• 4 minutes Who Really Benefits From The "Iran Attacked Saudi Arabia" Narrative?
  • 7 minutes Trump Will Win In 2020
  • 12 minutes Ethanol, the Perfect Home Remedy for A Saudi Oil Fever
  • 15 minutes Experts review Saudi damage photos. Say Said is need to do a lot of explaining.
  • 17 mins Millennials: A boil on the butt of the work ethic
  • 7 hours A little something for all you Offshore swabbies
  • 18 hours Europe: The Cracks Are Beginning To Show
  • 15 hours Ban Fracking? What in the World Are Democrats Thinking?
  • 3 hours When Trying To Be Objective About Ethanol, Don't Include Big Oil Lies To Balance The Argument
  • 8 hours Hong Kong protesters appeal to Trump for support.
  • 3 hours LA Times: Vote Trump out in 2020 to Prevent Climate Apocalypse
  • 5 hours Saudi State-of-Art Defense System looking the wrong way. MBS must fire Defense Minister. Oh, MBS is Defense Minister. Forget about it.
  • 20 hours Iran Vows Major War Even If US Conducts "Limited Strikes"
  • 6 hours Memorize date 05/15/2018 cause Huawei ban is the most important single event in world history after 9/11/2001.
  • 6 hours Shale profitability
  • 8 hours US and China are already in a full economic war and this battle for global hegemony is a little bit frightening
  • 2 hours Pompeo: Aramco Attacks Are An "Act Of War" By Iran
  • 15 hours Let's shut down dissent like The Conversation in Australia
Alt Text

Oil Wealth Could Fund Free Education In This State

Money from New Mexico’s general…

Alt Text

Saudis Insist Oil Supply Will Be Fully Restored Next Week

Despite continued reports that Saudi…

Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

More Info

Premium Content

Russia Bets Big On Arctic Oil

Gazprom Neft, Russia’s fourth largest oil producer, has big plans for its Arctic oil operations, and it seems that neither sanctions nor production cuts can force it to quit its presence there. In fact, the oil division of Gazprom will try to turn itself into what its head of strategy and innovations called “a benchmark,” but not in terms of production. Gazprom Neft wants to become a benchmark in areas such as safety and efficiency, and most notably technology.

Arctic drilling was one of the top targets of U.S. sanctions that banned U.S. oil companies—and their European peers—from sharing technological know-how with Russian producers. This may have slowed down the progress of Gazprom Neft and others in the Arctic, but it did not put an end to it. Not that it could: Russia’s energy industry has been working on Arctic exploration for much longer than the four years since the annexation of Crimea, which became the grounds for the sanctions.

Gazprom Neft launched its first Arctic field, Prirazlomnoye, at the end of 2013, and first oil, and the new blend, ARCO, from Arctic Oil, reached markets the following year. Since then, more than 10 million barrels have been shipped from the field. Recoverable reserves at Prirazlomnoye are estimated at 540 million barrels of crude, and the peak of production is set to be reached in 2020, at 110,000 barrels per day.

The Arctic as a whole is top priority for Gazprom Neft: in 2016, two new projects got the go-ahead there. Messoyakha, which is the northernmost onshore oil field in Russia to date, is estimated to hold 470 million tons of oil and condensate. Novoportovskoye, or Novy Port, field holds an estimated 250 million tons of oil and condensate. Related: The New Alaskan Oil Rush

Now, according to the company’s chief of strategy and innovations, Sergey Vakulenko, as cited by Platts, Gazprom Neft was on track to expand production in all three fields, despite the cuts and despite the sanctions. Actually, Vakulenko suggested that the OPEC+ partners may want to consider a change in the production quotas to take into account rising demand and lower global stockpiles. In that, he echoed an identical suggestion by Russia’s Energy Minister Alexander Novak during last Friday’s partner meeting in Saudi Arabia.

Yet it’s not production that is Gazprom Neft’s top priority right now. It is efficiency and safety, according to Vakulenko, who spoke at a media briefing in London. Neither is something that springs to mind when one thinks about Russia’s oil giants. Nevertheless, Gazprom Neft seems to be changing with the times, no doubt helped by the oil price rout and the sanctions.

Vakulenko said that thanks to efficiency gains, an average well at the Novoportovskoye field yielded 5,000 bpd, compared with 300 bpd from an average well in any field in Western Siberia. However, it’s doubtful if efficiency gains are the reason for the difference: fields in Western Siberia are mature, while those in the Arctic are new.

Interestingly, Vakulenko did not give Gazprom Neft credit for going it alone in technology. “We definitely think that in the current world you cannot develop all the technology alone -- the world is too complicated and there are too many technologies that have to go into the project," he said, clearly suggesting the sanctions-bound companies are not the only ones with know-how that Russian oil producers can use to adapt to the specific nature of Arctic drilling. Related: Saudi Arabia’s $100 Oil Dilemma

To make things even more interesting, Vakulenko added that even so, international cooperation in oil tech could be “a bit of a gamble,” which was why Gazprom Neft was staying flexible, devising Plan Bs and avoiding the dependence on a single technology.

Arctic exploration is crucial for the sustainability of Russia’s oil industry. There is quite a lot Siberian oil still in the ground, but as the Arctic becomes warmer, the billions of barrels there will become more easily accessible. Gazprom is simply staking its claim on these barrels early, and efficiency is simply a means to always the same end: higher production.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:




Download The Free Oilprice App Today

Back to homepage



Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News
Download on the App Store Get it on Google Play