Bazhenov shale to start producing in three years – Gazprom says

Gas well in Siberia
Source: DollarPhotoClub

Commercial production from Russia’s rich Bazhenov shale formations could start in three years, despite U.S. sanctions limiting the transfer of fracking technology – according to OAO Gazprom Neft, the oil arm of Russia’s state-run gas exporter.

Kirill Strizhnev, head of unconventional projects for Gazprom Neft, told reporters in Moscow that the company aims to produce about 40,000 barrels of crude a day from the deposits from 2018. As Bloomberg points out, that’s about 2.7 percent of Gazprom Neft’s daily first-quarter output of 1.5 million barrels of oil equivalent.

The Bazhenov Shale is a formation in the West Siberian basin, which – while exact estimates vary – is generally believed to contain substantial reserves of tight oil.

An estimate by Wood Mackenzie of the Bazhenov Formation put oil in place at 2 trillion barrels, while in 2013, the Russian oil company Rosneft estimated recoverable reserves of 22 billion barrels for the formation. Meanwhile, the Russian government agency Rosnedra estimated in 2012 that the Bazhenov contained 180 to 360 billion barrels of recoverable reserves.

The U.S. Energy Information Administration – the most used source when it comes to estimating unconventional resources – in its estimates published in June 2013 said:

“For the total Bazhenov shale prospective area in the West Siberian Basin, we estimate a risked shale oil in-place of 1,243 billion barrels, with 74.6 billion barrels as the risked, technically recoverable shale oil resource. In addition, for this prospective area, we estimate a risked shale gas in-place of 1,920 Tcf, with 285 Tcf as the risked, technically recoverable shale gas resource.”

Russia, which until recently was a world leader in oil and gas exploration, has recently been forced to turn to developing its unconventional resources, in the face of dwindling production from its maturing fields.

With the richest estimated shale oil deposits in the world (according to the EIA), Russia was hoping that with the aid of the technological know-how of its western investors, it could start production soon. These dreams have been all but shattered by the recently imposed sanctions by the U.S and EU, which have stalled ventures involving Exxon Mobil Corp., Total SA and Royal Dutch Shell Plc.

In November 2014, plans to explore the Bazhenov Shale by the Indian company ONGC Videsh were under threat of being disrupted because the company contracted the Denver-based Liberty Resources to drill the exploratory wells in the formation.

Despite these obstacles, some exploration work has been carried out by the Russians themselves. In October last year, Gazpromneft-Khantos, a subsidiary of Gazprom Neft, announced that it had started drilling the first horizontal well to explore the Bazhenov complex of the Palyanovsky deposit at the Krasnoleninsky field.

Apart from that, work on a second Gazprom Neft project for developing shale oil deposits continues to take place at the Bazhenov-Abalak formation of the Southern-Priobskoye field, where Gazpromneft-Khantos received the license in March 2014.

“Foreign companies are stronger in this type of drilling so it’s faster to do it with western help,” said Alexei Vashkevich, head of geological exploration and resource base development, who worked in North Dakota before joining Gazprom Neft in 2013.

“Can they be excluded? Yes, they can. Can we do it without them? Yes, we can. It will be a little harder and will take a little longer, but it’s possible.’

Gazprom Neft, which has drilled nine wells at Bazhenov so far, expects to need to drill 20 to 30 wells and develop one or two fields before devising a full investment program – Vashkevich said.

There won’t be “quick victories” at Bazhenov, he said. “Everything should be done in right way this time.”

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