Offshore oil production in Russia to grow in the Far East and in the Caspian Sea

7 march 2017 | Rossiyskaya Gazeta

Over the next five years offshore oil production in Russia may grow by as much as 29 % from 19.4 million tonnes recorded last year to 25 million, Analytical Centre experts write in their new energy bulletin titled Access to Energy Infrastructure.

Alexander Amiragyan
Alexander Amiragyan
Department for Fuel and Energy Sector

The experts believe this is going to happen primarily as a result of new projects in the Caspian Sea and in the Pechora Sea on the Vladimir Filanovsky oil field (commissioned in 2016) and on the Prirazlomnoye field (where production is expected to peak in 2023). In addition, there is still massive potential in the Arctic Sea bed, but extracting oil there entails major environmental and business risks (high production costs that are not always worth it given the instability of oil prices). Because of that, the start of drilling there is always being postponed.

At the moment, there are offshore drilling projects in all the main regions in Russia (the Far East, the Baltic Sea, the Southern seas, Pechora Sea). However, analysts point out that they are all small-scale projects.

“The operating costs that Russian oil companies incur to produce oil are about USD 3-5 per barrel. But that is pretty much average and is actually comparatively low thanks to major land-based oil fields characterized by minimal production costs per barrel and pretty good flow rates,” Alexander Amiragyan, deputy head of the Department for the Fuel and Energy Sector of the Analytical Centre, told a Rossiyskaya Gazeta correspondent, commenting on the situation. Offshore drilling has higher costs because more complex drilling methods have to be used as well as more complicated methods for shipping the oil from the offshore rigs. However, the expert noted that for the moment we do not have accurate data on offshore oil production costs.

“In Russia offshore drilling is done using stationary drilling platforms with protection against ice that are installed over the oil and natural gas fields in the sea bed,” Mr Amiraghyan said. “The main production component of such a platform is a drilling complex that is basically what drills wells. Oil is then pumped from the sea bed via underwater pipelines into oil reservoirs. It is then taken via pipelines or in tankers to distribution centres on the shore or gets shipped in large tankers to ports in Russia or abroad.”

In other countries they have been using deep water drilling technologies that allow for oil to be extracted from the sea bed at depths of 125-1,500 and below 1,500 meters, but we do not have any projects of this kind in Russia yet. More complicated drilling methods have to be employed in deep water drilling and that naturally drives up costs. In this sense, all Russian offshore drilling projects are shallow water projects, which allows them to save on costs, the expert believes.

Until 2025 the increase in offshore oil production in Russia will mostly come as a result of the development of oil fields in the Far East and in the Caspian Sea, at which point Arctic Sea bed projects will start coming online, especially two projects in the Pechora Sea, the Prorazlomnoye field and Dolginskoye field. However, while the exploration of the first one is going on schedule, exploration work on the second one was put on hold back in 2015, Analytical Centre experts point out. The official reason was new geological conditions.

As for the possible implementation of new projects on the Arctic Sea bed, at the moment there are no such projects and those few that do exist are still at the geological exploration stage, meaning that even in the best case scenario they will not be coming online until at least 10 years from now.

For more see the Access to Energy Infrastructure bulletin.

For other issues of the Energy Review see the Publications section.