ROGTEC Talks Exploration with Jean-Louis Gelot, Vice President, CGG Veritas Russia

1.a What are the key future and current exploration areas in Russia?

In Russia, although there is still room to find significant reserves in the southern part of western Siberia, exploration is definitely moving north an East. North of the mature Timan Pechora basin in the Pechora and Barents Sea, north of Western Siberia in Yamal-Nenets region and in Karal Sea, and then East in Eastern Siberia and Far East in the Sea of Okhotsk. Licensing will also take place in Laptev and East Siberian Seas. This is a huge exploration territory in harsh climatic and geographical areas

1.b What are the key future and current exploration areas in 
the Caspian?

In the Caspian Sea, the majority of issues related to sovereign claims between the littoral states have either been ratified or are close to agreement, i.e. Azerbaijan, Kazakhstan, Russia, Turkmenistan and Iran. Additional transportation infrastructure (BCT pipeline, expansion of the CPC, Trans Caspian link etc) will resolve the critical export issues for additional to-be-discovered hydrocarbon reserves. There will also be continued development of the onshore resources in these countries, where the potential investors profile are more in line with the reduced capital commitments and need for local partnerships that characterizes the onshore exploration market.

2 What are the key differences between exploring Russia and the Caspian?

Talking about seismic exploration, the main challenges in Russia are the very short acquisition survey time windows; December until April onshore in a large part of territory and July to October offshore. For large projects this means high capacity vessels (10 streamers) and a high productivity land crew which is possible with vibro-seismic in Yamal-Nenets region. This means technology, large equipment investment and know-how which do not exist today in Russia. If large seismic vessels can mobilize and demobilize quickly to other areas of the world, this is not the case with land crews. High productivity land crews, with long mob-demob periods, have very high depreciation costs with 8 months in stand-by. In the Caspian Sea, seismic exploration has its own difficulties with ice in winter and water depth changing significantly with wind.

3 What are the key regulatory issues faced in the region?

It is almost impossible for an international seismic contractor to work in Russia without a local partner. Permitting and authorisations with local regulatory agencies are very cumbersome. Access to restricted coordinates is denied to foreign companies although GPS technology is available anywhere in Russia! This means, for example, that a foreign geophysicist can not be involved in part of the field acquisition quality control. CGGVeritas has a strategy of partnership with Russian companies that will overcome these hurdles.

4 Up to 15% of the total global reserves are believed to lie undiscovered in the arctic. What measures are companies taking in order to take advantage of these reserves?

The Russian Ministry of Natural Resources is financing exploration programs. Russian giants GAZPROM and ROSNEFT, and IOC’s have already made significant progress in the artic region. SHELL and EXXON are operators in Sakhalin projects. BP has a very large exploration project with ROSNEFT in the Far East. Shtokman will be developed with foreign IOC’s and services companies. Rules for international operators about access to strategic deposits start to be more clear and this will accelerate new investments. Although this is not GOM or Brazil deep offshore, harsh climatic conditions increase CAPEX and OPEX. Better well productivity and reservoir management will be possible with intensive use of 3D seismic for development and production monitoring.

5 Siberia is a notoriously challenging area for both exploration and production of oil and gas. What are the major challenges faced when exploring the region?

As stated before, the main challenge is the short winter time window. Global warming certainly does not help! In East Siberia structural and stratigraphical complexity brings acquisition design and processing challenges. Some progressive E&P companies are evaluating onshore summer acquisition but this poses critical environmental issues. Low impact seismic, which is not well introduced in Russia, will help to move towards longer acquisition periods.

6.a What technologies are being implemented in order to overcome the harsh environmental conditions?

Offshore, CGGVeritas high capacity vessel fleet can satisfy demand for large (2000km2) surveys in summer. Solid streamer technology from our SERCEL equipment division is less sensitive to rough sea conditions, thus decreasing weather stand-by. Onshore, CGGVeritas has been using narrow drilling equipment and heliportable operations for a lesser environmental impact and can bring this know how to Russia. HPVA (high productivity Vibroseis Acquisition) with high channel count ( SERCEL 428) used in Middle Eastern desert areas can be deployed in Northern West Siberia.

6.b What advances can you see happening in the future that will aid the exploration of remote and hard to reach areas?

Again, onshore, the next step will be the use of helicopters during summer. Russian companies do not have this experience. We, at CGGVeritas, have a strong reputation in this area.

7 To what extent will your exploration and production technologies and working practices be modified to address the environmental sensitivity of the Arctic?

CGGVeritas has very strict HSE rules. For example, with the AGC (Association of Geophysical contractors), we are proactive in evaluating the impact of offshore seismic on mammals. Solid streamer technology overcomes the potential contamination issues that existed with fluid filled streamers

8 Russia’s output has declined slightly over the last decade due to underinvestment in exploration during the Soviet era, creating a drive to push exploration boundaries further in to Siberia and the Artic shelf. How do you see the attitudes to exploration in Russia changing?

Russia has realised again recently that exploration is very much needed. The Ministry of Natural resources (MNR) is financing large 2D seismic programs in artic waters as well as in East Siberia. It is also revising licensing terms for exploration (geological licenses) where the license owner will be able to transform the license into an exploitation license in case of deposit discovery. The MNR is also clarifying the rules for foreign operators with the definition of strategic fields. New ongoing construction of oil and gas pipelines towards the Pacific coast and China will contribute in accelerateing the exploration and development of East Siberia.

9 Many of Russia’s more mature fields are on a downward production curve. What role do the latest exploration methods have in increasing the outputs of these depleting fields?

More than exploration methods, we would talk about seismic technology for better reservoir characterisation and therefore optimized well placement and productivity. For fractured reservoirs, wide azimuth, longer offset and multicomponent acquisition, azimutal anisotropy dependent processing and seismic fracture characterization are key technologies not yet widely used in Russia. In clastic reservoirs, I would use the same comments about better acquisition design coupled with full elastic and petrophysical inversion techniques.

10.a How are Western companies working with Russian companies to enhance technology in this area?

CGGVeritas has an open technology business model. Russian seismic contractors intensively use our latest SERCEL seismic equipment (SERCEL 428) as well as our GEOCLUSTER software technology that they can buy on a commercial basis. Russian contractors also benefit from our partnership strategy.

10.b What key partnerships have you undertaken to enhance your technology transfer and under taking?

Our key partnerships with Russian contractors are still in their early days. For the last 3 years, CGG Group resources have been committed to our more traditional markets. However, with our recent merger, CGGVeritas is in a better position to develop these Russian partnerships. It is a large market with many local players, and hence it will take time.

11 What are the key processes that you undertake in order to maximize the quality of the data that you produce?

In our partnerships, we have introduced our CGGVeritas integrated standard quality control process during field acquisition. We would also like to see higher geophysical expertise in Russian E&P companies so that their standards, in terms of quality and productivity, can rise to international levels.

12 What advances have been made within data processing and interpreting these results?

CGGVeritas offers the most complete set of processing algorithms available on the market. The best of both CGG and VERITAS is now being gathered into a full single offer. Listing all algorithms and methodology would go beyond this interview. VERITAS brings its current Canadian artic experience, such as dealing with permafrost, to the similar conditions of Russia.

Jean Luis Gelot is CGGVeritas country manager, based in Moscow, in charge of business development for Russia. After 10 years in mining and underground water geophysics in various countries, he managed a geosciences software company (GEOMATH Inc.) from 1990 till 1998 in Denver and Houston. In 1998 he joined CGG Americas as manager of integrated reservoir studies services with postings in Rio de Janeiro, Houston and Caracas. He moved to Moscow in early 2005.

He holds a MS in Mechanical Engineering (Arts et Metiers-France) and Petroleum Geophysics (Institut Francais du Petrole). He is a member of AAPG, SEG, EAGE and SPE.