RUSSIA - Exploration

Russian oil exploration began in the 19th century and concentrated on the southern Caspian region, mainly in Azerbaijan. Exploration was extended to western Kazakhstan at the turn of the 20th century and oil production in the Atyrau region began in 1911. In the early 1960s the emphasis shifted to western Siberia. Exploration of other parts of Russia began in the 1970s, when world oil and natural gas prices rose sharply. Most of Russia's natural gas discoveries were made in the 1970s and 1980s. Discoveries in the early 1990s were not significant.

Russian geologists under the ministry of natural resources made important oil and gas discoveries in 1997 and stopped eight years of decline in the geological sector. According to the ministry, exploration in 1997 resulted in 44 oil discoveries with reserves totalling 252m tons of oil and six gas finds with reserves totalling 394 BCM of gas. They were added to the country's reserves. The ministry said the geological sector implemented contracts worth Rbs16.93 bn (about $2.8 bn), up 9.6% from 1996 in constant prices. About 74% of the funding went to oil and gas exploration.

Russia's proven oil reserves stood at 48.6 bn barrels by end-1997, and the R/P ratio was 21.7 years. The country's proven reserves of natural gas were 48.14 TCM, 33.2% of the world's total, and the R/P ratio was 85.9 years. Of these, proven gas reserves held by Gazprom were 33.4 TCM.

Offshore exploration now features Russia's northern sector of the Caspian Sea, rich in oil and gas. This area was opened in late 1997 and the bidders were led by LUKoil and Yukos, the largest among Russia's integrated oil companies. On July 6, 1998, Presidents Yeltsin and Nazarbayev of Kazakhstan signed a landmark agreement dividing the seabed resources of the northern Caspian between the two countries. The Kazakh sector is said to contain up to 100 bn barrels of oil (see OMT).

Bidding for E&P blocks on the Russian side of the northern Caspian has been reserved for Russian companies. LUKoil says it has already spent $70m on exploring the Severny structure there, whose deposits are believed to be 600m tons of oil equivalent. LUKoil has a 100% working interest in Severny. LUKoil, Yukos and other Russian companies winning Caspian blocks are expected to invite Western partners for the field development phase, or even in the exploration phase.

LUKoil has been negotiating to involve its strategic partners Arco and Agip in the $2 bn development of the Yalama field in Russia's southern sector of the Caspian. This block extends to the Azeri sector. The Azeri state-owned NOC Socar holds 40% in the block, with 60% held by LUKoil. LUKoil may sell a 10% equity to each of Arco and Agip and retain 40%.

Four offshore blocks were offered in the Dagestan Republic's sector of the Caspian. A presentation on them was made on Dec. 12, 1997 at the Russian ministry of natural resources in Moscow. The bid deadline was April 10, 1998. The blocks cover 3,500 sq km in the uncontested 10-mile zone in the southern Caspian called the Terek Caspian Foredeep. There are deposits in the blocks' Miocene to Jurassic at depths of 1,000-1,500 metres to 5,000-6,000 metres. One block, Sulak, has deposits in the Miocene to Cretaceous at depths of 2,500- 6,000 metres.

In late 1997, the big offshore gas fields of Rusanoskoye and Leningradskaya in the Arctic Kara Sea were offered for companies to participate in detailed design studies. Their development, with 5 TCM of reserves located under moving and thick ice cover, is to cost $25 bn. The fields are proposed for subsea development, based on new technology, and could produce up to 1m b/d of syncrude over 60 years. The liquids should be produced by six syncrude plants to be built on an artificial island off the Yamal peninsula. The liquids would be exported to the western markets by tankers from a terminal at Novaya Zemlya and to the far east by submarine tankers. A subsea technology needed to drill the production wells, install the production systems and operate below moving ice without any support from surface vessels or platforms was identified in 1997 by a $4m technical and economic assessment (TEA) unit involving Werner Deep Engineering of the US and Maris International of the UK. The new technology includes fully automated "wet" drilling rigs and mud processing units located on the seabed, and "one atmosphere" subsea control and power centres. The venture could also produce LNG for export to the far east by submarine tankers.

Irkutsk republic covers 700,000 sq km bordering Lake Baikal in Siberia. It is said to have reserves of 59 bn barrels of oil equivalent, mostly gas, in 10 fields now on offer. They include the Koviktinskaya and Verkhnechonskaya giants. The big Angarsk refinery gives access to Siberian pipelines. The area is served by the Trans-Siberian and Baikal Amur railways. Prospectivity is centred on Cambrian and Vendian reservoirs on and around the Nepa-Botuobian basement uplift, which trends south-west across the region from the oil and gas-rich areas of south-west Yakutia. Away from the relatively well explored uplift, there has been limited exploration in the Angara-Lenskaya and Prisayno-Eniseiskaya areas. Discoveries were made. There are extensive plays, both structural and stratigraphic.