Russia’s Gazprom Neft together with France’s SNF and its Russian subsidiary, SNF Vostok, have signed a partnership agreement to develop a new market for Chemical Enhanced Oil Recovery (CEOR) technologies and products for the Russian oil industry.
SNF, the world’s largest producer of polyacrylamide (the water-soluble polymer used in CEOR), signed the agreement in January with Gazprom Neft Technology Partnerships, previously known as the Bazhenov Technology Center.
Although CEOR is embraced globally to boost production in aging fields, Russia’s industry has generally snubbed the technology, largely because of the high cost of importing foreign polymers and the lack of any cheaper, Russian-manufactured, alternatives.
This resistance has affected SNF’s efforts to expand its Russian presence despite the market’s obvious potential. SNF broke ground in 2016 to build a plant to manufacture chemicals used in CEOR in Saratov, located 720 km southeast of Moscow.
The company also set up a Russian subsidiary to run the business. But the commissioning of the facility, planned for 2019, has had to be reset to 2022.
Press reports attribute the delays to a lack of demand for the technology because of push back from the Russian industry; despite the fact that CEOR has been shown in some cases to double production in fields entering the “end of life” stage.
SNF’s new collaboration with Gazprom Neft Technology Partnerships may help convince Russian companies otherwise. The parties have agreed to collaborate in producing and supplying polymers for Gazprom Neft projects which employ chemical enhanced oil recovery techniques.
In effect, Gazprom Neft will be creating a CEOR market in Russia and leading other Russian majors by example. Gazprom Neft already uses EOR technologies at its license blocks in Khanty-Mansiysk and Yamalo-Nenets.
“Testing at our assets has shown that using this methodology increases the Oil Recovery Factor (ORF) by practically the maximum possible 70%—twice the industry average,” Alexey Vashkevich Director for Technological Development at Gazprom Neft said in a press release. “According to our calculations, a further 450 million metric tons (3.3 billion bbl) of oil could be produced in the Khanty-Mansiysk Autonomous Okrug [region] alone.”
Gazprom Neft’s technology subsidiary is a reincarnation of the Bazhenov Technology Center, which was set up in response to US sanctions that sought to block Russia’s access to technologies targeting tight, unconventional reserves like those in Siberia’s Bazhenov and Achimov formations.
In short, the Bazhenov Center, was charged with developing new “Made in Russia” alternative technologies.
Gazprom Neft Technology Partners continues this mission and is also responsible for managing the marketing and monetization of Gazprom Neft’s upstream technology products.
Regarding SNF’s Sartov initiative, a key factor in choosing its location was to be close to Lukoil’s petrochemical subsidiary Saratovorgsintez, which is Russia’s only producer of acrylonitrile, a raw material needed to produce polyacrylamide.
Being able to source local raw materials would enable SNF to compete successfully on price in Russia against imports that are currently supplied from France, the US, and China, according to press reports. It is also an investment in the future.
Despite Russia’s current skepticism, the global oil industry is increasingly embracing CEOR to produce more oil from mature wells and from tight formations, and according to UK media, it is oil and gas that is driving SNF’s growth beyond its traditional water treatment, pulp and paper, and mining markets.
As an example, the UK’s Oil&Gas Authority recently developed an “Enhanced Oil Recovery Strategy” to maximize output from declining offshore wells along the UK’s continental shelf, and it identified CEOR polymers as part of the future of North Sea production.
In response, SNF announced it will be investing over $140 million into a new manufacturing plant in Billingham, UK, to provide local capacity.
