TNK-BP Accelerates Development of Uvat Project
Production Growth in Uvat Outruns Forecasts
TNK-BP continues capital investments into construction of facilities and development of fields of the Uvat project, which was started in February 2009. To ensure the planned production growth, the company has upgraded its custody transfer unit in the Kalchinskoe field, tripling its capacity, and is now launching a second line of the central gathering facility in the Ust-Tegusskoe field and a new oil pumping station in Kalcha.
The volume of daily production in two fields of eastern Uvat reached 6,800 tons in late September and will amount to 8,000 tons a month later. As a result, oil production in the Tyumen Region has exceeded 2 million tons in early October. According to optimistic forecasts, the oil production of TNK-BP in the currently active fields of Uvat may grow up to 3 million tons by the end of 2009, which is 0.5 million tons more than expected.
In early February 2009, TNK-BP put into operation the 264-km long Ust-Teguss-Kalcha oil pipeline to supply oil from the Ust-Tegusskoe and Urnenskoe fields in the eastern Uvat District of the Tyumen Region into the trunk oil pipeline of Transneft (see "New Oil Province in Southern Tyumen" in Neft i Kapital, No.3, 2009). This oil pipeline has become an infrastructural axis of the Uvat project, which will connect all other fields of the project.
In Tyumen Swamps
TNK-BP gathered its assets in southern Tyumen Region during at least 10 years regaining control over its subsidiaries, buying promising areas in tenders for their geological exploration, and merging small subsoil users (see "Long Way to Uvat").
In fact, project formation process has not ended yet. On the one hand, TNK-BP is returning licenses to unattractive subsoil plots to the unallocated subsoil reserve fund according to the results of exploration works. In 2008-2009, for example, the company declined the Irtyshky, Chiprsky, Ligiyarsky, and Ururny subsoil plots. On the other hand, neighbors in the Uvat District and the adjacent areas of the Khanty-Mansi Autonomous District and Omsk Region will certainly wish to connect to the constructed pipeline as TNK-BP is not the only company prospecting and exploring subsoil plots in this region. Such cooperation will increase the efficiency of the oil pipeline even though external assets will hardly be integrated into the project. Apart from that, issuance of licenses for subsoil plots in the region is going on. For instance, the Vostochno-Katyssky and Yuzhno-Katyssky subsoil plots adjoining the Katyssky area of TNK-Uvat will be put to tenders till the end of this year.
Currently, TNK-BP and its subsidiaries in the Uvat District -- Tyumenneftegaz and TNK-Uvat hold licenses for 13 areas. According to the information provided by the company, the recoverable oil reserves of category C1+C2 in the 21 fields discovered in these areas are estimated at 200-220 million tons. Approximately one half of these reserves (100 million tons) are concentrated in two fields of eastern Uvat -- the Ust-Tegusskoe and Urnenskoe fields. This is why the launch of these eastern fields was acknowledged as the official start of the project despite the fact that oil production in the Uvat District began in 1993 in the Kalchinskoe field and amounted to 1.5 million tons a year in 2005.
Oil production growth prospects of TNK-BP in Uvat today are closely associated with drilling activities in the Ust-Tegusskoe and Urnenskoe fields. Drilling of well clusters is used for development of these fields. This drilling method is currently considered the most efficient way of field development in difficult geological and geographic conditions. The wells drilled by TNK-BP in these fields are mainly horizontal and more than 3,000 m deep. According to the project feasibility study, up to 48 wells may be drilled from one well cluster pad provided that the overall production rate of these wells does not exceed 4,000 tons a day. As of September 2009, 4 well pads were constructed in these two fields and 101 wells were drilled in these pads, of which, according to Andrei Rublev, head of TNK-Uvat, 72 wells were active. According to the plans, 9 well pads will be constructed in the Ust-Tegusskoe field for drilling a total of 414 wells and 7 well pads will be constructed in the Urnenskoe field for drilling a total of 370 wells.
In February 2009, commercial production in these two fields began at the level of 4,000 tons a day. In September, production was increased by more than 1.5 times up to 6,800 tons a day. With this rate of production growth, TNK-Uvat reported in August about production of the first million tons of hydrocarbons in these new fields.
The growth of production in the Verkhnechonskoe field, which, together with the Uvat fields, is one of the top priorities of TNK-BP, is far slower. First commercial oil from the Verkhnechonskoe field was supplied to the East Siberia-Pacific Ocean trunk pipeline in the fall of 2008 (see "Commercial Scale" in Neft i Kapital, No.11, 2008), but the overall production in this field is still under the first million tons. The recoverable reserves of the Verkhnechonskoe field are twice the joint reserves of the Ust-Tegusskoe and Urnenskoe fields, and the peak production of oil in the Verkhnechonskoe field will be higher than in the Uvat fields. Still, the Uvat project will make a greater contribution to maintaining the production level of the company than the Verkhnechonsk project.
This is the result of the company's comprehensive approach to infrastructure construction and development of fields in the Tyumen Region. Drilling of production wells started in them even before the construction of an oil pipeline. When the oil pipeline was ready, these fields had a solid well fund sufficient for quick buildup of production. According to the plans, production in these fields will grow up to 8,000 tons a day in October-November.
Over 13 billion rubles will be invested into development of the Ust-Tegusskoe and Urnenskoe fields by the end of 2009, of which nearly 10 billion rubles is already invested.
In February 2009, along with the oil pipeline, the first line of the central gathering facility with a capacity of 2 million tons a year was commissioned and put into operation in the Ust-Tegusskoe field. Oil from the Urnenskoe field too is transported to this central gathering facility. Since 1994, oil from the Kalchinskoe field of Tyumenneftegaz, where the oil pipeline ended, is being supplied to the custody transfer unit with a throughput capacity of 1.5 million tons a year and then to the oil pipeline connecting the Kalchinskoe field to the trunk oil pipeline of Transneft. The company is delivering materials and equipment in the (far east) of the Uvat District through the Demyanka river, in which navigation is limited to 2-3 months, or a winder road.
With the production in the Kalchinskoe field declining for the third consecutive year (from the 1.2 million tons produced in 2008 to 0.924 million tons planned for 2009), the gathering facilities of the Kalchinskoe field sufficed and were used for a certain time for gathering new oil from the Uvat fields. However, the growing production in the Ust-Tegusskoe and Urnenskoe fields demanded increased capacities of gathering facilities in Kalcha, which was chosen by the company as the infrastructural center of the Uvat project. For this reason, in 2009 TNK-BP completed implementation of the measures previously developed for building up the project infrastructure. The total cost of these measures will amount to 6 billion rubles by the end of 2009.
In late September, the company completed reconstruction of the oil custody transfer unit in the Kalchinskoe field, which was started back in 2005, and raised its throughput capacity up to 4.5 million tons a year. In 2010, the upgrade of this custody transfer unit will be continued to increase its throughput capacity up to 11 million tons a year -- the peak production rate of the Uvat project. Apart from that, a new oil pumping station in the Kalchinskoe field rated from the very beginning to 11 million tons a year is being prepared now for commissioning and industrial operation. The cost of construction of this oil pumping station exceeded 1 billion rubles. A new oil pipeline from the Kalchinskoe field to the Demyanskaya linear operating dispatcher station, which is under construction since 2005, will be ready for commissioning together with the oil pumping station. For this reason, TNK-BP increased the throughput capacity of the oil custody transfer unit at the Demyanskaya linear operating dispatcher station.
In parallel, the company kept building oil gathering pipelines, roads, and power transmission lines in the active fields of the Uvat project and erecting two gas-turbine stations with capacities of 9 MW and 6 MW, which will be commissioned and put into operation in 2010. These gas-turbine stations will use associated petroleum gas, whose content in local oil is rather low. Finally, a second line of the central gathering facility is under commissioning in the Ust-Tegusskoe field and works are underway for its further extension and buildup of its throughput capacity to 6 million tons a year.
Construction of a permanent automobile road to the eastern fields was planned last year, but this project has been postponed because of the financial crisis and uncertainty of its route. According to one version, an automobile road 50 km long may be laid to the Tailakovskoe field of Slavneft in the Khanty-Mansi Autonomous District. According to another version, the road will be built from the east, from the Ust-Tegusskoe field, to the west, along the oil pipeline, together with implementation of the Uvat project.
More Oil to Come
According to estimates, in the peak years of 2015-2016 the Uvat project will yield approximately 11 million tons of oil a year, a half of which, some 5-6 million tons, will be produced in the already active Urnenskoe and IUst-Tegusskoe fields. The other half will be produced in other, smaller fields in the central and northern regions of the project. A plan for connection of these fields to the oil pipeline at the first stage is already worked out.
The Tyamkinskoe field in the Pikhtovy area discovered in 2004 will be put into industrial operation in 2010. The new oil pipeline traverses this field, and construction of additional field pipelines will not be required. In 2008, TNK-BP planned to make a maximum progress in construction of infrastructure in the Tyamkinskoe field together with construction of infrastructure facilities in the Urnenskoe and Ust-Tegusskoe fields in order to start supplying oil from the Tyamkinskoe field to the oil pipeline in shortest possible time, but these plans were changed and works were slowed down due to the crisis. These works were resumed last August. Now, development wells are being drilled and field pipelines are being laid in the Tyamkinskoe field. In August 2009, TNK-BP held a tender for construction of a winter road starting from the 161st kilometer of the Turtas-Urnenskoe winter road.
According to plans, the Kosukhinskoe field, whose reserves of category C1+C2 are estimated at 18.7 million tons, will be connected to the oil pipeline after the Tyamkinskoe field. The Protozanovskoe field discovered in the Yuzhno-Pikhtovoe area will be connected to the oil pipeline next, in 2011.
Representatives of TNK-Uvat emphasize that the company continues prospecting and exploration works in the already discovered fields and promising areas and expects new discoveries and reserve increments. For example, potential reserves of southern areas are estimated by the company at 60 million tons. For this reason, the peak production parameters and sequence of connection of fields to the oil pipeline may be adjusted many time in future.
Apart from that, the company is considering several versions for merging its assets in the neighboring regions, first of all in the Omsk Region and the Khanty-Mansi Autonomous District, to the Uvat project. TNK-BP owns 4 license areas in the Omsk Region with total in-place reserves estimated at 55 million tons of oil. The Taitymskoe field with in-place recoverable reserves of category C1 estimated at 4.5 million tons was discovered in the Taitymsky area, approximately 80-90 km south of the Urnenskoe field. The company conducted 2D seismic surveys in the Taitymskoe field and explored the heads of abandoned wells in 2008-2009 and expects to increment the reserves of the Taitymskoe field by 23 million tons (transfer them from category C2) by 2010.
In the Khanty-Mansi Autonomous District, the next candidate of the company for integration into the Uvat project is the Polunyakhskoe field lying approximately 80 km northeast of the Tyamkinskoe field. The Tailakovskoe field of Slavneft (of which 50% is owned by TNK-BP), which is in about 40 km from the Ust-Tegusskoe field, may also be incorporated into the Uvat project. In the vicinity of the Tailakovskoe field, Yugansk-Nafta and TNK-BP Technologies, subsidiaries of TNK-BP, are exploring 13 areas adjoining the Ust-Tegusskoe field from the north.
Finally, tenders will be held in November-December in Yugra specially for TNK-BP for development of the Ai-Yaunskoe, Gustorechenskoe, and Travyanoe fields with total recoverable reserves estimated at approximately 57 million tons, which may quickly be connected to the Uvat project. Purchase of these assets may considerably change the economic aspect of the project.
Representatives of TNK-BP refrain from specifying the payback period of the Uvat project, but it is already known that the cost of this project will amount to $2.5 billion by the end of 2009. Apparently expecting that increments of reserves will shorten the project payback period, the company forecasts made in 2006-2007 estimated the payback period at 7-9 years (provided that oil prices do not drop below $40 per barrel). Since that time, oil prices made abrupt jumps but their average was always higher than that, whereas the reserves keep growing owing to discovery and exploration of new fields. In 2008, the total increment of reserves of categories C1+C2 in the Tyumen Region amounted to 63 million tons, most of which was provided by TNK-BP.
Long Way to Uvat
Oil reserves in the Uvat District of the Tyument Region were found and the Ust-Tegusskoe and Urnenskoe fields were discovered 35-40 year ago. However, development of these reserves was economically inexpedient due to the complete lack of infrastructure in the region and the complex geological structure and considerable depth of deposits.
In the 1990s, two leaders of the oil industry came to the Uvat District. One of them was Yukos, which worked in 9 northwestern areas traversed by a trunk oil pipeline. The other was TNK (at that time without BP), which was in good relations with the regional administration and whose subsidiary Tyumenneftegaz started development of the Kalchinskoe field with over 20 million tons of recoverable reserves back in 1992 and pilot development of the Severo-Demyanskoe field in 2000.
Yukos did not find large fields in Uvat, scaled down its works in 1998, and eventually lost its licenses in the Tyumen Region in the early 2000s. On the contrary, TNK reinforced its positions in the region through a number of merges and prepared documents for signing a production sharing agreement for the Uvat project, which became irrelevant after introduction of amendments into the Tax Code of Russia in 2003 and was eventually discarded by the company.
Afterwards, for 4 consecutive years TNK-BP participated in tenders to put the Uvat project together again. Local authorities, interested in progress of the oil industry in the region, used to help the company and put the areas interesting to TNK-BP to tenders. In parallel, the company kept exploring the purchased areas (and spent over $500 million in 2004-2006 to their further exploration) and constructing infrastructure facilities in the first fields.
Representatives of TNK-BP emphasize the role of three-dimensional seismic surveys in the development of the project. "Uvat is a formation with a complex structure and channels in rocks. Three-dimensional seismic surveys combined with contemporary technologies for interpretation and processing of their results made it possible to see these channels. So we knew where to drill," said Timothy Summers, Vice President, Technology, TNK-BP. The accuracy of prediction of oil-saturated reservoirs according to the studies of wells drilled in Uvat was approximately 70%. The cost of exploration per ton of oil equal to $3.7 was relatively low, according to experts, owing to the use of three-dimensional seismic surveys.
By 2007-2008, TNK-BP discovered several new fields in the Uvat District -- the Kosukhinskoe, Protozanovskoe, Secero-Kachkarskoe, Nemchinovskoe, Sredne-Keumskoe, A.Malyk, Yuzhno-Venikhyartskoe, Zapadno-Epasskoe, and other fields and started pilot development of eastern fields and construction of an east-west oil pipeline.
The investments of TNK-BP into the project reached their peak of $1 billion in 2008. The same amount was invested into the project by the company from 2004 through 2007.
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