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Finding Petroleum – Russia and the FSU London 18 June 2013
The Geopolitics
Julian Lee
Senior Energy Analyst Centre for Global Energy Studies
The good bits
Stable government Stable currency Wide range of opportunities available Widespread infrastructure in core areas Well educated staff Low entry and holding costs 20
22
24
26
28
30
32
34
36
38
Jan-0
5
Jul-0
5
Jan-0
6
Jul-0
6
Jan-0
7
Jul-0
7
Jan-0
8
Jul-0
8
Jan-0
9
Jul-0
9
Jan-1
0
Jul-1
0
Jan-1
1
Jul-1
1
Jan-1
2
Jul-1
2
Jan-1
3
Rubles per US Dollar
Restrictions
Legal restrictions on foreign company access to ‘strategic’ deposits >= 70 mn tonnes (500 mn bbls) oil >= 50 bcm gas Offshore (shelf) deposits reserved for Rosneft and Gazprom Core oil areas are tightly controlled by Russian majors (Rosneft, Lukoil, Gazprom Neft, Surgutneftegas) Although under attack, Gazprom retains its monopoly on gas exports from Russia. This may be undermined, but only for LNG and only in a very controlled way.
Getting access - auctions
Auctions
Announced twice per month, generally 100 - 150 blocks per year
Transparent process
No drilling commitments, no relinquishment penalties
Little competition from majors outside core areas
BUT
Preparation time is short, while the paperwork required is considerable
Often very limited geological and geophysical information
For an exploration licence, there is no guarantee of a production licence in the
event of a discovery
Getting access - acquisitions
Little transparent M&A activity
Few truly independent companies
Cultural resistance to foreign ownership
Lack of standard reporting practices, making valuation difficult
Strict controls of acquisition of more than 20% of enterprises involved in the development of ‘strategic’ deposits
There are a number of foreign listed independent companies operating in Russia and Kazakhstan
Getting access - jvs
There have been some successful jvs
Salym [Shell & Sibir (now Gazprom Neft)]
Samara-Nafta [Hess & Simon Kukes]
There have been some very unsuccessful ones
Naryanmarneftegas [ConocoPhillips & Lukoil]
Offshore:
Deep pockets required !
Access to overseas projects is also a bonus
-
10
20
30
40
50
60
Jan-02
Sep-02
May-03
Jan-04
Sep-04
May-05
Jan-06
Sep-06
May-07
Jan-08
Sep-08
May-09
Jan-10
Sep-10
May-11
Jan-12
Sep-12
'000 bpd
Source: Argus, EIG & CGES
-
20
40
60
80
100
120
140
160
180
200
Jan-02
Sep-02
May-03
Jan-04
Sep-04
May-05
Jan-06
Sep-06
May-07
Jan-08
Sep-08
May-09
Jan-10
Sep-10
May-11
Jan-12
Sep-12
'000 bpd
Source: Argus, EIG & CGES
-
20
40
60
80
100
120
140
160
180
Jan-02
Sep-02
May-03
Jan-04
Sep-04
May-05
Jan-06
Sep-06
May-07
Jan-08
Sep-08
May-09
Jan-10
Sep-10
May-11
Jan-12
Sep-12
'000 bpd
Source: Argus, EIG & CGES
Assessing opportunities
Geological & geophysical data – lots of it…
BUT
Not centralised
Not consistent / compatible
Not clear who owns it
Export restrictions on data
Some data is classified
Cost data can be hard to find.
Financial and other considerations
0
20
40
60
80
100
120
140
Jan-10
Ap
r-10
Jul-1
0
Oct-1
0
Jan-11
Ap
r-11
Jul-1
1
Oct-1
1
Jan-12
Ap
r-12
Jul-1
2
Oct-1
2
Jan-13
Ap
r-13
Mineral extraction tax
Export tax
Urals crude oil price
$/bbl
Average margin (Jan-10 – May-13): $31.50/bbl
Detailed field development plans, must be approved at each step.
Heavy reporting burden.
Gas flaring regulations.
Heavy tax burden.
Customs clearance delays.
Access to pipelines.
Lack of quality bank on export pipeline system.
Small companies complain of a lack of choice on export routes.
The opportunities
Industry consolidation is releasing experienced executives.
Brownfield and greenfield acreage is available.
Opportunities for EOR and late-life field management.
Growing interest in hard-to-recover and unconventional liquids resources.
Technological partnerships with Russian companies.
The Caspian Sea region
Azerbaijan
Running out of opportunities?
Offshore – deep gas (reservoirs at ~ 6 km)
Onshore – largely depleted?
Kazakhstan
Offshore moratorium to be lifted?
Personal relationships are important
Competition from the Chinese
Turkmenistan
Offshore exploration – a slow process
Onshore – service contracts only
CGES provides a range of analysis on the oil and gas sectors of Russia and
the Caspian Sea region
FSU Oil & Gas Advisory • Comment and analysis of developments
in the oil and gas sectors of the FSU
• Subscription service
The outlook for Caspian oil exports • Study
FSU oil and gas maps • A set of 30 maps covering the oil and gas
sectors of the FSU
FSU digital mapping data • Digital data for accurate mapping of FSU
oil and gas fields and infrastructure
Russia and the Caspian
Julian Lee Senior Energy Analyst
Centre for Global Energy Studies 17 Knightsbridge London SW1X 7LY
UK
www.cges.co.uk