In the Oil game, Russia has the longest suit to play

Guest post by David Archibald

Logistic decline plots may be misleading when the production profile has been affected by political events. Nevertheless, Figure 1 shows a logistic decline plot for Russia’s conventional production. The result is in line with Russian estimates of their ultimate recoverable reserves of conventional oil and the proportion produced to date. The logistic decline plot assumes no change in technology. It accounts for future conventional discoveries but does not account for a new play type that has not been hunted before such as shale oil.

Figure 1: Russia Logistic Decline Plot

Production usually starts declining once a country has produced more than 50% of its ultimate recoverable reserves. Russia’s production decline was delayed by the turmoil of the 1990s. Assuming that Russia’s conventional oil production is on the cusp of decline and that decline rate is 6% per annum, Figure 2 shows what that decline will look like to 2040. At 6% per annum decline, Russia’s conventional reserves will be exhausted by the end of the century.

Figure 2: Russia Production Profile of Conventional Oil 1930 – 2040

Russia’s shale oil resources are potentially enormous. The best source of information on this is a U.S. Geological Survey Report:

G.F.Ulmishek, 2003, Petroleum Geology and Resources of the West Siberian Basin, Russia, U.S. Geological Survey Bulletin 2201-G, 49 pp.

As at 2003 and as estimated by the USGS, the West Siberian Basin had discovered reserves of 144 billion barrels of oil and more than 1,300 TCF of gas. The assessed mean undiscovered resources are 55.2 billion barrels of oil, 642.9 trillion cubic feet of gas, and 20.5 billion barrels of natural gas liquids. Most of the undiscovered conventional reserves are assumed to be in stratigraphic traps. 90% of the reserves are thought to be sourced from the Bazhenov Formation.

The Bazhenov Formation is an Upper Jurassic unit deposited in a deep marine environment. It is 25 to 50 metres thick over the centre of the basin, where it is also in the upper part of the oil window of source rock maturation.

Figure 7 is from page 12 of the Ulimshek report. It is an isopach map of the Bazhenov Formation. The green blobs are oilfields within the Bazhenov.

Figure 8 is from page 8 of the Ulmishek report. From the centre of the basin in a transect through Surgat, it shows the Bazhenov Formation and the prograding deltas that built over it in about 400 metres of water. The relevance of this cross-section is that it illustrates the deep marine environment that the Bazhenov Formation was deposited in. The Bazhenov Formation is 2,500 metres deep in the area of this cross-section, so there is another 2,000 metres of sediment on top of what is shown in this figure.

Figure 16 is from page 23 of the Ulmishek report. It shows the total organic carbon content (TOC) of the Bazhenov Formation. Most of the central part of the basin has TOCs over 7% with some large areas over 11%. By comparison, the oil generative part of the Bakken has a TOC of 18% in outcrop where it is immature and 11% within the oil window, with the difference due to expulsion of oil in the latter. There are 45 feet (14 metres) of generative shales in the Bakken. So the Bakken and the Bazhenov Formations are very similar in generative potential per cubic metre of rock, with the Bazhenov being twice as thick.

Figure 17 is page 24 of the Ulmishek report. It is a map of the vitrinite reflectance of the Bazhenov Formation. The green is marginally mature and the oil window is shown by grey and brown. Combining the data from Figures 7, 16 and 17, there is a sweet spot for the shale oil potential of the Bazhenov Formation the centre of the West Siberian Basin that covers about 800,000 square kilometres.

The Bazhenov Formation is particularly favourable for shale oil development.

Consider these passages from the Ulmishek report.

“The Bazhenov Formation commonly is 20–40 m thick; locally the thickness increases to 50–60 m. The formation covers an area of almost one million square kilometers and contains about 18 trillion tons of organic matter (Kontorovich and others, 1997).” – page 22

“The organic matter in the Bazhenov Formation is derived from plankton and bacteria. The TOC content averages 5.1 percent over the entire formation (Kontorovich and others, 1997). In a large central part of the basin, TOC is higher than 9 percent, and in many analyzed samples it is higher than 15 percent.” – page 22

Unconventional reservoirs in fractured Bazhenov shales are poorly understood. The shales are commercially productive in the Salym and adjacent fields (Greater Salym area), where nearly 200 wells were drilled into the Bazhenov Formation and the reservoir rocks are best studied (fig. 15). No significant commercial production has been established in other areas of the Bazhenov-Neocomian TPS, although oil flows were tested in many wells. The conventional analytical measurements of porosity and permeability in cores do not reflect properties of the shale rocks at reservoir depths because of fracturing induced during drilling and lifting of the cores (Dorofeeva and others, 1992). Well logs also are unable to identify reservoir intervals in the formation (Klubova, 1988). Indirect estimates of porosity of productive reservoir rocks in the Greater Salym area vary between 5 and 10 percent. Porosity is related to leaching of silica from radiolarians (Dorofeeva and others, 1992), transformation of montmorillonite to illite (Klubova, 1988), or to both processes. Permeability of the shales results totally from fracturing, although the volume of fractures is small compared with the pore volume. Horizontal fracturing strongly dominates over fracturing in other directions. In some instances, the fracturing is so intense that the rocks cannot be cored. The fracturing was originated by hydrocarbon generation and related increase of pore pressure (Nesterov and others, 1987).

Oil produced in the Greater Salym area from fractured self-sourced reservoirs of the Bazhenov Formation contains little or no water, as bottom water in conventionally producible pools is absent. Productive wells commonly alternate with dry wells. Only about 20 percent of drilled wells are commercially productive, another 20 percent are dry, and the rest of the wells produced noncommercial or marginally commercial oil flows (Dorofeeva and others, 1992). During the last 25 years, only about 20 million barrels of oil were produced from the Bazhenov reservoirs of the area (Shakhnovsky, 1996). Oil pools are strongly overpressured; the reservoir pressure in the Salym field is 1.7 times higher than the hydrostatic pressure. At a depth of 2,700 m, the reservoir pressure is as high as 50 MPa (7,250 psi) (Matusevich and others, 1997). Laterally, the magnitude of overpressure commonly changes from well to well. The hydrodynamic connection commonly is absent even between neighboring producing wells. Nevertheless, a limited number of wells have been producing hundreds of barrels of oil per day for more than 5 years. Maximum original yields of wells were as high as 40,000 b/d; however, in most cases yields decreased abruptly in a short period of time, probably because of collapse of the reservoir rocks with decreasing pressure (Nesterov and others, 1987).” – pag26

In comparison to that 40,000 BOPD figure from a vertical well, in 2010 Brigham Exploration had announced that it had completed 39 consecutive high-frac-stage long-lateral Bakken and Three Forks wells in North Dakota with an average early 24-hour peak flow back rate of approximately 2,777 barrels of oil equivalent.

Can we quantify the potential? Let’s assume that in that 800,000 square kilometre sweet spot each square kilometre of Bazhenov Formation averages 25 metres thick with a TOC of 10%. That amounts to 2.5 million cubic metres of organic carbon per square kilometre. If the yield to liquids is 30%, that amounts to 0.75 million cubic metres or 4.7 million barrels. At 10% recovery, that in turn yields 0.47 million barrels per square kilometre. The total for the sweet spot is thus 378 billion barrels, and there is possibly a third as much again outside the sweet spot. The central Bazhenov could maintain Russia’s current production rate of about 10 million BOPD for over 100 years. By comparison, the Canadian tar sands have reserves of the order of 177 billion barrels – about half as much.

What does this mean geopolitically? The very high tax rate on the Russian oil industry funds the Russian State and its adventurist policies. In 1904, J.H.Mackinder developed the heartland theory in geopolitical analysis. In 1919, he summarised his theory as “ Who rules East Europe commands the Heartland; who rules the Heartland commands the World-Island; who rules the World-Island controls the world.”

The sweetspot of the Bazhenov Formation is in the centre of Mackinder’s pivot area, where the “V” of PIVOT is in the map above. The Bazhenov Formation will be literally fueling forays from the Heartland for decades to come. To the east of Russia, China has about one trillion tonnes of recoverable coal which could make 2 trillion barrels of liquid fuels using the Fischer Tropsch process. To maintain comparative advantage against that combined flood of fluid, a good nuclear technology will be required.