas of social investments that address license requirements and include Salym Petroleum Development gratuitous contributions to the region. Our future programmes are expected to build on existing successful areas of cooperation, in addition to selected new ones, and concentrate on education, health and safety, economic development of the region, bio-diversity and cultural heritage.

All these I believe are great achievements for our company, showing good progress towards our goal of becoming the Best Operator in Siberia.

Over the next 12 months Salym Petroleum Development plans to further increase its production and to continue our focus on safety and environmental performance. We are developing new projects to further increase oil recovery from our existing licenses. Salym Petroleum Development is currently studying the application of 'enhanced oil recovery' techniques, and specifically the use of chemical flooding, to increase reserves from Salym oil fields. In 2009, we will be conducting a field pilot to test how much extra oil recovery we can realise through the use of chemical flooding, an exciting technology not yet applied in Russia on a significant scale. We have also started a "Well Reservoir Management" project to further improve our reservoir management and operating performance, using advanced technologies, which will enable us to monitor and operate our wells and facilities continuously and remotely, but also using a work approach called LEAN, which originated in the automotive industry and amongst others is aimed at taking unnecessary waste out of our activities. All these projects are looking very promising for Salym Petroleum Development.

You mentioned in a previous issue of ROGTEC that integration between Western and Russian technologies is a key policy at Salym Petroleum Development - how is this working out?

The integration between Western and Russian technologies is really a key issue for Salym Petroleum Development. And I'd also speak not only about a combination of technologies but Western and Russian experience and culture as well. In essence, our success is based on a few key elements. First of all, we assumed that with more than 40 years of experience of oil and gas field operations in the West-Siberian basin, there were many best practices available already and we had to readily and quickly adopt these. We then identified the specific areas where the addition of selected international technologies and techniques - offered by companies such as Shell - would significantly improve performance. Thirdly, we created an environment where creativity, innovation and learning would flourish. And finally, we surrounded this with a culture where continuous joint improvement, between ourselves and our contractors, was the norm. This approach has really paid dividends, and I can give some specific examples.

Let's take well construction; we currently have 4 rigs active, and all of them were built by a Russian company. Before starting the drilling operations we modified these rigs to our needs, amongst others by installing a Western 'top drive', which is safer, more efficient, and expands the rig's functionality. It resulted in a significant increase of drilling rate and mitigation of risks of well problems and complications (even exclusion on some stages). We also got a chance to drill extended reach drilling wells with step-out up to 2,500 m. Moreover, these rigs are operated by the Russian Siberian Service Company (SSK) and the western company KCA Deutag. In my opinion it's a very good and successful integration and a ground for sharing experience. In our view healthy competition between the contractors is for the benefit of the business.

We also successfully combine Western and Russian technologies and experience in coring operations. When we started coring 4 years ago Salym Petroleum Development cut the reservoir section of some 70 meters, and cut it per 6 meter or 12 meter sections at a time. We brought a bit of our own experience together with the contractor, Siburmash, and then Salym Petroleum Development was able to progress the 6 to 12 meter to 18 - 27 meter and now routinely to 36 meter. We have brought the time down to 50% so what before was taking us 5-6 days is taking us now only some 2 days.

Salym Petroleum Development used integration between Western and Russian technologies in downhole production equipment. We run well completions with Russian-manufactured ESP and 'Y'-tools. The advantage of this technology is the ability to run production-logging tools below a working ESP at any point in time during production without pulling the completion string. Flow rates in different perforation intervals and other valuable information will now be collected for production optimization and enhanced recovery plans.

The environment is a concern for all companies in the regions O&G sector. How is Salym Petroleum Development ensuring environmental compliance?

Undoubtedly, environmental protection is one of our key areas. That's why at the very beginning we set very high performance standards. One of the Salym Petroleum Development goals is to work with no harm to people and environment. Our company has developed an HSSE system that includes the use of advanced technologies that have proven their worth in the area of environmental safety. All Salym Petroleum Development environmental programmes and projects are based on the requirements of the Russian law and environmental standards of Shell, as one of Salym Petroleum Development's shareholders.

We pay much attention to the associated gas utilisation issue. Salym Petroleum Development has built and is operating a RUR 1.2 billion 45 MW gas turbine power plant at West Salym. It's our major environmental project, as the power plant addresses the issue of flared associated gas that is now used to generate electricity. The power plant allows the company to reduce reliance on our electricity supplier, improve the energy efficiency of our operations and reduce emissions of carbon dioxide into the atmosphere. When in operation, the power plant has so far allowed to achieve associated gas utilization at Salym fields up to 35%. To achieve an associated gas utilization factor of 95% by end of 2010, Salym Petroleum Development has jointly with RussNeft and Monolith companies started implementing a project to build a gas processing plant at West Salym.

Another large environment project in Salym Petroleum Development is the second phase of the polygon development. The construction of a unit for thermal utilization of oil waste called Tourmaline started in August 2008. The unit will become operational in the middle of 2009. It will process more than 12 thousand tons of oil and household waste per year.

Preventing and eliminating oil spills is another important component of Salym Petroleum Development environmental efforts. Salym Petroleum Development maintains its own emergency response team that has all technical resources required to perform its mission. There are regular drills to achieve smooth cooperation of all teams concerned in the event of an oil spill. We implemented an Integrated Safety System for the Salym Petroleum Development's 90-km long export pipeline. To protect the pipeline's most vulnerable areas, there is a system of fences and video surveillance, some valves are put inside enclosures with access control systems. All incoming information goes into the monitors of the central security control room 24 hours a day and allows for quick response if there is a risk of damaging the environment or other emergencies.

Salym Petroleum Development extensively uses corrosion inhibitors to protect the integrity and seal of tanks, separators, oil gathering lines from well pads, infield pipelines and the export pipeline. To achieve the best results, we put inhibitors into the system as soon as a well becomes operational. Cathodic protection control stations have also been installed to provide additional protection for oil pipelines. Air, soil, surface water and sediments are monitored on a regular basis on the territory of the Salym fields and along the export pipeline's right-of-way. The readings are compared against the natural background levels. The main purpose of this activity is to make sure production operations do not impair the condition of the environment.

What advantages are you seeing from the implementation of Smart Wells in the Salym fields?

As you know, Salym Petroleum Development operates reservoirs where the oil is trapped in different, non-connected layers. In order to have good reservoir management and quantify the oil production from each layer we employ smart wells technology. In Salym Petroleum Development the way we use this is that we have two reservoirs, both perforated and between these reservoirs is a packer, and we use a flow meter and pressure and temperature gauges to allocate flow and calculate water cut from the different reservoirs. Data is gathered on a continuous basis and at the same time the well is produced at its optimum without the need to shut down for measurements. The smart wells create considerable cost efficiencies and reduce environmental impacts, with fewer well pads and field facilities.

Moreover, Salym Petroleum Development introduces novel ways of working that will allow monitoring and managing production and injection volumes in a more efficient and effective way. This project is called Well Reservoir Management, and it's fundamentally about how best we can manage our reservoirs, to increase production, increase ultimate recovery, and contain OPEX costs. It includes the implementation of Shell 'Smart Field' technology, which will enable us to transmit information from the well site to the control room in real time.

By including features such as automatic measurement of fluid levels in the well the operators makes fewer trips to the well pad, conduct fewer repetitive tasks, improve HSSE performance and make more time for themselves to carry out higher value work. Another significant benefit from the implementation of the Smart Field technology is the creation of the so-called 'Collaborative Working Environment'. This means that office staff in the head office and field staff have access to the same real time information. This improves our teamwork and our capability for problem solving and optimization efforts.

What are your plans in terms of new exploration projects?

We are continuing to explore the Salym oil fields as part of our plans and exploration commitments. We have already discovered seven oil accumulations, including four in 2008 only. But there is still much work to be done and further exploration wells will be realized over the coming years.

What I also want to highlight is that we use different opportunities to acquire detailed information about our reservoirs. In 2007, following the successful drilling campaign of the previous three years, Salym Petroleum Development embarked on a major exercise of optimising the development planning by utilising the vast amount of newly collected subsurface data. As part of this exercise, Salym Petroleum Development developed high-resolution 3D sector models of the West Salym field. 3D visualisation of the dynamic fluid flow helps reservoir engineers to improve and optimise the subsurface development plan in view of numerous subsurface uncertainties in order to achieve higher oil recovery. Currently, Salym Petroleum Development is expanding the modelling effort to develop a full field integrated static-dynamic model for the West Salym field.

What effect, if any, has the oil price had on new technology investment at Salym Petroleum Development?

The world financial situation with oil prices dropping fast inevitably influences Russia and its oil and gas industry. It has an impact on the companies, their suppliers and their customers. In Salym Petroleum Development in particular, we are committed to maintaining our activity levels as well as the projects with the implementation of new technologies. Nowadays Salym Petroleum Development is actively implementing a work approach called 'LEAN'. It is aimed at taking unnecessary waste out of the Company's activities. Salym Petroleum Development has already trained many of it's staff, and conducted a number of pilot projects, which highlighted many opportunities in areas such as ESP management, well testing, water sampling, etc. This programme has the potential to fundamentally impact the way Salym Petroleum Development does its work, across all areas of our business, and thereby improve safety, increase production, reduce cost and increase profitability.

"Peak Oil" seems to be a hot topic with many differing opinions. What is your view on this?

Although it is difficult to predict the exact rate of growth, it is evident that the global demand for energy will continue to increase and that at the same time we are running out of "easy" oil. Furthermore, as a result of the cost and practical limitations of renewable and nuclear energy, fossil energy sources will remain an important part of the energy mix. Finally, the concerns over the consequences of climate change will no doubt further increase in the coming years. Putting all this together makes me think that it will take all the combined resources and ingenuity of our industry and it's regulators to be able to meet society's future demands and expectations. In terms of hydrocarbons, there are still many opportunities; for example, Russia has vast unexplored territories in the Artic and in East Siberia. They require large investments and implementation of complex technologies. That is the area where I believe joint efforts between Russian and international operators can be of great value and I personally hope the Salym project is a good example of how such ventures can benefit all stakeholders involved.

Labels: Harry Brelelmans, Interview, Russia, Salym Petroleum Development, SPD

posted by The Rogtec Team @ 15:41 

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