Oil Gas Technology RoundtablesUncategorized

Technology Roundtable: Arctic Exploration

Continuing the series of Technology Roundtable discussions, ROGTEC talks “Arctic Exploration” with the leading exploration service and technology providers. With the cost of oil rising, and the eagerness for Russia to push its O&G frontier deeper into the Arctic, what will it take to make Arctic development a reality?

Development of the Russian Arctic has long been talked about, but when do you think we will see some significant activity?

PGS: I think that this year can be seen as the start point for some serious exploration activity in the Russian Arctic sector. There is some major seismic exploration planned for Rosneft in the Kara and Pechora Seas and in the coming years, the volume of seismic exploration will only grow. Based on our estimations, there will be about $900 million worth of work in the northern seas through 2016.

Schlumberger: It is an interesting question, on one hand the Arctic opens up new horizons for the development of natural resources, on the other hand, it involves some enormous investments and risks. The Arctic is divided into five sectors of responsibility between the United States, Russia, Norway, Canada and Denmark. I think as soon as one of the parties is able to obtain a positive result in the Arctic, then the rest of the countries will immediately deploy an active exploration of mineral resources.

ION Geophysical Corporation: I believe that we are seeing the early stage of exploration beginning to take place. The resolution of the Disputed Zone between
Russia and Norway is a perfect example of how the Russian government is taking a leadership position in stimulating Arctic exploration activity. A second sign that development is underway has been the announcement of joint ventures between Russian exploration companies and large integrated energy companies. Production from the Arctic may still be a long way off, but we are now seeing the business foundation for successful exploration being established.

Geotech Holding: Development of the Russian Arctic Shelf, which had almost stopped entirely during the early Soviet period, restarted over the last decade with the commissioning of oil fields in Nenets Autonomous Region, gas fields in Yamalo-Nenets Autonomous Region and Yamal-LNG project.

Most activities on the continental shelf are primarily funded by the State, however in the littoral zones adjacent to the continental fields that were discovered during earlier exploration, subsoil license users finance the operations on their own.

However, the real activity in this area can only be expected after some key global geopolitical issues are resolved, such as the endorsement of a long-term Russian Arctic program, including the resumption of navigation through the Northern Sea Route.

Politics, financing, know how, technology and market demand are all key factors that will affect the speed of Arctic development. What are the major obstacles & challenges that you see ahead for the region?

PGS: The demand for hydrocarbons, certainly does influence how fast the Arctic shelf develops. Considering long-term tendencies, and when we’re talking Arctic it is always long-term planning, the market is the stimulating factor in accelerating the Arctic exploration.

The main barrier that remains is the monopoly of Gazprom and Rosneft for Arctic shelf exploration. In spite of the positive news in 2011 regarding the changes to the existing legislation, the Arctic shelf remains closed not only for other petroleum companies, but also for geophysical companies that would like to invest in Arctic exploration. I’ve written a lot about this issue in the past, but there is still no movement in this regard. The state oil and gas companies may face some serious challenges in the coming years they have to meet their obligations for the license agreements. The Russian shelf should be made attractive for serious investments and the exploration market should be open and competitive.

The absence of specialized arctic technologies also either impedes or makes exploration of a significant part of the arctic impossible, due mainly to offshore areas with difficult ice conditions.

Schlumberger: I believe that the basis for most of the problems is economic. Developing such a complex region as the Arctic, in terms of climatic conditions, carries a huge risk, it’s not just about the monetary expenditures, but also about new technological solutions, the environment, and the human factor. If the market feels the urgent need for resources, I’m sure all of these problems will be resolved.

ION Geophysical Corporation: As with any long term project, the stability of both government policy and commodity prices is critical to the overall success of the project. The Russian Arctic margin is no different from a commercial stand point. Where the Russian Arctic Margin differes, is that sucessful development of some of the more remote exporation opportunities is effected by the presense of both multiyear and transitional ice. The technologies required for year round exploration of these basins is still under development and it may still be many years before being ready for commercial application.

Geotech Holding: Primarily, the absence of a clear political strategy. While the level of Russia’s domestic technologies for arctic development may be considered as quite competitive, the development of Arctic offshore fields is impossible without the consolidated efforts and know-how from the global petroleum community. At least in the early stages.

Financing such large-scaled and costly projects, especially considering the strictest environmental requirements that are typical for the region, is also impossible without attracting foreign investment.

With such harsh conditions for both crews and equipment, does Russia currently possess the technical equipment and experience that is required for successful exploration?

PGS: Russia has accumulated some great knowledge and experience of arctic operations. Remember the ice research and the history of the icebreaker fleet development in Russia. Indeed, these ice breakers will actually be an integral part of many seismic exploration projects in the Arctic. The Russian geophysical companies have been working in northern conditions for a long time now. However, the actual experience of operating in real Arctic conditions is still relitively small.

Schlumberger: Certainly, the Russian specialists have unique experience in the northern regions. In comparison, most studies in Canada are done by remote methods, it is very common to use airborne magnetic prospecting. Today the Russian specialists are transitioning to the detailed studies of known structures, and all work is carried out by ground methods. One can only admire the courage and professionalism of Russian geologists and geophysicists.

As for the equipment, the situation is not that easy: the foreign tools are not often designed for the conditions in which they have to operate, but this problem can be resolved, as the manufacturers are generally interested in improving the performance of their equipment, so they do try to meet the requirements of the Russian consumers and upgrade their equipment to the required level. As for the domestic equipment, designed for the needs of old Russian technologies, unfortunately, it has almost completely outlived its usefulness.

ION Geophysical Corporation: Successful Arctic exploration is broken into two categories. First is the hardware and the second the pool of experienced people to draw from. You cannot succeed in the Arctic without an equal measure of both. Russia is uniquely qualified to provide both the Arctic maritime equipment and Arctic experienced mariners required to make any Arctic project a success. I believe that over time we will see an increased collaboration between Russian companies and Western oilfield service companies that will not only impact the success of Arctic exploration in Russian waters, but in the global Arctic region as well.

Geotech Holding: For the continental Arctic I would say almost certainly. As for the offshore arctic, I do not think that any country can claim to possess the entire “tool set” and Russia is no exception. Our competitive advantage however lies in the availability of qualified personnel that are not only adapted to working in these extreme conditions, but are also capable of living in these harsh extremes. Indeed, the number of these personnel exceeds the population of some north European countries.

What Arctic experience does your company have?

PGS: It could be said that PGS has the most significant arctic experience, having worked in Arctic conditions since 1993. Over the last 3 years, we’ve completed 27 projects in the Arctic, both 2D and 3D. Last year, we completed the northern most 3D seismic project to have ever been undertaken.

Schlumberger: Very recently, we have completed some studies on oil and gas bearing capacity in Chuckchi Sea. We have also launched a number of pilot projects for a few Russian companies for regional geologic modeling; within the framework of these projects, we are helping these companies to assess the prospective oil bearing capacity of the regional systems and the corresponding risks.

ION Geophysical Corporation: ION Geophysical is the leader in Arctic geophysical services. We have been active in the Arctic since 2005 and since that time have developed a slew of patented technologies that have made under ice seismic exploration a reality. This technology has operated successfully in the north American Arctic, Greenland and in the Russian High Arctic.

Geotech Holding: For many years, the divisions of “Geotech Holding” have been running successful research, exploration and detailed seismic works in the continental Arctic region, from the estuary of Pechora to that of the Yenisei. We also have experience of working in the transitional zone between the land and the sea. The overall volume of seismic and associated works executed by the Company’s operational divisions in the continental part of arctic and subarctic regions comprises over 1 million running kilometers of 2D and over 100 000 km of 3D seismic data.

What specific solutions does your company have for the Arctic region and how do they benefit the search for hydrocarbons?

PGS: Working in the Arctic means an entire complex of difficult organizational and technical measures. One of the things I should mention is that PGS uses a unique GeoStreamer GS technology which allows a reduction in downtime due to harsh conditions in comparison with our competitors’ technologies. Just imagine, we can complete the work and leave the exploration area with difficult weather conditions and without refueling, let’s say, 25% faster, which means a significantly higher chance of successful project completion and a significant reduction in risks for the crew, the vessel and the environment.

Schlumberger: Modern software such as Petrel or Techlog does not only allow us to execute the classical interpretation method, which usually means structural interpretation of sesmic data, mapping of geological boundaries and faults by potential fields, inversion transformations, determination of rock types, calculation of petrophysical characteristics and 3D modeling. Schlumberger had developed software which takes into consideration such non-characteristic factors as quality of the seal, conditions of petroleum formation
and its migration.  We study the structure of the source rock and the factors affecting the hydrocarbons formation, review the potential migration routes and HC accumulation zones, i.e. we separate the zones where HC formation could happen and where it could not; and which structures HC could migrate to. The tools for paleo-reconstruction of sedimentation history explains whether there was enough time for HC formations given that all other conditions were favorable.

Modeling the mechanical properties of the structure shows the dependency of the seal integrity on the reservoir depth. Apart from this, it allows to prospect the zones of HC seepage through the faults.

The final stage is a risk map for all elements of the petroleum system and analysis of structural uncertainty: by changing the structure we analyze how changing the horizon will affect the reserves.

ION Geophysical Corporation: Please refer to our previous comment.

Geotech Holding: Any technical solutions similar to those used in other parts of the world, we are capable of implementing in Arctic conditions. If necessary, we can develop exclusive methods and technologies based on the customers’ requirements in their endeavors to resolve especially complex geological challenges.
Our key advantages are:
»    physical presence of operational divisions in Arctic and subarctic regions;
»    over 50 years of operational experience in “Extreme North” conditions;
»    sufficient number of highly qualified personnel with arctic experience;
»    a developed logistical chain to ensure procurement in remote location;
»    availability of technical and human resources and the ability to use them with flexibility.

What specific challenges does Arctic exploration bring, and how have you addressed these with your solutions?

PGS: The main challenges are ice in the water, low temperatures affecting the crew, the vessel and outboard equipment, fog, logistics, absence of port infrastructure in exploration areas and the operation of auxiliary vessels in harsh climatic conditions. The vessels are equipped with special ice radars and infrared cameras, there is heating for work stations, special materials for avoiding frost-up are used, and special arctic service technical systems have been developed. There are special procedures designed for operations in arctic conditions, the crew undergoes special training and the crew also includes ice condition specialists and marine animal observers.

Schlumberger: The prospecting stage of geological exploration works is one of the hardest in regards to data interpretation for poorly studied regions with lack of a prior information. Harsh climatic conditions and difficult access to the Arctic complicate the study of the region which explains insufficient information about the area. The low temperatures do not only limit the ability to use human resources, but also make it impossible to use much of the hardware equipment and modern methods. This is why it is important to use all available information.

Any research is based on an initial concept or a model of the object in question, and the lack of data leads to oversimplification of the geological model. For example, such key features as seal quality, conditions of HC formation and their migration are almost entirely ignored. Naturally, all specialists are well aware of the huge risks related to these factors, but limitations of the tool set that geologists and geophysicists have available, compel them to simplify the model of the region under review, which often leads to drilling dry holes even in presence of structure and good reservoir properties. This is why Schlumberger proposes a collaborative analysis of all above mentioned factors with a purpose of detecting prospective areas and allocating exploration drill holes using a single software complex – Petrel.

ION Geophysical Corporation: There are multiple road blocks to successful Arctic exploration. Some are simply access restrictions due to Geopolitics, some road blocks are related to the access to markets due to the roadblock related to transportation systems, but many are related directly to the lack of Seismic data required to know where to explore. ION Geophysical’s focus has been on solving this single challenge to provide high quality seismic data in ice infested waters. If we can identify large exploration projects using modern seismic techniques, many of the remaining road blocks become only challenging engendering exercises.

Geotech Holding: The main challenge for any operations in the Arctic sector is a combination of long distances from infrastructure and the climatic conditions. All other difficulties, as numerous as they are, result from these two main factors. The foundation for resolving problems and difficulties is thorough planning, detailed operational preparations, timely procurement of production units with necessary resources, the utilization of highly qualified experienced personnel, strict observance of safety procedures and other key policies that we ensure are implemented.

How are best practices being integrated with local Russian know-how?

PGS: PGS has been in the Russian market since the 1990’s. During this period, we have accumulated extensive experience and understanding of the local market conditions. I think that this knowledge, in combination with our technological leadership in the global market, allows us to keep ahead of the game in this challenging market. I think that both Rosneft and Gazprom can vouch for us on this point. Also, we’ve been able to attract some highly qualified professionals for our Russian team. I am sure that such names as Yuri Ampilov, Vladislav Dolgov and Dmitry Baturin are familiar to many industry professionals. I should also mention that since 2006, our joint venture, PGS Khazar, has been working successfully. Through this company, PGS has been able to implement its’ best practices. Since 2011, PGS has been exclusively represented by PGS Khazar for projects in the Russian arctic.

Schlumberger: Schlumberger’s priority in the field of new technologies and software products that we supply to the market is high performance of our products, integration of all specialists to operate on a single platform and possibility of expanding the functionality.

Expansion of the functionality is done using an open software development environment Ocean, which allows any specialist with some basic programming skills to exercise his ideas and integrate them into Petrel. That is, any algorithm, any computer technology which is standard for your company, can be adopted and implemented into the integrated
Petrel environment.

We also have a group of specialists in Russia who support the software users, provide training and consulting services. Naturally, these professionals are aware of our Russian customers’ needs and they communicate these requirements to our software developers.

ION Geophysical Corporation: The Russian Arctic maritime experience level is second to none. Any
company that would consider exploration in the Arctic without tapping into the Russian Arctic maritime knowledge base would be fool hardy indeed.

Geotech Holding: Our specialists closely follow the development of new technologies. After evaluating the operational and/or economical efficiency, our experts analyze the applicability of these solutions in specific conditions and their potential competitive advantages. All new methods/technologies that are applicable for specific operations and are of interest to the customers get tested in production environments and are then integrated into the production process of our territorial subdivisions.

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