Russian oil and gas production shifts to the East

Russian oil industry is actively exploring eastern Siberia and the Far East as the region possesses vast petroleum resources and allows further expansion to Asian markets. Besides traditional oil and gas, Russia is developing a liquefied natural gas (LNG) project in the Yamal Peninsula in order to increase the country's share of the world LNG market.

The geographic shift in oil and gas exploration adds reserves and reshapes the Russian industry, considers The Journal of Petroleum Technology. According to a panel of experts at the 2017 CERAWeek conference by IHS Markit, it stimulates development of pipelines and ports in the region for further expansion to the Asian oil and gas market. The shift is also changing Russia's production mix by adding fields that are rich in natural gas liquids and therefore spurring large development in gas processing.

In 2016, Rosgeologia, the Russian state geological exploration company, performed a record amount of research in eastern Siberia and the Russian Far East to meet the demand in a region that is ''not covered by intense development,'' says the company's Director Roman Panov. One of the regional market's players, Irkutsk Oil Company, was responsible for one third of the production growth last year in Russia due to the launch of 32 drilling rigs in Eastern Siberia with the support of investors from Asia, Europe and the U.S.

According to Mikhail Margelov, vice president of Transneft, which controls 90% of the pipeline traffic in Russia, oil is now exported in two directions and none of them is more important than the other. In addition to the pipeline supplies, Russia is now seeking a rapid expansion of LNG export to Asia from the east of the country and the Arctic, where the ambitious LNG project is being realised in the Yamal Peninsula. Russia is aiming to increase its share of the world LNG market from 5% to 15%.

Rosneft's Berkut offshore drilling platform in the Russian Far East. Photo:

The outlook for the traditional oil production region is also optimistic. Established fields in western Siberia still have significant oil reserves, but they are commonly trapped in tight rock in horizons that were never produced. As a result, the industry saw a rapid growth of horizontal drilling and fracturing. For example, Gazprom Neft started drilling horizontal wells using a fish bone pattern to deal with unexpectedly complex rock effectively. ''We are not pioneers'' of the method, says the company's Deputy Chairman of the Management Board Vadim Yakovlev. ''But what is special is how quickly we can go from testing to production.''

Over the last years, the Russian energy sector has felt an impact of the Western sanctions, but Minister of Energy Alexander Novak believes that the effect has not been a negative one. Although the measures limited the supplies of technologically advanced equipment, later Russian producers began filling the gap. Moreover, local companies benefited from ruble-based pricing as it made the machinery far more affordable.

By Anna Litvina