The ROGTEC Interview: Oleg Karpushin, Executive Vice-President for Production, Exploration and Oil Field Services, JSC NC KazMunayGas

1. Firstly, congratulations on your new role and position at JSC NC KazMunayGas. For our readers, can you please describe your new position and your areas of responsibilities?

Thank you. From June 12th, I have taken up the position of the Executive Vice-President for production, exploration and oil field services. Summing it up in a short sentence, I am responsible for the Upstream business of NC KazMunayGas.

2. As the previous CEO of Salym Petroleum Development, you bring a wealth of experience with you. How will you use the experience gained within the Russian market to further develop the Kazakh sector for JSC NC KazMunayGas?

Indeed, my background allows me to draw both from the experience obtained in the Russian petroleum sector and also from many years of working for a major IOC. In Russia, there are many mature fields which are being successfully and profitably developed in later stages of their reservoir life through application of modern technology coupled with rigorous pursuit of economic efficiency and barrel chasing. This means that solutions in improving the waterflood, well and reservoir management is something that we can apply here in KMG.

3. JSC NC KazMunayGas have plans, amongst other things, to boost production of its brownfields, reduce HSE related incidents and look to increase exploration to secure new deposits. This is a wide- ranging set of areas to tackle – so what are your immediate priorities? 

HSE will always be our number one priority. This is at the core of my values. But growing reserves and adding

economic production are also very important goals. These are not simple tasks. Gaining sustainable production growth will require introducing new ways of working, new production and wells related technology applications specific for mature fields, investing time and effort in upgrading our surface facilities and in additional training of our workforce. Our production efforts are underpinned by a robust exploration plan that consists of conducting regional studies, carrying greenfield exploration projects and by adding reserves in areas of mature fields. Significant effort goes into the exploration of the northern and central Caspian. We hope that the anticipated changes to  the fiscal regime for offshore development, will enable us to launch  more projects in the Caspian.

4. With a vast number of onshore wells, KMG EP is undertaking a major workover programs in its largest operating divisions. Can you tell us about this program, the current state of the wells, the technologies you are using and the costs savings you hope to encounter?

I would like to begin by saying that KMG onshore fields still bear significant potential for production. Even though many of them have been extensively drilled and have decades of production history. Existing oil recovery factors when compared to similar fields in other parts of the world indicate there is still a lot more oil to be produced. Our integrated teams of engineers and geologists from both the operating companies and KMG Institute of production

and drilling technology are working on improving waterflood applications, enhancing productivity of wells, reducing count of idle well stock and increasing mean-time between failures of artificial lift systems. Many of our wells suffer from integrity problems due to poor zonal isolation and tubular corrosion. Improving quality of well construction through

new well design, modern primary cementing process and application of new cement formula is something that our engineers are also working on. So far, the success rate of well repair by cement or chemical squeeze have not been high; however, this remains to be the focus area. Current technology offers an array of options from expandable plasters and downhole isolation tools to specialty chemicals like epoxy resin. The overall estimated economic gains through the use of new technologies that we are introducing is expected to reach millions of USD in the coming years.

5. To date, the onshore well profiles in Kazakhstan are generally simple and not overly complicated, although I understand that some new, more complicated horizontal wells are being planned within KMG´s operations. Please tell us about these more complicated wells you are planning to drill?

Extensive infill drilling though being a simple process, does not guarantee the highest gains. Drilling of horizontal wells both completed with slotted lines and by multi-frack completions will significantly increase. Horizontal drilling will give KMG high producing wells and in many fields it fits our strategy of increased oil recovery. Overall, I think there is a big future for horizontal drilling in KMG.

6. JSC NC KazMunayGas has recently signed MOU’s with SOCAR, Agip, Rosneft and the CNPC for KMG Eurasia. What is the estimated development cycle for the Caspian Development?

Eurasia is a strategic project with a goal of accomplishing a large scale geological study of the Pre-Caspian hydrocarbon basin. We cannot expect fast results from this project however I believe that most exploration and development work in Kazakhstan will be driven by the outcome of the Eurasia project by the end of the 2020’s or the beginning of 2030’s.

7. How important will the Eurasia Project be for Kazakhstan?

Very important. The Pre-Caspian represents a major sedimentary basin with depths in excess of 15000 meters. Yet this basin has only undergone a partial geological study primarily due to previous technological limitations for subsalt exploration. However, the potential of this basin is comparable to the Gulf of Mexico or Western Siberia and we expect that future exploration results in Pre-Caspian will open up new fields the size of Tengiz and Kashagan.

8. What other offshore fields are targeted for development and what lessons have been learnt from the Kashagan project?

Kashagan gave a significant number of valuable lessons to the entire industry that will be used for development projects in the shallow waters of the North Caspian and elsewhere. The project team has found unique answers to the significant challenges represented by the exceptionally high H2S count in the crude produced, built artificial islands in a freezing shallow water environment, constructed sophisticated facilities using state of the art processes and process control systems. However, one lesson that cannot be underestimated is that for projects with similar levels of complexity a single project team as early as at the concept select phase needs to have a focus on major project delivery risks to secure its value. Today we have several exploration projects in central and northern offshore Caspian as well as one oil field that is ready for development. In order to optimize development costs, together with our partners we are studying various options to maximise use of the existing production infrastructure in the Kashagan area.

9. To ensure the continued implementation of “best practices” across Kazakhstan´s upstream  operations – the latest technologies and services are required. With the tough current market conditions – what can/ is being done to ensure the region remains attractive to international technology and service providers within the JSC NC KazMunayGas field operations?

Indeed, the current level of oil pricing has made a significant impact on the market condition. KMG, like other oil companies, is ever more focused on optimizing expenditure and increasing efficiency. However it is during times like these technology and innovative solutions can make the difference in increasing economic production and sustaining production growth. KMG through its operating companies and the Institute of production and drilling technology

have been actively engaging with new service and product providers, in order to drive value creation in our fields. Every year KMG  tests new technologies and  new tools through multiple specially set up pilot projects. Our procurement rules take into account the total value of a proposal submitted through tenders which assess both the price and the economic benefits of a technology and the exemplary quality of services and products. KMG, as you may know, has a large segment of in-house service companies that specialize in drilling, workover, construction and other traditional services. We have received several proposals from foreign service and technology providers for forming a partnership both in Kazakhstan and abroad. I think that overall it is an interesting idea that could be beneficial for both parties.

10. What interesting upstream projects does JSC NC KazMunayGas have planned that you can tell us about?

Given the extent of KMG’s growth strategy we have many upstream projects that we are currently working on. One of the most interesting projects is the rejuvenation of the Uzen field. This is an old field with stock-tank oil initially in place in excess of 1 bn tons. The field has been in production since 1966. We believe that it has more reserves that can be produced. In the near future we plan to conduct a new high resolution seismic study of this field that would ultimately mean more oil to produce. At the same time, among many other initiatives, we are intensifying horizontal drilling, working on integrity repair of a large number of production and injection wells and modernizing artificial lift systems.

11. Given your vast international experience working on both the drilling/service company and operators side, what are your thoughts on the separate service drilling model? Do you have plans to implement this at JSC NC KazMunayGas?

Efforts to address existing well construction challenges of poor integrity and low profitability will inevitably lead us to use specialist services in order to drill complex, high production wells and to extend well lives. Integration of these services will not come from the drilling contractor but from dedicated teams set up by the company or a specialist third party. However for simple wells, the turnkey model will still be dominant.