OPENING NEW HORIZONS FOR RUSSIAN BUSINESSES
As any large oil project, Salym field development requires the involvement of a huge number of contractors, including construction companies, design institutes, manufacturers of equipment and materials, transportation companies and others. More than 400 contractor companies now operate in the Salym fields. Working in Salym allows the Russian companies to acquire experience that will make them competitive on the international markets.
When SPD started the development of the Salym group of fields in 2003, an extensive amount of preparatory work was performed by the company in identifying and analyzing the best practices used by Russian oil companies. This study involved frequent visits to West Siberian oil fields, where SPD learned how Russian companies managed their operations, and what technologies and materials they used. SPD also visited Russian manufacturers of oil production equipment.
Based on the results of this analysis and a comprehensive study of well construction methods and techniques used in Russia, the company developed its own drilling operations strategy. The strategy of well construction adopted by SPD relies on the best Russian drilling equipment, materials and operational experience, plus the application of organizational and technological solutions that have been proved by the Shell Group. This approach allows the company to combine the best Russian and international practice. That strategy was later incorporated in the Russia Plus concept, which the company follows not only in well engineering, but other areas as well: from oil production to environmental protection to social partnership. According to this concept, the company does not forcefully impose international business practices: it rather proceeds from the Russian values and traditions, enriching them with those elements of international technology and management systems that would help the business.
This approach benefits the company and its shareholders, but it also helps all companies involved in the Salym project. After a thorough analysis of the drilling contractor market, the company selected two drilling contractors, one Russian, the Siberian Service Company (SSK), and one Western, KCA Deutag. On the one hand, fair competition between the contractors allows SPD to continuously optimize the drilling process and improve well construction performance. Both contractors are interested in improving their business processes and adopting new technologies, and continuously set new records in well drilling speeds. On the other hand, KCA Deutag receives valuable experience of working in the Russian oil and gas province, and SSK learns the standards used by an international company, which will make it more competitive on the international market. “It is very interesting and useful for our company to participate in the Salym project”, says first deputy CEO of SSK Vladimir Shesterikov. “In the first place, it is a long-term and stable contract, but it also gives us an opportunity to borrow the valuable experience of SPD’s engineers, who had participated in many major oil projects with Shell and other international oil companies. We hope that the successful cooperation with SPD will promote the standing of SSK with potential customers in Russia and help us win tenders for international contracts.”
For most Russian companies the most difficult part is to ensure they comply with the high HSE standards adopted by SPD. “The first thing we found with SPD is its tough requirements related to safety at the contractors’ production facilities”, notes Vladimir Shesterikov. Giniyat Ishbaev, CEO of Burintech, a manufacturer of drilling equipment, supports this opinion: “We had to change our whole thinking process. SPD’s HSE standards have made us rethink our attitudes to these issues and change our training standards, procedures and policies”. Bulat Khairullin, CEO of SibBurMash, agrees with his colleagues: “When we started, SPD’s requirements seemed overly tough. But, with time, we came to regard them as standards of high performance”. Airat Mustafin, Chief Engineer of Kogalymneftegeophysika (KNGF) logging contractor, acknowledges that health and safety of people in the field are SPD’s top priority. He said his company “had to adapt its procedures to comply with SPD’s health, safety, environment and security standards”. “Unlike many other companies who pay lip service to these matters, SPD really involves the personnel of contractor and subcontractor companies in these issues, starting from top management down to rank-and-file workers, explaining implications of non-compliance, training people how to conduct operations safely, and promoting caring attitudes towards the environment”, says Airat Mustafin. The relentless effort to create a safety culture in Salym fields has helped contractors to continuously improve their HSE performance. In one instance, SibBurMash has not had a single lost-time injury in Salym over its six years of operations. This shows that Russian contractors are ready to accept Western attitudes towards safety and improve their safety performance.
Tough competition in the international market of oilfield services makes it a must for service companies to continuously improve their operations and optimize their business processes. SPD’s high requirements make contractors seek continuous improvement in their operations. In June 2005, SPD first tested Burintech’s drill bits with astonishing results: the average rate of penetration with the drill bits of the Russian manufacturer was 2 times higher than that using their foreign equivalent. However, SPD and Burintekh engineers did not stop at that and continued to work to improve the performance of that technology. Burintekh engineers worked at drilling rigs on a permanent basis to address all issues and test innovations, which allowed adding another 20% to the rate of penetration. It took 34 days to drill the first well in Salym, and now the average drilling time has improved to an average of 10 days. SibBurMash is another company addressing the challenge to continuously improve its performance. “When we started coring operations, the length of core recovered in one run was 6 m, and now we are recovering 36 m runs of core. And the mechanical drilling speed has increased 4 times, from 1.96 m/sec to 7.93 m/sec”, explains CEO of the company Bulat Khairullin.
It is not only services that form part of SPD’s Russian content, but equipment as well. All materials SPD uses in well construction, including casing pipes, wellheads and completion equipment, are made in Russia, as are the drilling rigs, where SPD is using rigs BU-4500 and BU-3900 manufactured by OAO UralMash. SPD purchases casing and line pipes from TMK and OMK, and uses wellhead equipment and X-trees manufactured by Korvet company. Drill bits are supplied by Volgoburmash as well as Burintech. Electrical submersible pumps installed in SPD’s wells are manufactured by Russian producers Borets, Novomet and Alnas. Insist-Avtomatika has successfully implemented its comprehensive leak detection solution on SPD’s pipelines, and Mikon is implementing an innovative technology to remotely monitor the level of liquid in the annulus.
In 2007, Shell opened a special department whose purpose is to help Russian contractors and manufacturers participate in tenders held by the company in its international operations. As a result, several Russian companies, including those contracted by SPD, have received contracts with Shell operating companies in other countries. In particular, Russian companies were invited to tender their bids for projects in Syria, Oman, Nigeria, Libya and Malaysia. Burintech’s products have inspired interest in the Netherlands, USA and Brunei. Giniyat Ishbaev explains that the Salym project was the first one for his company where it was exposed to a Western system of managing drilling operations: “It goes without saying that partnership with SPD has made our company better. Almost all international companies operating in Russia are now our clients, and the list of our overseas customers is continuously expanding”. Burintech plans to continue taking part in tenders and testing technologies in other projects together with Shell.
CEO of SibBurMash Bulat Khairullin also believes that his company received definite benefits from participation in the Salym project: “The new coring technologies that our engineers developed in partnership with SPD in Salym fields will quickly find their way to the Russian market, where SibBurMash is active in all main oil producing regions. In other projects, our company will use the experience of recovering long runs of core, which produce a more accurate picture of the rock’s geological properties.”
Kogalymheftegeophysika, another company whose cooperation with SPD was the first exposure to Western production culture, is also ambitious about its future prospects. In the course of the Salym project KNGF has managed to dramatically improve its performance to effectively compete against leading international service companies who are also operating in Salym fields. On order from SPD, Kogalymneftegeophysika had developed and successfully implemented a ComboTool technology where all logging tools are run in hole in a single stack. This tool is similar to Western equipment, including the Platform Express (PEX) tool of Schlumberger, which is also used in Salym. The high accuracy of these tools gives a more accurate understanding of the thicknesses and properties of the pay interval.
SPD encourages fair competition between the vendors and contractors participating in the Salym project and actively promotes Russian companies on the international markets. More than 80% of the company’s budget now goes to pay for the services and equipment of Russian companies. SPD selects contractors on a competitive basis, establishing equal conditions and making sure that all bids are evaluated objectively. With all other terms being equal, SPD will give preference to regional companies in the tendering process. Local contractors and vendors (those from the Salym village and Nefteyugansk district) account for approximately 15% of all SPD’s expenditures.
Alexander Efimov: Senior Corporate Affairs Specialist, SPD
