Energy potential of the Russian Arctic Seas: Choice of Development Strategy

428 Pages·2012·29.53 MB·English

by  Alexey Piskarev and Mikhail Shkatov (Eds.)

Developments in
Petroleum Science
Volume 58
8 FundamentalsofReservoirEngineering
19a SurfaceOperationsinPetroleumProduction,I
30 CarbonateReservoirCharacterization:AGeologic-EngineeringAnalysis,PartI
32 FluidMechanicsforPetroleumEngineers
33 PetroleumRelatedRockMechanics
36 ThePracticeofReservoirEngineering(RevisedEdition)
40a AsphaltenesandAsphalts,I
40b AsphaltenesandAsphalts,II
41 SubsidenceduetoFluidWithdrawal
42 CasingDesignTheoryandPractice
43 TracersintheOilField
44 CarbonateReservoirCharacterization:AGeologic-EngineeringAnalysis,PartII
45 ThermalModelingofPetroleumGeneration:TheoryandApplications
46 HydrocarbonExplorationandProduction
47 PVTandPhaseBehaviourofPetroleumReservoirFluids
48 AppliedGeothermicsforPetroleumEngineers
49 IntegratedFlowModeling
50 OriginandPredictionofAbnormalFormationPressures
51 SoftComputingandIntelligentDataAnalysisinOilExploration
52 GeologyandGeochemistryofOilandGas
53 PetroleumRelatedRockMechanics
55 HydrocarbonExplorationandProduction
56 WellCompletionDesign
57 PressureTransientFormationandWellTesting
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Preface
Startingwith thelast decade ofthe twentieth century, theresource baseofthe main
hydrocarbonmaterialsuppliercountrieshasbeenincreasing,chieflyduetooffshore
fields.IndiscoveringanddevelopingoffshorefieldsinthePersianGulfandtheGulf
ofMexico,WestAfrica,Brazil,andotherseabasins,explorationgeologistsallover
the world are increasingly convinced that a major share of the so far undiscovered
large fields isconfined tothe subsurface ofthe Arctic seas of Russia.
Russiahasanextensivecontinentalshelf(20%oftheWorldOceanshelfarea),but
itisonlystartingtodevelopanoffshoreoil-and-gas-producingindustry.InRussiaat
present,oilandgasareproducedatsixfieldsintheBaltic,Caspianseas,andSeaof
Okhotsk (the Sakhalin shelf). Several fields in the southern Barents and Kara seas
havebeenpreparedfordevelopment,andalargestockofrevealedstructureshasalso
been formed inthe northernparts ofthese seas.However, duetothe low density of
seismiclines,manyoftherevealedprospectiveareasinthisregionareoutlinedpro-
visionallyandrequirefurtherinvestigation.In2010,reflectionCDPseismicsurvey-
ing,financedfromthefederalbudget,wasstartedintheEastSiberianSea.Thework
aimsatinvestigatingthegeologicalstructureandtheassessmentofoil-and-gaspres-
enceinsedimentarybasinsofthismostpoorlyexploredareaonthecontinentalshelf
of the Russian Federation(RF).
Russiaisthelargestsupplierofenergyresourcestoforeigncountries.Inconnection
with the RF Government resolution on constructing the East Siberia–Pacific trunk
pipelineandthenecessityoffillingit,large-scaleexplorationworkstartedinEastSi-
beria.Theassessmentsoftheresourcepotentialofthisregionarehigh;however,tak-
ingintoaccountitsspecificfeatures,thecomplexstructureofthefieldsaswellasan
almostcompletelackofproductioninfrastructure,aquickattainmentofhighproduc-
tionvolumesisunlikely.Underthesecircumstances,inourview,thedevelopmentof
the hydrocarbon raw materialresources on the shelves should beprioritized.
Regional geophysical studies of the Russian shelf seas of the Arctic Ocean were
completed toward the mid-1980s. At the same time, the geological and geophysical
uniqueness of the Arctic Ocean became clear. Nowhere else on Earth one can find
suchadiversityofstructuresofdifferentageandtype,amongthemactivesuturestruc-
turesconcentratedonsuchasmallarea.ThedeepwaterpartoftheArcticOceancovers
anareaslightlyexceedingfourmillionkm2,whichislessthantheareaofthePhilip-
pineSea.Possibly,themainreasonofsuchuniquenessisduetothefactthattheevo-
lution of the currently existing structures of the Arctic Ocean since the Jurassic
occurrednearthePoleoftheEarth’srotation;thatis,thedirectimpactofrotational
forcescausing orderingin the tectonic movements was minimal here.
The difficulty of disclosing the historical evolution of the Arctic Ocean also in-
creases due to purely climatic and geographic difficulties related to performing the
viii Preface
mappingwork.Therefore,specialthanksandacknowledgmentsareduetothespecial-
istsofVNIIOkeangeololgiya,Sevmorgeo,andPMGREfromSt.Petersburgaswellas
MAGE (Murmansk), whose works to a large extent ensured the modern level of
knowledgeontheshelfoftheArcticseasofRussia.AmongthemareI.S.Gramberg,
Yu.E.Pogrebitsky,Yu.I.Matveev,V.D.Kaminsky,Yu.V.Roslov,T.S.Sakulina,I.V.
Belyaev,M.L.Verba,O.I.Suprunenko,V.L.Ivanov,B.I.Kim,I.Yu.Vinokurov,N.M.
Ivanova, V.A. Basov, V.A.Vinogradov, and many others.
At the present time, Russia has to make very difficult economic and political
choices:
1. ToprioritizethedevelopmentoftheArcticshelforthedevelopmentofthecontinentaloil-
and-gas-producingregions.
2. Tointegratewiththeworldleadingoil-and-gascorporationsortorelyonlyonitsownforces.
3. Todevelopthepublic,private,oranotherformofmanagingthebrancheconomy.
The sectoral problems, economic, geological, engineering, technological, organiza-
tional, legal, etc., are no less complicated.
The solution of these problems should be driven by the experience of the world
suppliersofenergyresourcesaswellasawell-consideredstrategyofdevelopingRus-
sianoil-and-gas resources.
Theauthors’aimisnottopresentacomprehensiveconsiderationoftheprospects
oftheArcticoil-and-gasproductiondevelopment.However,weareconfidentthatthe
materialspresentedhereandtheirdiscussionwillhelpthecommunityatlargetore-
alizetheimportanceofboththeproblemforthedevelopmentoftheRussianandworld
economy, and the elaboration of the corresponding strategy for extraction of the
resources ofthe Arctic seas of Russia.
We greatly appreciate help from T. Vasilieva who translated the manuscript.
Alexey Piskarev and Mikhail Shkatov
The color figures of the book can be found at http://www.elsevierdirect.com/
companion.jsp?isbn=9780444537843
1
Prospecting, Exploration, and
Development of Oil-and-Gas Fields
in the Twentieth Century
1.1 Organization of Oil Production and Delivery
The analysis of the development of offshore operations in prospecting, exploration,
and production of hydrocarbon raw materials shows a close correlation between
changes in the organizational forms of this process with stagewise changes in the
exploration and production technology, and with general engineering progress. The
relationshipsbetweentheproducingcompaniesandthestatesproducingandconsum-
ingthehydrocarbonrawmaterials,themechanismsofgovernmentregulationofthe
activityofcertaincompaniesandcartelschangedfundamentallyatdefiningmoments
inthetechnologicaldevelopmentoftheindustry.Themaineventsthatdeterminedthis
development were the implementation in the 1940s of remote exploration methods,
mass computerization of data collection and processing at the beginning of the
1970s,andthetechnologicalrevolutionofdatarecordingmeansinthe1980s,which
madethe possibilities ofthese means virtuallyboundless.
The global political changes also had a direct impact on the development of the
offshoreoil-and-gasindustry.Thetwentiethcenturywasmarkedbyarapidlygrowing
energydemand.Inthenineteenthandthebeginningofthetwentiethcentury,coalwas
themainenergyresource,butlatertheindustrystartedtorapidlypassontoconsumption
ofoilasthemainsourceofenergy.AftertheSecondWorldWar,coalproductionstarted
decreasingabruptly,andtheplaceofcoalintheworldeconomywastakenbyoil.The
globalinfrastructureandtransportvehiclesdesignedforoilconsumptionweregrowing
rapidly,whichmadethesocietyhighlydependentonthisresource.Asoftoday,40%of
global demand for energy is covered at the expense of oil (BP Statistical Review
ofWorldEnergy,2007).Theannualoilproductionnowisapproximately26billion
barrels,andwithadditionofalloil-relatedproducts,almost30billionbarrels.
Thecontinuinghighdemandforoilraisesthequestionwhetheroilproductionin
thefuturewillbeabletocoverdemand.Thisquestioninitsturnhasgeneratedmany
theoriesofthetimewhenoilproductionreachesitsmaximum;thetimehasprobably
alreadycomewhenoilproduction,takingintoaccountallthelatesttechnicalachieve-
ments in exploration and production, will not be able to grow further and cover the
demandfor thisresource.
DevelopmentsinPetroleumScience.DOI:10.1016/B978-0-444-53784-3.00001-4
Copyright#2012byElsevierB.V.Allrightsofreproductioninanyformreserved.
2 EnergyPotentialoftheRussianArcticSeas:ChoiceofDevelopmentStrategy
Along with the improvement of oil exploration and production technology, the
structureandformsoftheproducingcompaniesandthenatureoftheirrelationswith
the governments of the countries in the territories of which the largest oil reserves
werediscovered,alsochanged.Inthehistoricalcontext,organizationofoilproduction
anddeliverycanbedividedintofourperiods,correspondingtothestagesoftechno-
logicaldevelopmentoftheindustry.Someeconomiccharacteristicsoftheseperiods
are summarized inTable 1.1.
Below, we consider the main forms of the organization of oil-producing compa-
nies, their collaboration and the role of the governmental and interstate institutions
for each of these periods; however, first, we briefly consider the historical roots of
the industry.
ThefirstregiontoproduceoilcommerciallywasAzerbaijan.Thehistoricalreports
oftheAzerbaijanoilindustrydatebacktoantiquity.TheArabichistorian,geographer,
and traveler Ahmed Al-Belaruri (the ninth century) stated that the economic
life in Apsheron from the ancient times was associated with oil. Abu Ishaq Istakhri
(the ninth to tenth centuries) and Abul Hasan Ali Masudi (the tenth century)
gave interesting data on the oil-bearing Baku land and the “white” and “black” oil
of Apsheron (www.azerbaijan.az/Economy/OilStrategy/oilStrategy02r.html). The
Italian traveler Marco Polo (the thirteenth to fourteenth centuries) described the
export of Baku oil to the countries of the Middle East; the German diplomat and
traveler Adam Olearius (the seventeenth century) spoke about oil wells in
Baku and the Turkish traveler Evliya C¸elebi (the seventeenth century) reported
oil fields exporting oil to Iran, Central Asia, Turkey, and India as well as the
annual income received from the export of oil. An inscription on a stone found
in one of the oil wells in Balkhany (at a depth of 35m) indicates that this well
wasdrilledasearlyas1594bythedrilloperatorAllahyarMamednurOglu.According
to Amin Ahmed Razi (Iran, 1601), by the beginning of the sixteenth century, there
wereabout50suchoilpitsandwellsaroundBaku,whereboth“black”and“white”
oil was extracted. The German traveler, doctor, and naturalist Engelbert Kaempfer,
a secretary of the Swedish Embassy in Apsheron Peninsula in 1683, after visiting
the oil fields of Balkhany, Binagadi and Suraxani, described oil export from
the Apsheron Peninsula to Iran, Central Asia, and Northern Caucasus. In 1803
(according to other sources, in 1798), a citizen of Baku, Kasumbek Mansurbekov,
drilled two oil wells in the sea near Bibi Eibat, 18 and 30m from the coast. Until
the beginning of the twentieth century, oil produced in the area of Baku was trans-
portedby camels(Fig. 1.1).
Ahundredandfiftyyearsago,theresidentsofTexasdiscoveredoilsourcesacci-
dentallywhiletillingthesoilintheirvegetablegardenswithspades,orbyguess-work,
seeingoilpatchesonthelandsurface,whereundertheinfluenceoferosion,tectonic
and other natural processes, oil seeped from the earth’s interior. Oil seepages on
the sea floor near the coasts of California were known as oil lakes and as oil rivers
in Trinidad Island, and the tar sands of the Athabasca River in Alberta Province
(Canada). From the middle of the nineteenth century, oil production became an
independentand developingsector ofindustry.
Table1.1 Evolutionoforganizationofdeliveriestotheglobaloilmarket
Periods Before1947 1947–1973 1973–1986 1986–tothepresentday
Pricingprinciple Cartel Cartel Cartel Competitive
Whoestablishestheprice IPC IPC OPEC Exchange
Numberofparticipantsof 7 7 13 Numerous
pricing
Characterofpredominant Horizontal Horizontal Vertical Verticalþhorizontal
competition
Demandbehavior Stablegrowth Stablegrowth Growth/decrease Slowgrowth
Costbehavior(keyfactor Decrease(natural) Decrease(natural) Growth(natural)/decrease(STP) Decrease(STP)
ofdynamics)
Markerbrands WesternTexas WesternTexas, LightArabian,WesternTexas WesternTexas,Brent,Dubai
LightArabian
Pricefluctuationsand Withoutspecific Withoutspecific Growthfrom2to40(by1981), Fluctuationwithin15–20(before
levels(dollar/barrel,in changes,about2 changes,about2 decreaseto30(by1985),dropto 1997),decreaseto10(before1999),
currentprices) 10(1986) growthto160(2008)anddecrease
SystemofcalculatingCIF FOBGulfof FOBGulfof FOBPersianGulfþfreight Exchangequotations
pricesatdeliverypoint Mexicoþfreight Mexicoþ2
freights
Dominanttypesofforeign Regular Regular Regular(Volume)þsingle Single(Volume)þregular
tradetransactions (VolumeþPrices) (VolumeþPrices) (Prices) (Volume)þexchange(Prices)
Dominantprices Transfer, Transfer, Market,reference,transfer Market,transfer
reference,market reference,market
Note:IPC,InternationalPetroleumCartel;OPEC,OrganizationofPetroleum-ExportingCountries;STP,scientificandtechnologicalprogress;FOB,“freeonboard,”petroleumpricepriorto
loadingandtransportation;CIF,“cost,insurance,freight”—pricetakingintoaccounttransportation.
4 EnergyPotentialoftheRussianArcticSeas:ChoiceofDevelopmentStrategy
A
B
Figure1.1 (A)Baku,Balkhany,about1900.Oiltransportationoncamels.(B)Baku,about
1900.Oiltransportationoncamels.
1.2 Oil Exploration and Production Until 1947
Theinitialperiodofoilindustrydevelopmentwascharacterizedbytheexistenceof
separateindependentoilproductionregionsandcompanies,which,providedtheyhad
sufficientcapital,monopolizedproductionintheseregions.Fromtheverybeginning
of oil production, the concentrated occurrence of the known oil fields on the globe
favored the formation of monopolies and cartels. The first production regions were
Pennsylvania (the USA) andBaku inAzerbaijan (Russia).
AfterthediscoveryofoilpoolsinPennsylvaniain1859,morethan2000wellswere
drilledtherein1860,theirdepthreaching150m.Intheinitialyears,theproduction
was chaotic, but later it was reorganized. In Russia, the development was initially
Prospecting,Exploration,andDevelopmentofOil-and-GasFieldsintheTwentiethCentury 5
slowerthanintheUSA.TheBakuoilgavealoweryieldofkerosene,whichwasat
thetimethemainrefinedproductandtherewerefewerentrepreneurialcapitalistsin
Russia than in America. In addition, the traditionally short-sighted Russian bureau-
cracyinterfered.WhenrapiddevelopmentofthepetroleumbusinessinRussiastarted,
thegovernmentin1872imposedahighdutyonkeroseneproduction,andthe“excise
formalitiesstronglysuppressedthenascentindustry,whichhadjuststarteditsdevel-
opment”(thenineteenthcentury).Asaresult,ofthe100refineriesoperatinginBaku,
only20survivedby1875,andthentheirnumberdecreasedto14,when,finally,the
governmentrealizeditsmistake,amendedthelegislation,andanexplosivegrowthof
theoilindustrystartedinRussia.In1876,alittlemorethan100,000tonsofoilwas
produced,whereasby1893theproductionexceeded5milliontons,andtheRussian
kerosene competed successfully with the American one in the European markets.
In 1905, the share of Russia in global oil production reached 27%; however,
global oil production in the early twentieth century developed with such gigantic
strides that by the pre-war year of 1913, the share of Russia dropped to 16.5%
(Vernadsky, 1969).
IntheUSA,attheendofthenineteenthcentury,thedevelopmentofnewoilfields
startedinCaliforniaandTexas.StandardOil,thecompanyfoundedbyRockefeller,
initially dominated the oil industry in America and carried out an active expansion
outside the USA. However, the appearance of competitors in this sphere prevented
Standard Oil from attaining a global monopoly. At that time in Baku, the company
of the Nobel Brothers was actively developing; they were exporting oil to Europe
across the Black Sea and were competing with Standard Oil. In 1891, Standard Oil
produced 25% and refined 85% of oil in the USA (Yergin, 1993). At that stage,
the maintaskofthe oilcompanies wasfinding newoffset markets.Oilexportfrom
theUSAtoEuropeandAsiadeveloped.However,attheendofthenineteenthcentury,
thedemandforoilstartedgrowingduetoamoreextensiveuseofgasolineandfuel
oilfortransportvehiclesandasaconsequenceofthetransferoftheindustryinAmer-
icaandEuropetooilinsteadofhardcoal.Correspondingly,theeffortsofoilcompa-
niesswitchedfromthesearchfornewoffsetmarketstotheprospectingofnewfields
whichcouldsatisfythegrowingdemand.Atfirst,thenewoilfieldswerediscoveredin
California. However, due to the lack of vehicles for oil delivery, it was mainly
delivered not to the east of the USA, but to Asia, for export. By the beginning
of the twentieth century, three companies, Standard Oil, Royal Dutch founded in
Sumatra,andShell,whichwastransportingfromBatumtoAsiaviatheSuezCanal,
dominatedtheglobalmarket.Atthatstage,StandardOilmadeanattempttotakeover
itscompetitors,towhichtheRoyalDutchandShellrespondedwithamergerafterthe
negotiations thathad continued for several years.
The price of oil at that stage was determined following the principle “from the
producer—to the consumer” and was made up of the expenses of oil companies on
oil production and the costs of transportation from the ports in the Gulf of Mexico.
IncaseofdeliveringoilfromthePersianGulftoEurope,startingin1935,theprofit
of the companies, correspondingly, increased due to a shorter delivery route, as the
prices were established on the basis of a virtual delivery from the Gulf of Mexico
tothe Persian Gulf plus further transportation to the consumer.
6 EnergyPotentialoftheRussianArcticSeas:ChoiceofDevelopmentStrategy
In1906,thegovernmentofAmericastarteditsfightagainstthethenpowerfulmo-
nopolyStandardOil.Fiveyearslater,StandardOillostthecase,andbyresolutionof
theUSSupremeCourtitwassplitinto34companies,fromwhichsubsequentlytheso-
calledsevensistersformed,whichtogetherwiththeFrenchcompany,formedaglobal
cartelonpricingintheoilmarket,whichdeterminedconsumerpricesalmostuntilthe
mid-twentiethcentury.TheAchnacarryAgreementof1928providedfortheassign-
menttoeachcompanyofacertainquotaofsalestoacertainmarketoutsidetheUSA.
Thecentral elementofthiscartel agreementwasthemechanismofincreasing prof-
itabilityofthepetroleumoperationsoftheIPC(InternationalPetroleumCartel)com-
paniesattheexpenseofestablishingasingleformulaforformingthesellingpriceof
oilwithbuyersoutsidetheUSAasdeterminedbythepriceofoiloftheMexicancoast
oftheUSAplusthecurrentfreightratesfromthiscoasttotheportofcargodelivery
irrespectiveofwherethephysicaldeliveriesofoilactuallycamefrom.However,in
accordancewiththeAgreement,thephysicaldeliveriesofoiltoacertainmarketout-
sidetheUSAshouldbecarriedoutbyeachcompanyfromtheoilproductionareaclos-
est to the market within the limitsof the quota allocated toit.
Until 1947, the companiesparticipating in the cartel blocked the price of oil and
increasedtheprofitattheexpenseofarapidlygrowingdemand,andcostreduction,
whichbecamepossibleafterthediscoveryoflargeoilfieldsintheMiddleEastinthe
1930s. Throughout the first half of the twentieth century, oil prices kept within 1–2
dollars per barrel with a slight tendency toward reduction, which corresponded
to the actual price within 11–20 dollars in the prices of 2008 with a peak in
1919–1920(Fig. 1.2).
Oilwonavictoryovercoal,andby1937halfoftheworldfleetwasalreadyrunning
ondieselfuel.Oilconsumerswerealsomultiplyingonland.Thus,thescientificand
technologicalprogresspromotedintensecommercialoilproduction.Itstartedwiththe
development of oil fields on land; however, with time, scientists and industrialists
turnedtheir attentionto the ocean.
As far back as 1824, the residents of the Caspian Sea coast near Baku dug wells
isolatedfromwaterandscoopedoilfromtheshallowhorizons.From1870,inJapan,
washover ofthe artificialislands started,and oil derrickswere set up inthem.
In1894,inCalifornia,thefirstoffshorewellforoilproductionwasdrilledfroma
woodenpier.Inthe1890s,drillingofdirectionalwellsatadistanceof200mfromthe
Figure1.2 Pricesforoilfrom1861to2008,indollarsof2008.