RUSSIA
CAPITAL: MOSCOW
MONETARY UNIT: RUBLE
REFINING CAPACITY: 5,435,480 B/CD
OIL PRODUCTION: 6.35 MILLION B/D
OIL RESERVES: 48.6 BILLION BBL
GAS RESERVES: 1,700 TCF
Russia's economy bounced back in 2000 after rough going only 2 years earlier. Russia's economy appeared to be in its best shape since the Soviet Union's collapse in the early 1990s.
With high oil and gas prices, oil production, formerly in steady decline, had almost stabilized. The country continued a wave of privatization efforts. In November 2000 the government ordered Gazprom to allow other companies to use as much as 15% of its pipeline capacity.
Russia was exporting 4 million b/d of oil and stood to benefit from an October 2000 pact in which the European Union agreed to help Russia develop its oil and gas reserves in return for a long-term supply commitment.
Radical changes to the Russian tax code, put into place by President Vladimir Putin at midyear 2000, were to affect expatriate workers within the Russian Federation.
The principle changes included a much lower, flat rate of tax for residents and a higher tax rate with a broadened liability for nonresidents. Nonresidents would be taxed on income attributable to Russian activities, regardless of whether payment is made from a source (i.e., a bank account) in Russia. Upstream developments
Russia in 2000 was trying to use joint ventures and production sharing contracts to diversify its oil and gas production.
About 90 fields produced 75% of Russia's oil, and 80% of its gas production originated from three fields, Urengoi, Yamburg, and Orenburg.
Russian officials told the 2000 World Petroleum Congress the country wanted to mount, with outside participation, a massive offshore exploration program. They said the extensive continental shelf areas had only 1 million line-km of 2D seismic data and 170 wells. That included 47 wells in the Barents Sea and 64 wells in the Sea of Okhotsk. A regional look at Russian offshore activity follows.
Russian Caspian Sea. Lukoil said a well in the northern Caspian sea discovered Khvalynskoye field on the Severny license. It said the field, the first found on Russia's Caspian shelf, could contain 2 million bbl of oil. It was building a jack up capable of drilling to 8,000 m in 800 m of water to appraise and develop the field.
Later in the year Lukoil, Yukos, and Gazprom signed charter documents in Moscow setting up Caspian Oil Co., a joint venture to explore for and develop oil and gas reserves in the Caspian region. Establishment of the JV was to allow joint investment from the founders to develop reserves.
The company was to seek licenses for exploration on promising structures in the shallow waters of the North Caspian.
Russian Far East. Sakhalin Energy Investment Co. Ltd., then led by Marathon Oil Co., became the first company to develop a Russian offshore field when it started oil production from the Astokh portion of Piltun-Astokhskoye field in the Sea of Okhotsk off Sakhalin Island in July 1999. Exports began in September 1999.
Marathon traded its 37.5% stake to a Shell affiliate in late 2000.
First efforts as part of the project took place nearly a decade earlier. The field is 10 miles off the island in 100 ft of water.
Part of the Sakhalin II project, Piltun-Astokhskoye oil and gas field and Lunskoye gas field had combined reserves of 1 billion bbl of oil and condensate and 14 tcf of gas.
Initially the field was to be produced only during the ice-free part of the year. Production was to reach 90,000 b/d by the start of the second producing season in 2000. Associated gas was to be reinjected into the reservoir until transport facilities were built.
Marathon said production could peak at 200,000 b/d of liquids and 2 bcfd of gas when both fields were fully developed.
During 2000 Exxon Mobil found a "significant" oil accumulation with a step-out to Chayvo gas field on one of its Sakhalin I blocks. The Chayvo-6 appraisal well penetrated an oil-bearing Miocene reservoir that flowed at a test rate of 6,000 b/d of oil. The well cut a 340-ft oil column on the west flank of the Chayvo structure. Chayvo-6 was drilled in 50 m of water to TD 10,089 ft.
An Exxon Mobil group was studying the eventual shipment of gas from Sakhalin Island to Japan via pipeline.
The company said the project could transport gas from Sakhalin I and other potential projects off northern Sakhalin Island to Japan. It said that it had identified a gas resource of 10 tcf on the Chayvo block, which had potential for further oil and deep gas reserves, and that other resource additions were possible on the Arkutun-Dagi and Odoptu blocks.
Gas from Sakhalin I and II fields could also fuel a proposed electricity-generating station. Unified Energy System, Russia's electric utility, at midyear proposed a $9.6 billion project to supply electricity to Japan.
A 4,000 Mw steam-gas electric station to be built on Sakhalin would supply 25.5 billion kw-hr/year of electricity to Japan by 2012. One fourth of that amount would be delivered to the grid on the northern Japanese island of Hokkaido and the rest to the Honshu grid, UES said.
The project also involved construction of 1,400 km of transmission lines. The electricity was to cost 2¢/kw-hr to generate and 3¢/kw-hr to transmit and would sell for 6-8¢/kw-hr in Japan.
Representatives from Magadan Province of far eastern Russia were assessing interest late in 2000 in a lease sale 50 miles offshore in the Sea of Okhotsk in mid to late 2001.
Western Siberia. Four large western Siberian fields contributed more than half of Russia's oil production in 2000.
Most joint ventures with western oil companies were in western Siberia, in the Tyumen region, but overall output in the area was in decline.
Russia's most productive oil fields in western Siberia were Samotlor, Mamontov, Fedorov, Lyantor, Krasnolenin, Vatyegan, and Sutormin.
Marathon traded its 37.5% stake to a Shell affiliate in late 2000.
First efforts as part of the project took place nearly a decade earlier. The field is 10 miles off the island in 100 ft of water.
Part of the Sakhalin II project, Piltun-Astokhskoye oil and gas field and Lunskoye gas field had combined reserves of 1 billion bbl of oil and condensate and 14 tcf of gas.
Initially the field was to be produced only during the ice-free part of the year. Production was to reach 90,000 b/d by the start of the second producing season in 2000. Associated gas was to be reinjected into the reservoir until transport facilities were built.
Marathon said production could peak at 200,000 b/d of liquids and 2 bcfd of gas when both fields were fully developed.
During 2000 Exxon Mobil found a "significant" oil accumulation with a step-out to Chayvo gas field on one of its Sakhalin I blocks. The Chayvo-6 appraisal well penetrated an oil-bearing Miocene reservoir that flowed at a test rate of 6,000 b/d of oil. The well cut a 340-ft oil column on the west flank of the Chayvo structure. Chayvo-6 was drilled in 50 m of water to TD 10,089 ft.
An Exxon Mobil group was studying the eventual shipment of gas from Sakhalin Island to Japan via pipeline.
The company said the project could transport gas from Sakhalin I and other potential projects off northern Sakhalin Island to Japan. It said that it had identified a gas resource of 10 tcf on the Chayvo block, which had potential for further oil and deep gas reserves, and that other resource additions were possible on the Arkutun-Dagi and Odoptu blocks.
Gas from Sakhalin I and II fields could also fuel a proposed electricity-generating station. Unified Energy System, Russia's electric utility, at midyear proposed a $9.6 billion project to supply electricity to Japan.
A 4,000 Mw steam-gas electric station to be built on Sakhalin would supply 25.5 billion kw-hr/year of electricity to Japan by 2012. One fourth of that amount would be delivered to the grid on the northern Japanese island of Hokkaido and the rest to the Honshu grid, UES said.
The project also involved construction of 1,400 km of transmission lines. The electricity was to cost 2¢/kw-hr to generate and 3¢/kw-hr to transmit and would sell for 6-8¢/kw-hr in Japan.
Representatives from Magadan Province of far eastern Russia were assessing interest late in 2000 in a lease sale 50 miles offshore in the Sea of Okhotsk in mid to late 2001.
Western Siberia. Four large western Siberian fields contributed more than half of Russia's oil production in 2000.
Most joint ventures with western oil companies were in western Siberia, in the Tyumen region, but overall output in the area was in decline.
Russia's most productive oil fields in western Siberia were Samotlor, Mamontov, Fedorov, Lyantor, Krasnolenin, Vatyegan, and Sutormin.
Putin in September 2000 welcomed the signing of agreements governing parts of a $672 million loan package for Russia's Tyumen Oil Co. Tyumen Oil was to use US equipment and services and US and Russian labor.
Halliburton Co. was to use $292 million of the 10-year loans to fund a 3-year project to stop the decline and maintain production of Tyumen's 320,000 b/d of crude interest in Siberia's giant Samotlor oil field. Halliburton would also use $93 million in other unsecured loans for the project.
Enterprise Oil PLC, London, boosted to 18.6% its holding in Khanty Mansiysk Oil Corp., registered in Delaware.
KMOC held production licenses on 10 fields near Khanty Mansiysk in the Tyumen region of western Siberia. Production exceeded 11,000 b/d in third quarter 2000, up from 6,500 b/d in 1999. Not all of the fields were on stream. A western engineering report attributed 420 million bbl of reserves to the fields.
The fields are East Kamennoye, Potanay-Kartopinskoye, Chernogorskoye, Paitykhskoye, Sredne-Nazymskoye, Galyanovskoye, Bolshoye, Olkhovskoye, Aprelskoye, and Tsentralnoye.
CanBaikal Resources Inc., Calgary, started production through a new 28-km pipeline in August 2000. The initial 450 b/d rate, from a well in Kulun pool, was to rise quickly to 650 b/d. Production from a second well, at Untegey North, was to start shortly after freeze-up, when the well was fractured.
Gazprom and another Shell affiliate were in early stages of a project to develop Zapolyarnoye field in Yamal-Nenets Autonomous Okrug 200 km northeast of Urengoi gas field. Shell said Zapolyarnoye's Neocomian aged reservoirs held 750 million tonnes equivalent of gas, oil, and condensate.
Volga-Urals. This region produces less than 25% of Russia's oil. Russia's most productive oil fields in the Volga-Urals in 2000 were Romashkino and Arlan fields, both in advanced stages of depletion.
Barents-Kara-Timan Pechora. Gazprom was to sign a production-sharing agreement involving development of oil reserves at Prirazlomnoye gas field on Russia's Barents Sea shelf. Rosshelf Co., project operator, in the fall received the first payment on a large loan from Germany's Wintershall AG to begin development.
Gazprom signed a $1 billion memorandum of understanding with Wintershall AG, a unit of BASF, to collaborate in developing the oil reserves. Gazprom, primarily a gas concern, was expanding its oil business. This pact would allow it to diversify its operations and lessen its dependence on gas.
Prirazlomnoye held an estimated 80 million tonnes of oil. Wintershall and Gazprom planned to create a 50-50 joint venture to develop the field, expected to produce first oil by 2003.
Russia also looked forward to development of supergiant Shtokmanovskoye gas field in the Barents Sea about 350 miles northwest of Prirazlomnoye.
Shtokmanovskoye lies 1,200 km east of the Snøhvit complex in the Barents off northern Norway.
Halliburton Co. was to use $292 million of the 10-year loans to fund a 3-year project to stop the decline and maintain production of Tyumen's 320,000 b/d of crude interest in Siberia's giant Samotlor oil field. Halliburton would also use $93 million in other unsecured loans for the project.
Enterprise Oil PLC, London, boosted to 18.6% its holding in Khanty Mansiysk Oil Corp., registered in Delaware.
KMOC held production licenses on 10 fields near Khanty Mansiysk in the Tyumen region of western Siberia. Production exceeded 11,000 b/d in third quarter 2000, up from 6,500 b/d in 1999. Not all of the fields were on stream. A western engineering report attributed 420 million bbl of reserves to the fields.
The fields are East Kamennoye, Potanay-Kartopinskoye, Chernogorskoye, Paitykhskoye, Sredne-Nazymskoye, Galyanovskoye, Bolshoye, Olkhovskoye, Aprelskoye, and Tsentralnoye.
CanBaikal Resources Inc., Calgary, started production through a new 28-km pipeline in August 2000. The initial 450 b/d rate, from a well in Kulun pool, was to rise quickly to 650 b/d. Production from a second well, at Untegey North, was to start shortly after freeze-up, when the well was fractured.
Gazprom and another Shell affiliate were in early stages of a project to develop Zapolyarnoye field in Yamal-Nenets Autonomous Okrug 200 km northeast of Urengoi gas field. Shell said Zapolyarnoye's Neocomian aged reservoirs held 750 million tonnes equivalent of gas, oil, and condensate.
Volga-Urals. This region produces less than 25% of Russia's oil. Russia's most productive oil fields in the Volga-Urals in 2000 were Romashkino and Arlan fields, both in advanced stages of depletion.
Barents-Kara-Timan Pechora. Gazprom was to sign a production-sharing agreement involving development of oil reserves at Prirazlomnoye gas field on Russia's Barents Sea shelf. Rosshelf Co., project operator, in the fall received the first payment on a large loan from Germany's Wintershall AG to begin development.
Gazprom signed a $1 billion memorandum of understanding with Wintershall AG, a unit of BASF, to collaborate in developing the oil reserves. Gazprom, primarily a gas concern, was expanding its oil business. This pact would allow it to diversify its operations and lessen its dependence on gas.
Prirazlomnoye held an estimated 80 million tonnes of oil. Wintershall and Gazprom planned to create a 50-50 joint venture to develop the field, expected to produce first oil by 2003.
Russia also looked forward to development of supergiant Shtokmanovskoye gas field in the Barents Sea about 350 miles northwest of Prirazlomnoye.
Shtokmanovskoye lies 1,200 km east of the Snøhvit complex in the Barents off northern Norway.
Russian geologists had said that 2 million sq km of Russia's arctic shelf were favorable for oil and gas. Assessed resources of the shelf were placed at not less than 700 billion bbl of oil equivalent.
Shtokmanovskoye, discovered in 1988, had difficult economics despite its size. Development would involve a $10-20 billion, three-platform project with first gas in 2008.
With reserves of 3.2 trillion cu m, the field is in 300 m of water and has a reservoir of Jurassic age some 4 km subsea.
Eastern Siberia. Federal lawmakers included BP Amoco PLC's biggest Russian gas project, Kovyktinskoye field in the Irkutsk region, on the list of sites covered by production sharing agreements, which offered tax breaks to investors. The Duma approved the law.
BP held about one fourth of Russia Petroleum, which owned the rights to develop most of Kovyktinskoye. The field, one of the world's largest with an estimated 1.4 tcm of reserves, was in for a production hike to serve China.
The company planned to build a pipeline to ship 20 bcm/year of gas to China and 10 bcm/year to South Korea during 30 years. Processing activity
Russia's refineries needed to be modernized.
Many of them were built piecemeal over decades and in 2000 had relatively new units alongside aging equipment. The greatest need was for conversion equipment to enable plants to make light products.
The other part of the loan involving Samotlor field to Tyumen Oil Co., totaling $217 million in loan guarantees, was for upgrading of the Ryazan refinery 120 miles southeast of Moscow. A further $70 million in financing for the Ryazan project was to come from other unsecured sources. Transportation
Russia was slowly moving to upgrade pipeline transport and export capabilities.
The Baltic Pipeline System involved construction of ports at Ust-Luga, Bukhta Batereinayaat, and Primorsk on the Russian Baltic coast. Primorsk was to take 10 years to build, but the other two ports were to be ready at end-2001. Russia was to ship western Siberian oil to the ports for trans-shipment to Baltic countries.
Russia and China signed a memorandum in mid-2000 under which construction would begin in 2003 on a 2.2 million b/d pipeline to ship western Siberian oil to eastern China.
The Blue Stream pipeline under construction at yearend 2000 across the Black Sea to Turkey was the centerpiece of Russian efforts to boost gas exports.
Gazprom and Kazakhstan's Kaztransgaz agreed to form a state-owned Russian-Kazakh natural gas joint venture. Gazprom was to replace Tractebel of Belgium as exporter of Kazakhstan's gas.
Kazakhstan was counting on the Russian gas giant for help in implementing a number of important projects, including delivery of gas to Europe and joint sales on the Chinese market. It also desired to enter into swaps under which Russia delivered gas to the Kustanai region in northern Kazakhstan and the Aktyubinsk region in western Kazakhstan in exchange for gas from Kazakhstan's Karachaganak field.
Shtokmanovskoye, discovered in 1988, had difficult economics despite its size. Development would involve a $10-20 billion, three-platform project with first gas in 2008.
With reserves of 3.2 trillion cu m, the field is in 300 m of water and has a reservoir of Jurassic age some 4 km subsea.
Eastern Siberia. Federal lawmakers included BP Amoco PLC's biggest Russian gas project, Kovyktinskoye field in the Irkutsk region, on the list of sites covered by production sharing agreements, which offered tax breaks to investors. The Duma approved the law.
BP held about one fourth of Russia Petroleum, which owned the rights to develop most of Kovyktinskoye. The field, one of the world's largest with an estimated 1.4 tcm of reserves, was in for a production hike to serve China.
The company planned to build a pipeline to ship 20 bcm/year of gas to China and 10 bcm/year to South Korea during 30 years. Processing activity
Russia's refineries needed to be modernized.
Many of them were built piecemeal over decades and in 2000 had relatively new units alongside aging equipment. The greatest need was for conversion equipment to enable plants to make light products.
The other part of the loan involving Samotlor field to Tyumen Oil Co., totaling $217 million in loan guarantees, was for upgrading of the Ryazan refinery 120 miles southeast of Moscow. A further $70 million in financing for the Ryazan project was to come from other unsecured sources. Transportation
Russia was slowly moving to upgrade pipeline transport and export capabilities.
The Baltic Pipeline System involved construction of ports at Ust-Luga, Bukhta Batereinayaat, and Primorsk on the Russian Baltic coast. Primorsk was to take 10 years to build, but the other two ports were to be ready at end-2001. Russia was to ship western Siberian oil to the ports for trans-shipment to Baltic countries.
Russia and China signed a memorandum in mid-2000 under which construction would begin in 2003 on a 2.2 million b/d pipeline to ship western Siberian oil to eastern China.
The Blue Stream pipeline under construction at yearend 2000 across the Black Sea to Turkey was the centerpiece of Russian efforts to boost gas exports.
Gazprom and Kazakhstan's Kaztransgaz agreed to form a state-owned Russian-Kazakh natural gas joint venture. Gazprom was to replace Tractebel of Belgium as exporter of Kazakhstan's gas.
Kazakhstan was counting on the Russian gas giant for help in implementing a number of important projects, including delivery of gas to Europe and joint sales on the Chinese market. It also desired to enter into swaps under which Russia delivered gas to the Kustanai region in northern Kazakhstan and the Aktyubinsk region in western Kazakhstan in exchange for gas from Kazakhstan's Karachaganak field.
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