There is no way back: why Russia must not reduce the oil production

Only five days are left before the actual implementation of OPEC ++ agreements to reduce oil production. This is likely to entail catastrophic consequences, and not only because of the fall in oil prices, but also for purely technological reasons. The fact is that due to the purely Russian specifics of oil production, in many fields the conditions are such that it will simply be impossible to resume their full-fledged work. This is written in an expert blog by Pavel Pukhov:

“The closer May is, the closer the promised physical reductions in oil production are. There will be a rather technical post, possibly containing profanity. And now we are mainly interested in the situation specifically in the Russian Federation. In other places around the world, the structure of oil production is different, and problems can also radically differ. And yes, of course, I interviewed quite a few different specialists, not all of them turned the valves at minus 40 in the wilds of the Khanty-Mansi Autonomous Okrug, but many of them are pretty much in the field of technological mining processes or on a day-by-day basis developing different fields, planning and implementation of activities, etc.

1) So, we really have a lot of very different fields. There is a breakdown by classification from purely oil and gas and oil to oil and gas. From unique in size to small stocks. Almost always there are many reservoirs and development sites with different characteristics (FES) and with different development grids (and different RPM systems, if any). With different predominant type of wells (GS or NNS) and completion. They have different geographical and surface conditions, different distances from the main pipe and markets. Probably, if all factors are taken into account, then it is possible to rank the whole economy from top to bottom according to the economy / emerging technological risks and difficulties, and as a result, by the possible volumes of reduction, etc. And already on the basis of this kind of analysis, decide on reductions. As you can see, at least this implies time and calculations.

2) At each field, there is a trinity linked to each other: formation - well - surface infrastructure. In the case of the presence of water injection with water injection (and this is the lion's share of deposits in fact), the system is almost closed, with additional water supply from aquifers. Accordingly, all the problems that arise amid a reduction in production can be classified as in-situ problems, vertical elevator problems, and surface infrastructure problems. When in the past we heard about the difficulties in reducing production in the Russian Federation, the main reason was the winter conditions and the load on the surface infrastructure of the RPM system. It is all about working temperature — well fluid recycling produces decent temperatures on the surface, which are slightly diluted with water from the intake.

3) Plast, as an object of development. In general, the developers, for some reason, do not see big problems for the formation - the existing cones will sit down a bit, the interference may go away, etc. It is likely that after restarting the well, even a smaller watercut can be seen. Some appeal to past experience and the huge simple well stock in the 90s. This is not entirely relevant to the forehead. In those years, the mechanical production itself was everywhere different, and the water cut was lower and the state of the well stock was significantly different. In addition, the structure of the fields was different. On longer time horizons, the processes of gravitational and capillary segregation of phases occurring in the reservoir are known, but this is rather typical for deposits with high permeabilities and other development modes (in depletion, in the mode of dissolved gas). In general, the developers' view can be described as weakly positive, but no one excludes certain options when the over-flooded fund after restarting can start working with clean water. All this in addition depends on the reservoir properties and the type of natural reservoirs (can it be more complicated with carbonates ?!). Longer-term issues related to the rational use of mineral resources and the achievement of targeted (project) CINs are pushed into the background, there is nothing good and is not expected.

4) Vertical elevator. In general, individual deposits, of course, are characterized by the presence of possible colmatants in the formation or fluid, as well as paraffinic, salt or asphaltene deposits, when a stop and even just a decrease in the multiphase flow can be associated with any crap falling into the bottomhole zone and downhole. But this problem is quite well-known, although its solution requires additional costs. Some fields and individual wells / wells are developed with a depression on the formation below the saturation pressure, when degassing occurs in the vicinity of the well, the filtration mode changes, etc. In any case, we can generally say that the problem is clear, but the more factors, the greater the additional costs incurred at the TKRS-OPZ after the well is launched. The old mechanical fund can also create certain problems, for example, if after stopping it will be necessary to change the pump (and so it could work to failure), this is also a cost. Perhaps, far from everywhere there is installed telemetry with remote control of the pump supply, which can complicate the suspension / reduction of production. Pumps in general, too, do not like on-off.

5) Collection system and PPD. A complete shutdown of the PPD system cannot be allowed, due to the probability of the onset of negative processes in the pipes (precipitation, crystallization, etc.). The volumes from the water intake are spread quite easily, the compensation in the development cells will remain the same and production wells will not feel the change in pressure impulse from the injectors (but this is not accurate). The balance of fishing in some conditions can be quite a difficult task, requiring at the time of concentration of resources, primarily human and material and technical. Certain repair work in the field, of course, was carried out regularly at all times, but stopping 20% of production is far from a frequent guest. The experience of this kind of business is limited, perhaps it is poorly translated between fisheries, especially in the established tight time frame. All this increases the risks of doing things, in the case of directives from above.

6) The latter is the economy of putting an idle fund on the regime. Due to the presence of a large number of highly watered products (I recall that in the Khanty-Mansi Autonomous Okrug, the average water content of the existing well stock is about 90%), there are objective economic cut-offs that, even with rising prices and a stimulating tax system, are likely to be overcome. In this case, part of the oil production will be irretrievably lost; it is rather difficult to make an assessment. In fact, the restrictions do not end there, there are deposits with high gas factors, with aggressive fluid in the product composition (H2S, for example), autonomous and remote fields, the operation of export terminals depends on which, or there are some obligations to supply and etc. There are permafrost zones, there are possible problems with pumps, fields with gas recycling may behave a little differently, etc.

But mainly, my main concern is concentrated in two points - the timing and heterogeneity of fields / wells pose risks during an emergency shutdown of production, and the presence of a long highly flooded tail can, from an economic point of view, prevent its return to full-fledged work ... ”

Network analyst Andrei Nalgin, for his part, adds :

“According to current forecasts, this year will be a period of deep recession for the global economy, which in scale risks to surpass the Great Recession of 2008-2009. Even if it is possible to quickly defeat, or at least curb a new coronavirus, if it is possible to find not a vaccine, but at least a working therapeutic regimen, a return to normal life will not be quick. And due to the inertia of economic processes, and because of the caution of politicians who are not at all willing to receive a “second wave” of incidence in the fall and winter (even if it takes place already in a case-fatality- facilitated format). At a minimum, international tourism and, in general, air and sea transportation risk being depressed even in 2021. But they form a significant part of world oil demand.

Accordingly, prices for it, having bounced off the current bottom, are unlikely to rise high. Moreover, starting in July, OPEC ++ will gradually increase oil production: by 2 million barrels per day from the second half of the year and another 2 million barrels from January 1, 2021. Despite the uncertainty of forecasts, analysts expect oil prices to return to $ 40-50 per barrel, only in a year and a half. A more optimistic option is possible only if China suddenly shows the world an economic miracle and quickly, already in the II-III quarter, will revive business activity at home, at least in the framework of restoring domestic demand.

As a result, the oil industry over the next six months to a year, or even one and a half, will live, if not on a starvation diet, then in much more constrained financial conditions than all the last time. An additional burden for them will be, firstly , a tax maneuver that involves transferring the severity of taxation from export duties to mineral extraction tax levied directly at the well . And secondly , the aggravation of price competition in the European market, if Saudi Arabia does not abandon the idea of crowding out Russia. So far, in any case, there are no prerequisites for easing competitive pressure on her part. As a result of the reduction in revenue, the very economy of oil recovery recovery , about which experts warned, will become more problematic.

That is, even if everything in the oil market settles down in the medium term, and OPEC ++ restrictions are removed, a return to previous production levels will become problematic for the industry due to the technological problems described above and limited resources to eliminate them. And for individual companies that still operate the Soviet fund of fields and wells, such a scenario could turn into a disaster ...

Who will save them in this case?”