The ROGTEC Interview: Francis Sommer, Senior Vice President, Operations & Technology at TNK-BP

What are TNK-BP’s key upstream objectives for 2012 in Russia?

Continued improvement of our HSE performance in all our operations will be a key priority for us. We will remain relentlessly focused on this task. Of course, efficient reserves recovery and increasing oil production in order to meet our planned performance targets are key objectives. We are counting on making meaningful progress on our major projects in Yamal, expansion of Uvat and VCNG. These projects will be critical components of our production growth going forward. Additionally, our shareholders expect that we will continue managing stable cash flows, so maintaining operational efficiency at our brownfields is also critical.

Reserve replacement is a prime task of all operators. Are you undertaking any specific projects to increase your reserves? What were the company’s replacement ratios in 2011?

At the end of 2011, the total proved SEC life-of-field (LOF) reserves of TNK-BP consolidated subsidiaries, estimated according to the criteria of the US Securities and Exchange Commission (SEC), amounted to 9.1 bln barrels of oil equivalent.

Through the addition of 0.97 bln barrels of proved reserves, the total proved SEC life-of-field (LOF) reserves replacement ratio amounted to 145% in 2011. Over the past eight years we have averaged a recovery ratio of 140%, and we are proud of that.

By PRMS (formerly SPE) criteria, our reserves amounted to 13.77 bln barrels of oil equivalent and the proved PRMS reserves replacement ratio in 2011 was 203%.

It was through solid operational execution and the use of technology that we have been able to demonstrate a solid track record of reserves growth. Speaking specifically about 2011, reserves growth has come from efficient development of several fields in the Orenburg Region and expansion of VCNG and Uvat projects.  We have also made progress on the development of Rospan which resulted in gas reserves growth. Favorable market conditions were also conducive to growth of the reserves replacement ratio in 2011.

In 2011, the company sealed a deal for acquiring assets in Vietnam, as a result of which proved reserves amounting to 30.6 mln barrels of oil equivalent, according to the SEC criteria, were added to the company’s balance sheet after the fields in Vietnam were included in the audit. Apart from that, the company’s reserves increased owing to efficient development and implementation of the program for construction of captive power plants, which made it possible to include the gas supplied for captive power generation in the reserves.

Internationally, TNK-BP is now working in a number of countries; how are operations going in Vietnam and Venezuela? And what are your plans for further international development?

TNK-BP’s international assets are seen as a key part of the Company’s future with the international portfolio offering opportunities to help replace reserves and production and improve financial performance through access to high-margin barrels in fiscally stable countries.

We are looking for opportunities in existing countries to deliver long-term international growth with significant financial returns to TNK-BP and continuing to review international opportunities that offer synergies with TNK-BP’s existing businesses to continue international expansion in the future.

In terms of current projects, TNK-BP started first offshore drilling operations on Lan Do field development in Vietnam. Lan Do field contains 2 vertical subsea wells at a water depth of about 185 m and is located 28 km east of Lan Tay Platform in Block 06.1, where TNK-BP is producing natural gas and condensate for power generation in Vietnam.

With “best practices” key to the optimization of oilfield operations, what upstream “best practices” have you recently implemented that have made a noticeable operational difference?

A good example of using best practices to optimize our oilfield operations was our successful implementation of a program to increase the run life of electrical submersible pump (ESP) wells. For example, at the end of 2011 the run life of ESP wells exceeded the target and reached 615 days at Samotlorneftegaz. This is no minor achievement.

Small and ultra-small electrical submersible pump units were developed and underwent field tests. Through comprehensive implementation at the initiative of Samotlorneftegaz specialists, these ESP units enabled profitability and production from the wells within design constraints. According to expert assessment, the use of this technology has the potential to incrementally increase oil production by133 mtpa.

In which oilfield area do you see TNK-BP having the greatest investment increase in 2012 (i.e. work over, new field construction, exploration)

The greatest area of growth will be drilling and major capital projects progression.

TNK-BP invests over $2.4 bln annually (in Russia alone) on drilling and construction of over 1,000 wells, in addition to upgrading existing wells by sidetracking. In 2004, we drilled our first sidetrack, but in 2012 we aim for over 350 sidetracks at old wells. Our proven track record of operational excellence and investment risks management will enable us to accomplish this.

Today we manage drilling of wells with various complexities in terms of well design and trajectory. Some of these are long reach wells with step-outs of over 4,000 meters, 3-D well profiles, multilateral or dual-completion wells at one end and shallow drilling at the other end of our scope.

What technologies have you introduce to TNK-BP field operations that have had significant impact on your field ops? Which technologies will TNK-BP focus on in 2012 to increase field performance?

The Company has been carrying out multi-stage fracturing at horizontal wells starting from 2010. We implemented several completion variants in horizontal sections followed by multi-stage fracturing depending on specific conditions.

In 2011, three-stage fracturing was conducted with well completion utilizing Isojet technology, providing for opening a cemented liner using sand perforations and CT. In 2012, the programs will continue using 2- and 3-stage fracturing in accordance with the proven technologies.

In 2011, our Drilling Department also introduced a Low Cost Access program. This is an initiative to introduce a step change in the way wells are constructed. The expected outcome is to access additional hydrocarbon resources in the Company’s existing assets that, in the current financial environment, are marginally economical.

We have also begun to introduce technologies not only for near-term recovery, but also to improve reserves recovery in the mid- and long-term.  In 2011, a pilot project to introduce the innovative BrightWater technology, developed by BP, was launched on Samotlor field. Technology plays an integral role in reducing well watercut and increasing oil recovery significantly.

At the same time, TNK-BP and the oil industry in Russia are currently facing a serious challenge of operating power costs growth caused by natural field depletion. All this makes the search for effective tools of reducing the share of power costs in the operating costs ever more important at all production stages – from meeting subsurface conditions and selecting well operation models to transferring oil custody to a metering facility.

TNK-BP has begun active implementation of new energy-efficient technologies in its oil production processes. Some technologies tested in 2011 have proved successful and in 2012-2014, they are
planned to be implemented at the Company’s other production assets. One example of scaling up such a solution is the use of high-voltage electric submersible motors.

Environmental compliance is essential for all operators. How does TNK-BP ensure that it achieves its obligations across Russia?  

HSE is a top priority at TNK-BP. All of our operations have the common goal of continuous improvement in HSE performance and we are proud of our track record in this area. In Russia and abroad we are fully committed to meeting these regulations and, in many cases, our world-class standards even go beyond these norms. We achieve this through dedicated staff training and supervision of our operations, all of which is aimed at delivering the highest HSE standards.