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The state of the hydrocarbon resource base of Russia and support measures provided by the government and aimed at its replenishment

Global energy products demand continues to grow. To maintain the level of oil and gas production, it is necessary, first of all, to replenish their reserves. Denis Khramov, First Deputy Minister of Natural Resources and Environment of the Russian Federation, spoke about the technologies and equipment provided to Russian exploration geologists, how much companies and the state spend on geological exploration, and what measures are taken by ministries and departments working in that sector.

The state of the hydrocarbon resource base of Russia and support measures provided by the government and aimed at its replenishment

 - Russia is one of the leaders in hydrocarbon reserves and production, that provides almost 40% of the budget. How much does the government spend on the reproduction of the mineral resource base and what is the percentage of state participation in the corporate geological exploration? 

- The costs of hydrocarbons in 2019 amounted to 14.1 billion rubles of federal budget (taking into account unfulfilled obligations of Rosgeologia JSC). According to preliminary data, the expenses of companies for geological exploration for oil and gas in 2019 are more than 300 billion rubles, exceeding the investments of 2018 (283 billion rubles). It is planned to maintain the achieved level of funding in 2020.

- And what about the extent of exploration and the scale of investments over the past year? Are there any regions where the interest of companies is most significant?

- In 2019, the federal budget spent on exploration 25.6 billion rubles, including 14.1 billion rubles on oil and gas.

According to the results of 2019, the costs of subsoil users for geological exploration are about 350 billion rubles (300 billion rubles for hydrocarbons and 48.4 billion rubles for solid minerals).

The regions of Western Siberia, the Arctic and the Far East are of the greatest interest for investment.

- Where is it planned to direct budget funds first?

- Geological exploration at the expense of the federal budget will be aimed, as in previous years, to clarify the geological structure of promising territories of the unallocated subsoil fund; to localize forecast resources, to prepare licensed sites for auctioning so that they can be subsequently processed by subsoil users.

Geological exploration is localized mainly in Eastern Siberia and the Far East.

- What are the main challenges facing Russian geological exploration?

- The objective industry challenges include:

the need to search for deposits in remote areas with undeveloped infrastructure;

the tendency of discovering predominantly small and medium deposits ("fading" of deposits);

the need to use new technologies for mineral search and exploration.

The answer to these challenges is systematic work to improve the legislation on subsoil, including one aimed at stimulating subsoil use and removing administrative barriers.

The challenges in the field of state regulation of the geological study of subsurface resources and subsoil use include:

insufficient funding for geological exploration of the early stages;

imbalance between the localization of forecast resources – the so-called “search reserve,” the increase in proven reserves and production.

The answer to these challenges is the development of measures to stimulate exploration activities and the work of Federal Subsoil Resources Management Agency to justify the directions of regional exploration in collaboration with scientific organizations and mining companies.          

- In 2019, the Strategy for the development of the mineral resource base until 2035 was approved, what is being done today as part of the implementation of the Strategy?

- By order of the Ministry of Natural Resources of Russia dated May 13, 2019 No. 296, the Action Plan for implementing the Strategy for the Development of the Mineral Resources Base of the Russian Federation until 2035 for the next five years was approved.

The measures of the Plan are aimed at achieving the goals and objectives for the development of the mineral resource base specified in the Strategy for the Development of the Mineral Resources Base of the Russian Federation until 2035 (approved by Decree of the Government of the Russian Federation dated December 22, 2018 No. 2914-r) within the framework of the first stage of implementation (years 2019-2024).

The plan includes measures aimed at increasing the geological exploration of the territory of the Russian Federation and its continental shelf, the development of a highly liquid mineral resource base for existing and emerging mineral resource centers.    Measures are being taken to stimulate the discovery of hydrocarbon deposits and solid minerals, to ensure the reproduction and rational use of the mineral resource base.

For example, in 2019, as part of the implementation of the Plan, normative legal acts were adopted, that:

have established the possibility of conducting a geological study of the subsoil as an independent type of subsoil use, in areas of federal subsoil located in inland sea waters or the territorial sea of the Russian Federation (No. 355 Federal Law of 04.11.2019);

have improved legal regulation of relations in the field of geological exploration and production of hard-to-recover mineral reserves (No. 396 Federal Law of 02.12.2019);

have established a new rate and procedure for calculating the tax on production of minerals in relation to rare metals in order to increase the investment attractiveness of projects for the development of domestic rare-metal deposits (No. 284 Federal Law of 02.08.2019).

 - Denis Gennadievich, to what extent is Russia provided with hydrocarbon reserves and how urgently, in your opinion, does the country need to replenish its resource base?

- Hydrocarbon raw materials – oil and natural gas are the main types of strategic mineral raw materials.

Given the economic conditions for the development of mineral resources, the profitable reserves of strategic and most important types of minerals of currently exploited deposits may last for about 25-30 years.

Moreover, in terms of quantity and quality, the balance of gas reserves under any scenario of economic development will satisfy the necessary long term needs.

Oil reserves, in accordance with the Strategy for the Development of the Mineral Resources Base of the Russian Federation until 2035, approved by Decree of the Government of the Russian Federation dated 22.12.2018 No. 2914-r, belong to the group of mineral resources, achieved production levels of which are insufficiently provided with reserves of developed deposits for the long term.

In accordance with the action plan (“road map”) for implementing measures to develop oil fields and increase oil production in the Russian Federation No. 598p-P9, approved by the Chairman of the Government of the Russian Federation D.A. Medvedev on 25.01.2019, Medvedev, the Ministry, together with interested federal executive bodies, prepared and sent to the Government of the Russian Federation proposals to stimulate exploration work carried out on land and on the continental shelf of the Russian Federation with a plan to expand the resource base by improving legislative regulation of economic measures and administrative impact. 

- In your opinion, is it already necessary to develop the hydrocarbon reserves of the shelf of the Arctic seas today, or does it make sense to work more actively on the continent?

 - The Arctic has a significant place in the economics of Russia.

Currently, more than 90% of nickel and cobalt, 60% of copper, 96% of platinum group metals are produced there, about 80% of gas and 60% of oil are being extracted.

Further development of the Arctic is one of the strategic goals of modern Russia. It is quite obvious that the Arctic can be developed only through large-scale and highly profitable projects that will become the locomotives of the development of its constituent regions.

Profit, compensating for the inevitable additional costs, will allow us to solve the whole range of tasks for the development of the territories while maintaining the profitability of the projects themselves.

Large-scale programs that serve as the engine for the development of the Arctic zone of the Russian Federation should be based on the specific competitive advantages of the Arctic: rich resources and transport communications that can maintain profitability over the next 20 years.

At the same time, transport projects in this zone can exist only if they have guaranteed loading as a necessary condition for the settlement of the macro-region.

The development of the Arctic region can be driven by hydrocarbon production, including the one on the shelf. The complexity of the implementation of such projects requires the need for innovative solutions, which, in turn, leads to the creation of high-tech industries, and hence high-paying jobs. The basis for the formation of localized effective demand appears, stimulating services and livelihoods, modern social infrastructure emerges. The need for oil delivery motivates the construction and expansion of transport networks.

All this complex of factors in total creates a multiplier effect and involves the integrated development of territories.

I want to draw attention to some nuances that are not immediately evident, but that are important. There is a difference between the total cost of the project and the running costs. For example, the development of the Prirazlomnaya platform on the sea shelf was expensive, but in the future, high-yield wells of this field will produce fairly cheap oil. The Novoportovskoye and Vostochno-Messoyakhskoye deposits are projects worth billions of dollars, but given their scale, they will also produce cheap oil.

In general, there are few deposits of this class left on land, but they still exist in Russia, and we are developing them. In addition, do not underestimate the potential of Western Siberia, because it is great. In addition to the Bazhenov suite, which everyone hunts for, there are many other layers and suites in which reserves are hidden, even if not many billion tons, just 1-2 billion, but the permeability of the rocks there is so much higher than in the Bazhenov suite. At the same time, Western Siberia is a well-equipped area with developed infrastructure. The cost of producing this oil may be higher, say, not 5-6, but 15-20 dollars per barrel, but not 40 dollars per barrel.

- Yes, hard-to-recover reserves require both additional costs and new technology. What is being done to stimulate the development of HTR reserves production technologies? What measures does the ministry offer to increase extrabudgetary investments in geological exploration? 

- In order to stimulate the development of unconventional sources of hydrocarbon raw materials, Federal Law No. 396 was adopted on December 2, 2019 “On Amending the Law of the Russian Federation “On Subsoil ” in terms of improving the legal regulation of relations in the field of geological exploration, exploration and production of hard to recover useful minerals” (hereinafter referred to as Federal Law No. 396), developed by the Ministry of Natural Resources of Russia in order to execute a number of instructions of the Government of the Russian Federation.

The law aims to stimulate the study, exploration and production of hard-to-recover mineral reserves (HTR reserves). The specific types of HTR reserves for which the new licensing regime will apply will be established by the Government of the Russian Federation.

At the open acreage, where the subsoil block contains only HTR reserves and does not contain other hydrocarbon deposits, it is provided for testing technologies at a competition for 15 years with the possibility of repeated extensions for up to 5 years.

In the subsoil areas of the distributed reserve, a subsoil block containing HTR reserves can be cut out from a larger block provided for the field development of hydrocarbon deposits in the upstream and downstream deposits. In this case, a site for the development of technologies is provided by decision of the commission created by Federal Subsoil Resources Management Agency, based on a request from the user of the main assembly for a period of up to 7 years with the possibility of a single extension of the use of subsoil for a period of 3 years.

At the end of the validity period of the technology development mode, the user has the right to switch from experimental work to industrial production in the usual production regime “for exploration and production”.

The establishment of deadlines for combined licenses is introduced in order to stimulate subsoil users to accelerate the transition from the pilot stage (technology development) to the industrial stage (exploration and production).

When working in the technology development regime in the provided area, it is allowed to produce HTR reserves in the amount limited by the design documentation. The regime implies the obligation to prepare specialized project documentation in a simplified format, which should be developed after the adoption of the law.

Federal Law No. 396 provides for the exemption of subsoil users from the payment of one-time and regular payments for the use of subsoil during the development of technologies.

- Companies operating in the Arctic region also need new technologies; does Russia possess these technologies?

- Obviously, to accelerate the study of the Russian Arctic shelf, it is necessary to modernize and expand the seismic exploration fleet, equipped with modern equipment.

This will make it possible to identify and localize structures with potentially highly profitable resources, the detailed exploration and development of which using a significant number of expensive offshore drilling rigs and supporting vessels may prove economically viable.

Among the promising underwater technologies of domestic production, I can point out a unique Russian robotic complex under design as part of the Iceberg project of the Rubin Central Design Bureau, which has no foreign counterparts (http://tass.ru/opinions/interviews/4572997). The project presented at the Neva-2017 exhibition (St. Petersburg) provides for the under-ice development of hydrocarbons, primarily in the Arctic zone.

- To what extent are Russian exploration geologists provided with modern equipment and technologies?

- Innovative technologies and equipment in geological exploration allow us to detect oil deposits, to study the regularities of location, formation conditions, and features of the field structure as accurately as possible. Thanks to these technologies, many companies are able to significantly improve the quality of work on the study and development of oil and gas fields.

Among many modern geological exploration technologies, I should single out the Green seismic. Unlike traditional seismic work, the Green Seismic technology is based on a wireless data acquisition system and is used in hard-to-reach places without cutting clearings in forests.

I can use PAO Gazprom Neft (GPN) as an example. When conducting seismic surveys in the Khanty-Mansiysk Autonomous Okrug in the winter season of 2017-2018, the company applied Green Seismic 2.0 technology in Zapadno-Pokurskaya block, in the winter season of 2018-2019 this technology has already been applied in several areas of works: Zapadno-Zimny, Salymsky 2, Palyanovsky, Vatinsky, which made it possible to reduce the clearing area due to the use of light drilling rigs and snowmobiles instead of bulky equipment.

LUKOIL also implements this technology in the Samara Region, Khanty-Mansiysk Okrug and the Komi Republic. In particular, it is planned to use wireless seismic surveys next season in the Yakhlinsky and Vostochno-Tugrovsky areas, and narrow clearcuts will be used in the Severo-Yagunsky and Zapadno-Ikilorsky license blocks.

Green Seismic 2.0 technology is based on a wireless data acquisition system, which allows:

- to reduce the width of the clearcut for seismic exploration,

- to abandon the use of heavy equipment,

- to increase industrial safety,

- to speed up the process of placing sensors in difficult terrain.

In order to reduce environmental pollution, oil and gas companies are developing and introducing new environmentally friendly technologies. Pitless drilling is being mastered, which can significantly reduce the volume of industrial waste. Technologies are being developed for the effective cleaning of contaminated surfaces using bacterial preparations and various flushing liquids.

Oil spills remain the main risk of environmental damage for the oil and gas complex. At the same time, it should be noted that all enterprises of the oil and gas complex of Russia have necessary Oil Spill Response Plans, their own off-nominal emergency formations and contractual relationships with professional emergency organizations, the necessary equipment and reagents.

The Ministry is resolving issues on the legislative regulation of relations in the field of preventing and eliminating oil spills on land. The relevant bill (No. 376642-7 “On Amendments to Article 46 of the Federal Law “On Environmental Protection” and certain legislative acts of the Russian Federation”) is being prepared for consideration for the second reading in the State Duma of the Federal Assembly of the Russian Federation.

Special environmental technologies are used in the study and development of deposits in the Arctic zone of the Russian Federation. Here, at the request of the Russian Ministry of Natural Resources, oil and gas companies have developed and are successfully implementing targeted programs for the conservation of vulnerable Arctic biodiversity.

- What are the main areas of regulation of the geological exploration industry is the Ministry focused on today?

- Improving the legislative regulation of economic and administrative measures in order to stimulate exploration work carried out on land and on the continental shelf of the Russian Federation remains one of the priority areas of the Ministry.

The relevant problem today is related to the fact that the provision for use of subsoil plots not completed by regional studies significantly increases the geological risks of subsoil users and often leads to negative or unclear results of exploration work, does not accelerate, and in some cases can even slow down the pace of geological exploration.

To overcome the deficit of promising territories, it is necessary to overcome the negative trends of recent years and increase the volume of regional exploration for oil and gas. Thematic work, quantitative assessment of resources and large regional generalizations are of great importance for substantiating the areas of exploration, and they need to be performed as the stages of regional study are completed.

In the coming years, it is planned to carry out regional correlations on the Barents and Okhotsk Seas, the Eastern Pre-Caucasian region, the framing of the Vilyui syneclise, to update the geological model of the Gydan-Khatanga zone, and to begin a new cycle of quantitative assessment.

In addition to the ongoing study of the Gydansko-Khatanga, Argish-Chun and Karabash zones, it is proposed to add to the adjusted list of priority oil-prospective zones: Preduralskaya, Poluiskaya and Kochechum-Markhinskaya.

 - Tell us more about measures to monitor and oversee compliance of subsoil users with license obligations. What are the main violations you encounter, what's causing them and what measures are taken to stop and punish violators?

Federal Supervisory Natural Resources Management Service (Rosprirodnadzor), in accordance with the Regulation on the Federal Service for the Supervision of Natural Resources, approved by Decree of the Government of the Russian Federation of July 30, 2004 No. 400, carries out federal state supervision of geological exploration, rational use and protection of subsoil, guided by the Regulation on state supervision of geological exploration, rational use and protection of subsoil, approved by Decree No. 293 of the Government of the Russian Federation dated 12.05.2005.

Compliance with the conditions for the use of subsurface resources by the subsoil user are monitored through scheduled and unscheduled inspections.

According to the results of inspections of subsoil users, violations are identified in terms of rational use and protection of subsoil, environmental legislation of the Russian Federation.

The main and most frequently detected violations during inspections of compliance with the terms of license agreements are violations in terms of work due to the absence of agreed and approved technical projects in the established manner or the violations of such; mining allotment documentation violation or absence of such; not registration of negative environmental impact objects, lack of permits for environmental protection (including emissions, discharges, waste disposal).

Also, there is often a violation of the established requirements for the development of technical projects. Sometimes project documentation does not contain specific environmental measures.

Based on the results of the violations identified, Rosprirodnadzor issues orders to eliminate the violations, administrative measures in the form of fines are applied; the damage caused to the components of the environment is also calculated and presented, information is sent to Rosnedra to take measures on the early termination of the right to use subsoil.

- Recently, much has been said about introducing the best available technologies. What is their purpose in geological exploration? 

- In accordance with Federal Law dated 10.01.2002 No. 7-ФЗ “On Environmental Protection”, the application of the best available technologies is aimed at comprehensive prevention and (or) minimization of negative environmental impacts.

Areas of application of the best available technologies may include economic and (or) other activities that have a significant negative impact on the environment, and technological processes, equipment, technical methods and methods used in carrying out economic and (or) other activities.

By order of the Government of the Russian Federation dated April 30, 2019 No. 866-r, a phased schedule for updating information and technical guides on the best available technologies for 2020-2024 was approved.

In particular, in order to reduce emissions of pollutants into the atmosphere, work is underway to use associated petroleum gas to produce gasoline and generate electricity. By order of the Ministry of Natural Resources of Russia dated May 21, 2019 No. 319, a regulatory document in the field of environmental protection “technological indicators of the best available technologies for processing natural and associated gas” was approved. The regulatory document in the field of environmental protection “Technological indicators of the best available technologies for oil production” was also approved (order of the Ministry of Natural Resources of Russia dated 13.06.2019 No. 376. 

- According to your estimates, for how many years is Russia provided with hydrocarbons?

- State balance of mineral reserves as per January 1st 2019 says that the Russian Federation recorded 3,176 fields with a total current technologically recoverable oil reserves of 29.9 billion tons, of which: 2,098 fields are at the stage of industrial development (currently being developed) with oil reserves of 23.2 billion tons; 1078 fields are under investigation and test operation (exploration) with oil reserves of 6.7 billion tons.

The current recoverable oil reserves of Russia in categories AB1C1 are 18.6 billion tons, in categories B2C2 –11.3 billion tons

Oil production security for existing production is: 47 years (taking into account the transfer of reserves of lower categories to industrial ones).

The reserves of free gas and gas caps in the AB1C1 category are 49.3 trillion m3, and in the B2C2 category 23.7 trillion m3.

The gas production security at the existing production is 89 years (taking into account the transfer of reserves of lower categories to industrial ones).





Author:

Denis Gennadievich Khramov, First Deputy Minister of Natural Resources and Environment of the Russian Federation





Статья «The state of the hydrocarbon resource base of Russia and support measures provided by the government and aimed at its replenishment» опубликована в журнале «Neftegaz.RU» (№4, 2020)