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Alexander Shpilman: The scope of exploration in KhMAD will probably remain the same for the nearest 2-3 years

January 19, 2017/ 09:14

Khanty-Masniisk. In 2017 the Russian oil producing industry should decrease the oil production by 300 thousand tons a day according to the agreement between OPEC and Russia. Alexander Shpilman, the director of V.I. Shplman Research Center for Sustainable Mining, comments on the effect of this decision on the biggest oil producing region in the country to the Oil and Gas Information Agency:

- In 2016 two oilfields were discovered and six put on stream in KhMAD. What is your forecast for 2017 in terms of production, drilling and putting new fields into operation?

- While forecasting the production for 2017 it is necessary to consider not only the natural production decline caused by the mature fields depletion, but also the political factor of OPEC-Russia agreement. With the planned production cut by 300 thousand tons a day for Russia, which corresponds to 41.2  thousand tons a day for the region, the production cut should amount to about 20 thousand tons a day or to 7.3 million tons a year. So, to comply with the OPEC-Russia agreement the production in KhMAD needs to be reduced to 232 million tons a year.   Meanwhile, the fields will be still put on steam as planned, the reduction will be achieved due to the low-production water-cut well stock, whose operational expenses are compatible with the profit from the oil produced there.

- Will it be possible to maintain the amount of investment into the exploration, or is the reduction of exploration financing planned in response to the long period of low oil prices?

- The scope of exploration in KhMAD has been more or less the same for many years now. Exploratory drilling reaches 250-300 thousand meters a year. Since the companies need new reserves, an approximately similar level will be maintained in the future for the nearest 2-3 years. The scope of seismic 3D surveys by CDP method is declining because most of the territory has already been studied using it.      

-  What conclusions can we make based on 2016 experience?  

- 2016 undoubtedly was the year when the oil and gas industry overcame the crisis caused by the global oil prices reduction. Even the drop to $30/bbl didn’t lead to any feasible changes in the industry. The oil market remained oversupplied. The companies didn’t reduce their investments, except for those into the most expensive projects (offshore, deep water, etc.). That once again proved the point that the oil industry in Russia and in the world functions steadily even with the oil price of $40-50/bbl.    

In Russia oil production grew in 2016, in Khanty-Mansiisk Autonomous District it declined only slightly, to 239 million tons. 

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