Ihiectoratc of
The North Caspian Basin: Salvation for Soviet Oil Production?
A konrdl 1'aptr
Thit paper was prepared jointly bj
Orhce of Sovieiof
Global Issues
Tbe North Caspian Batin: Saltation for Soviet Oil Production?
Moscow needs high levels of oil production lo sustain domestic economic growth, earn ihe hard currency necessary to import vital Westernand grain, and prop up economically weak client states. Soviet planners are calling for oil production to stabilize at iu presentoverillion barrels per. Meeting this objective will depend on the development of sufficient new oil redrew to offset production declines inroducing regions. Only one new oil region has thisNorth Caspian Basin.
We estimate that the North Caspian Basinillion barrels of recoverable oil Thb is equivalent to about half of the initial reserves in West Siberia, the USSR's largest producing region, and roughly three to five times ihe oil in Prudhoe Bay. Alaska. The North Caspian's Tengiz field alone, which is already under development, may contain as much asillion barrels of recoverable oil
The North Caspian presents greater challenges to Soviet oilmen than has any other oil region:
Oil-bearing rocks are aboul twice as deep as the average in the USSR.
drill and complete wells at deep fields in the North Caspian. Comparable wells in Ihe United States are completed in lessear.
Pressure in ihe oil reservoirs is three to four limes as high as pressures found in West Siberia.esult, one well at TengU Mew out of control and burned forear until US (pecialists were called in lo control it. Formation lemperalures are also high, iricreasing stress and the likelihood of equipmeni failures.
High concentrations of extremely toxic and corrosive gas pose adanger to life and ihe environment
The Soviets, nevertheless, are committed to priority development of the basin. They plan to investillion rubles in North Caspian petroleumover themount equivalent toercent of oil industry investment over the pastears. Demands for development of
so"
CI tQ-IQOSBX Aft!
the North Caspian will come on top of resource requirements foroil regions, where the Sovieu are trying to moderate declines in production. The toughest competition for oil industry resources is likely to emerge in thes the Sovieu try to step up invwmcnt bi West Siberia while building substantial infrastructure in the North Caspian.
The Sovieu recognize that they must depend extensively on Western technology and equipment for development of the North Caspian. Moscow has already spent more than S3 billion on Western equipment for the area, and over the neattight hard currencylikely to award additional contracts worth billions of dollars. French and West German firms are likely to get large coo tracts for expensive oil treatment plants, but US firms will still have promising tipDortunities to participate as subcontractors in the construction of these planu and to sell oilfield equipment. US oilfield equipment is state of the art and surserior to most West European equipment fo* handling the technical challenges of the North Caspian.
Soviet reliance on the West for technology and equipment to develop tho North Caspian is likely to be as large as. or larger than, in any recentincluding the West Siberia-Western Europe gas exportutoff in the supply of Wesiern equipment would stymie petroleum development in the basin. However, the Soviels are likely to beabout the extern of iheir reliance on the West. To diminish long-term dependence on outside suppliers, Moscow probably will try to enlist Western firms to upgrade some Soviet oilfield equipment plants and will pursue joint ventures for petroleum equipmeni more vigorously
With Wesiern equipment, we estimatethe best ofCaspian production would grow ton thend ton the. If things go poorly, however. Nonh Caspian produclion mighl grow tor less by theonsidering plausible rates of decline in production from existing oil regions, the North Caspian is likely to support national production of5n thenly in the most favorable circumstances. With poor results in boih the North Caspian and existing oil regions, on the other hand, oil production could fall as muchelowoal by the mid-
is-"
I
By the, lhc severity of Ihe shortfall should be apparent, If problems persist in the North Caspian, Ihe Soviets may feel considerable pressure lo turn to the Wesl for management aod operating expertise. Wesiern management would improve the efficiency and the coordination of different aspects of devdopment; drilling times would be reduced and production would probably increase. Moscow has alreadyesiern consortium, whichajor US oil company, about joint explorationield near Tengit
We believe, however, that the North Caspian development program would have lo fail dismally before the Soviets would seek joint ventures to bring in Western management expertiseargeoint-venture arrangement probably would concede about half of tbe oil output to the Western partners. Bringing in Western management to operate moreew fields in the North Caspian, furthermore, would increase Soviet dependence on the West lo newituation that Moscow probably is anxiousvoid.
If development of the North Caspian moves slowly and the Soviets decide against Ijiee-tcale Western involvement, they will face the prospect of making do with less oil or pouring even more invesiment into tbe oil industry to keep production up. If Moscow decides to maintain oil output at any cost,.the drain in invesiment resources would undermine goals for economic growth and improvement in consumer welfare. On the other hand, keeping oil industry investment constant would cause output toharply and leadramatic reduction in the availability of oil fot export
Contents
Pa><
Note
Oilong-Term Soviei Goal
North Caspian Basin: Enormous Oil Potential
Below-Salt Deposits: Technical Challenges
the Resources and Technology
Requirements
Equipmeni aod Technology: Essential Ingredients
Caspian Production Prospects
18
Prospects for Other New Regions
Estimating Potential Oil Resources of the North Caspian Basin
upergiant Oilfield
Drilling in the Northook at Two Fields
Ilic North Caspian Basin: Salvation for Sonet Oil Production? '
Oilag-Terui SotletComl
Despite lhc fact (hat oilecoming Incseasingly more difficnlt and expensive to sustam, the Soviet long-term energy program caus for atabllii-log production of oil and gu condensate aboveillioo barrels per day) througbootsee inset, "Soviet Oil Production Ina many ways, Moscow hai little choice in Ibe matter;
Soviet domestic oilnlikely toil provides about one-third of ibc economy's energy needshe source of nearly all motor and aviation'fuels.
Exports of oil to tbe West earn about cioe-tbird of the USSR's bard currency trade revenues, allowing Moscow to make huge purchases of grain and high-technology machinery from tbe West.
Oil exports to Eastern Europe promote closeand politics) ties between Moscow and its CEMAubsuntial cutback in deliveries would undermine ibe fragile economies of Eastern Europe '
Maintaining Soviei oil production at current levels throughithout airable prodoctiooaior new oil region would be nearly impossible. All of the major currently producing regions are mature, nnd output in all of theseikely to be declining In:
In West Siberia, which accounts for two-thirds of national output, appears to be peaking (seend table Ik Because of ihe continued worsening in quality of new reserves, the Sovicu are
Table I
Soviet Oil Produetle
ill
sabaria
uin
lnduda mediioiu Iron. IS* (ft-ninc.Komi ASSR. Central AsU.SSR.cp.6lks.Oeo.ru' SSR.
K.SR.
finding it increasingly difficult to bring on line enough new capacity in West Siberia to offset deplcikei, let alone provide for growth. Wc believe that prodoctioo wQI most likely continue ator the next few years and then begin to decline.
Outside West Siberia, production has been fallingn the other key prodectagVolga-Urab. ibe North Caucasus. Aierbaljao, and Centralhas been declining for several years.tile chance thai Moscow can reverse these declines. ladeed. Soviet press reports indicate thai, at best, Moscow can only hope to stabilize outpui io many of these
' Sm Dl Baanh Pipe- SOV
borSviri Oil ffdw/noti fio-jn im, irw iSoAvi AM
Ol iMesstpsnotOV
funr
Spit*
Satin Oil Production in Peripeclite
Soviei oil Industry has risen to first place in world oulpul byeries of Oil regions, beginning wllh hand-dug wells near Baku. Produclion In each major region hasypical cyclical pattern. CM oulpul Initially Increases rapidly wilh the commissioning af high-quality reserves. As the regionroduclion from the old fields declines and produclion from the new but smaller and less productive fields Is unable to offset thoseventually, production from the entire regionand principal exploration and development movesew area.
The Soviets refer to Iheir successive oil regionseries of "Bakus ":
The first major oil-producing region, near Baku inihe Caucasus, remained ihe USSR's largestregion until the.
After World War II. the focus of exploration moved to the Volga-Urals region. During, the development of large, high-qualityIn ihis region allowed national outputrow rapidly. Bui output from this "second Baku" peaked and beganecline In the
l* early naga of pnutwciton, rturvol, (Wnn.in and arwwtttpowi ore Uili. Adtevate ttiervotr ettium rrttl*dtr iht
aredtmnldyia,
name ttfutrtmtais. After itntal yra'l of arodwilo*.difmnt. wttlfto^ifttt. aad lar rolvmr
UK from fnvfnUf wtth linrmri al th/ ttrmr ef oil To tom.wMioft/orUm-1well Slow, WIlia, -ore.of new Weill needed IO maintain production laiitairi rirantailat-If. Tht a, aftiarairvt mad tomjtttalrd ihnraat mad tktaatat. txraattdtrtvtfi ttehMovtt toatatttatt ihtfitld't tuodnttlna temporarily. bvtvtlirally fSottom omJrodeiltar
In the, ihe Soviets moved on to the "third Baku."developing very large, prolificin Wen Siberia.
But during thend. West Siberian production became Increasingly complicated and expensive. Average flows from new wells fell from more35 while imestmenl rose byercent. The share of free-flowing (easy maintenance) wells feltercent5 loercentlso, the average she of new fields felt substantially. Because of these worsening operating conditions, growth In West Siberian output slowed, and nationalfellfd4
6 the StMeiserculean effort lo reverse the decline In oil production. For example. In West Siberiahe Soviets willquadruple the number of fields brought on line and double the volume of drilling and new well commissioning! overevels. Because of declining well flows and Increasing well depths, ihe Soviets must Increase drilling and new wellevery year to commission enough capacily lo atjsex depletion. Although national output rose6aily produclion rates leveled off and bexan to fallecause of IncreasingIn West Siberia, the Soviets must find andfourth Baku" orharp fell In oil production
The Sovicu have been actively lookingajoe new oil region For several yean ihey have been exploring and Invest igni ing the oil poicntttl of ihe Barents Sea. other offshore areas. Ean Siberia, and the North Caapiea Basin. All of these areas except ibe North CaMgtaji otTer only Ural led poteniial for. Severe operaiing ertviroemcnu. iisadoquste proved reserves ready for dcvcloprncal, and Ihe long leadiimes required for major oflihorc dcvcsogertcAt win probably preclude any significant produciion from these legioni until al least thetec appendix A. "Prospecu for Other New
Tbe North Caspian Easier Knoimoua Oil Potential
Subsurface structures that could act al hydrocar-bon reservoirs are abundant. Al least nine broodfcontain all of ihe presently producinglocated around the deeppcirtion of the baiin. Within these regions lie numerous arches, domes, and other desirablethai could have trapped upwardly migrating hydrocarbons generated by the source rocks below.
Sealing rocks lhal are esseniial to retaining oileservoir areuge salt layer, aod the salt domes It creates, offer en excellent sealing mocha-nlsm throughout the basin. Other significant seals bt the baiin are likely to include rocks similar lo ibe reservoir rocks, but with much lower porosity and permeability ihat would halt further oil movement.*
quarethanNorth Caspian Basin ranks among ihe largest acdlmeatary basins in the world (see figureoviet press report Indicated ihat the oilof ihe North Caspian Basin could be equal to (he original poteniial of the Volga-Urals region, which has produced overillion barrels of oil since. The Soviets have earmarked developmenl of the North Caspian Baiin as the key developmenl effort for
US geologists believe thai Ihe basin Is the world's deepest, with sedimentary rocksoret the basin's deepest point. Withuge volume of rockeologic history spanningillion years, Ihe basin's geology and oil poteniial presentproblems. Nevertheless, our analysis of Soviet and Western geological literature indicates that tbe North Caspian Basin contains the three major factors necessary for Ihe gene ration and trapping of hydrocarbons:
Source rocks that are typically shales or limeslones rich In organic maierial have been burlediifhciently long lime and ai high enoughlo generate oil. condensate, or gas. We believe that at least six separate source rocks in Ihc basin generated hydrocarbons during its geologic history.
Tbe most important geologic feature in the basin is ihe ihkk layer of salt depositedillion years ago. Because salt flows under pressure, il tends lo get squcered into bulb-shaped mounds called tall domes as sediments arc laid on lop of it Tbe salt layer horizontally divides ibc basin, creating essentially two basins in one (secn tbe "above-salt" layers, tbe numerous salthundred have beenall other geological features. These soli domes pierce through the sediments in tbe top half of tbc basin and have created countless potential traps in the same manner as salt domes in tbe Gulf of Mexico, the Bay of Campeche, and Iran.
A reconstruction of the basin's geologic history nnd analysis of the geochemical factors thai control oil generation allowed us to arriveest estimate of ihe amount of oil that is trapped in subsurface reservoirs, known as oil in place (secoviet Basin's Oilnd appendix Bk For technical and economic reasons, most of the oil in
* Porooiy It Iht percolate of roe*ooaipterj hy open or pore
inoil ran aocumulaie.rare ol tbe
case villiCUds nq Ikeooth Will pert roxc
<"
t
Estimating.few.il rotratial
tolof< analyil, hy tolltcung dataariety of tounti. includingItdbufli Journal! and Sovtti open KttftuttfZ
ado//ie Sdvieri
nee drilling and, fy injertnct, wmcn areat ihty btlltvt to bt moil promiring Thii analysts. coupled wllh other soureti, pro-rtdri tome Information on iht dtpih and extent af tht ttitrvtUti and lypts of fluids bring produird MotrovtriZ.
provtaeInformation on many aiprrljitld'i charac-Itrlilies.
for ihe North Caspian, wt
angt id tmmoKi of the region'suied eeochtmicol analysis
to assess tht liketilarOd of all forme:sing infor-mation on the turns af organic mattriol in source re-is and tcenperaiurt profile/ This technique il used by Western Industry to prrreide general guide-linei for rtgtons there rtplotaiior.lill in an early stage
We compartd and
Soviet data, and
Whilt discrepancies remain, moil af the tnfoeenation "at consiiltnl and mutuallyeneral view af the rtrion'i oil geology tmtrgtd. Ourhas shown that these mtthodiairly accurate antiimtnt of thr magnltiidt and rangeasin's reserve potential;asin will be oil prone, gas prone, ot both; the likelihood for large fields: and whether well flowi will bt high or low.
Elll:.Jttng production, kowrvrr. tt more dUJitull because ,vt do not know whal tffort the Sovirts will make to grt ilie oil oui of thr ground Wt derived rough projections baitd on production history In other Soviet oil ba,.ns linolly
3 reviewed the entire
protect
wilt never he recovered (or eexnmeecial uie. hut tbe type* of reservoirs the Sovietsound to date suggcit they can reaionably etrxel to cue act abouleiceni of Ihe oil in place
Out geologic analysis of (he Nocih Caspian Basin indicate* tint recoverable resource* could be huge, perhaps rivaling Weil Siberia in oil potential Assum-ingerceni of Ihe oil in place can be recovered, wc believe (hat:
Thereent chance thai the North Cesp-an Basin holdi nearlyillion barreU of recoverable oil. or roughly three lime* ai much oil at Prudhoe
The bataaair chance of yield.rgilbon bairrli cat cel.oun rraugbly rnraal to mrfial rcterru of the VolgaUrah region
Al the entente, the ultimate recovery could eaceedillion faaircU. more than three time* curreni proved 'etcrvea in Ihe United Statei {tee table 2)
We eslimaie thai aboul one-fourth of the recoverable oil will be found in the thallow ftcldi above the massive salt tayet Thr Soviets have already developed TO above-salt fields thai presenird few technicalew above.salt rcscrvoiri ate likely to be found inrx>aled -ila the numerous sail dome* scattered thi on ghoul Ihe bastn. although trace vrairs neat lhc cenlci of Ihe bast* are more likelyield gas than ml These potential above-salt
Tht ir* .w.atll atatUal -an iH-> .,
-a Ow* at tht Cmbi-
rwaxor* lv> He- ae*ai Ml He-
tastx .tK-eMrMi.acVe.avrM. SODMh/a
J
While we consider ihe oil ai Tengti lo be available lor development. moil of the teat of lhc potentially recoverable oil in oar estimate has yet toeliberate program ofory and development drilling can convert oil in place into proved reserves. Untilrogram it successful, meal of the other oil in Ihe North Caipian Basin can ooly beotential resource. While our analysb confirms recent Soviet claims lhat the North Caspian Basin couldajor oil-producing region In the future, Ihe Uming of production is ptobkrnatk.
numerous, will be smaller and geologically more complea than those already discovered.as it Ihe ease with existing fields, well rtows will be tow because they are likely to contain heavier, more viscous oil
The remaining ihreofounhs of the recoverable oil in the North Caspian Basin is likely to lie below tbe salt layer ateters and deeper. Reservoirs in Iheection arc formed by different geological mechanisms and could be of substantial siic. We believe the geographic location of potential below-salt reservoirs may be limiteding around ihe perimeter of ihe basin where subsurface rock types are conducive to large accumulations of oil (see figure 4)
So far, the Soviets have discoveredilfields below the saltumber of deposits, including ihe supcrgianl Tengia oilfield, are currently underA comparison with analogous basinsand analysis of Soviei geological data suggesi thai the Teagiz held, which probably contains aboulillion bands of recoverable oil. is likely to be the largest, or one of the largest, fields in the basin and will account for at leasi two-thirds of North Caspian production in.xamine)in moreui we cannot rule out the possibility of other mult! bill ion barrel oilfictdi in the North Caspian Basin. The deep below-salt rocks offer cicelieni possibilities for the discovery of additional major fields
'Oilfieioi wllh recmeilfc reserve* inner ihin TO millmine eseUsnid (iiuu To linkeVs mini eunlain reeuiersbteof atarrctt
Developing Betow-Salt DepoaitL Technical Challenges
Soviet geologists have characterized the below-salt depcniis in the North Caipian Baaln at the USSR's mosi difficultlTexU io dale lo develop the region's deep oil potential show tbal the Soviets are having great dirliculiy dealing wiih major technical problems and lhat Weatcra technology is critical io solving them. Development of fields in lhc North Caspian has been complicated, cipensive. and slow because:
Depthearing rocks is aboul iwiee as deep as average drilling depths in ihe USSR. Srwsct drilling crews lack Ihe cipcrtisc and much of tbeequipment and icchr-stogy to drill deep wells efficiently For cnarnplc. wc estimate lhat. ontwo io font year* have been needed in drill and complete wells ai Tcngn (see appenOnecent Sovieieport iradrcaied thai annual drilling plans at Tengii would be completedonth elsewhere in the USSR. Drillingcrrscthcless. often fail to meet plan, and some manager* of drilling crews reportedly have been fired fot incompetence
Pressure tn the ml eeaervoir* ia three lo four lime* at high as pressures found In Went Siberia Drilling crew* mull uie special equipment and undertake precaution* to avoid bio*he mosi visible, sign
o*tralled Hen ot oilhaistew
diillinidawnValetl the
dritlinr haia iiIbryi*cnajpi ibe iuc*
4.
. Oil will -i
afeoMrvl Tht
UoHVat oerurrrd rvidafr ofi tr'Of oaJWi*o.ovfttaw I* iftirt 4tn*n
ihr writ But tVeausrr*e'r
Ian) or* Wf*llrrJturlirt; In tumvori7*r
.uT* javeur-
Iiii cVoHftl Ini i
r'oe"ki
Ssviei inability to handle high reservoir pressures wai the wdl blew oui of5 at lengi/ (see figure SJ.ovicu narrowly missedblowcuind oil ministry officials repiriediy remain very concerned about the potential for future blowouts.
High concentrations of extremely toxic andguignificant danger io life and the environment. The Soviets need special plants to process oil with high concentrations of deadlysulfide. Technical journals indicate that, at come locations and depths, Tenc.ii oil contains little, if any, hydrogen sulfide, but most reportingthat the presence of hydrogen sulfide is ihe rule rather than tbe exception.'
Formation temperatures are high, increasing sires* and the likelihood raf equipment failures. High temperatures act in conjunction with ibe hydrogen sulfide to accelerate corrosion (see
he oil-
Because of these technical challenges, development of Tengiz has been much slower than that of the USSR's other very large oilfields. Romashkino in the Volga-Urals region, discoveredegan produclion in
evel of kjdrotcn suinde can 'ity ullu' tenrwrllKa pitseM ai specific lotausni
lor mil*.
amoilor in West Siberia, discoveredegan productionn contrast.id not begin prrsduciion
Finding the Resource* and Technology Burgeoning Requirements
Because of its technical challenges, the NorthBasin will be relatively expensive to develop. Tbe Soviets plan lo investillion ruble* in Nortb Caspian petroleum development over themoum equivalent toercent of oil industry inveslmenl over the pastears. Some of these funds are almost certainly earmarked foroilfield equipment, which the Soviets will need in substantial quantities to meet productionen without ihe demands of the North Caspian, however, oilfield equipment plants are working above their design capacity. Shortages of such equipment will force new investment in this industry or more imports of equipment.
Tbc North Caspian also needs substantial investment in housing, roads, and other Infrastructure,ot as much as would be requiredemote, undeveloped area such as West Siberia. Tbe North Caspian region alicadyailroad, hard-surface
-
Table 3
Characteristics ol Key Heidi in (be North Caspian Basin
Piiii.k
VotBKK o( HlOtOfln
Oio.ik uwivwl
mo
Ml
many large cities,rude oil pipelines tbat are curreoily operating at leu than Full capaciiy. Moreover, the North Caspian Is near the industrial regions of the USSR and the Volga-Urals region where many oilfield equipmeni plants and petroleum refineries are located.
In addition to investment funds, the Soviets must supply the Nortb Caspian Basin with trained oilfield personnel, presently in short supply. Some drilling caews are being flown In to the basin on temporary assignment while Others are being permanentlyThe Soviets arc also relying in part on East European workers at Tengiz. and may put pressure on Eastern Europe to supply greater numbers. The East Europeans have Utile interest in doing this, bul would probably concede because of ibeir heavy reliance on energy supplies from tbe USSR
The most dllucnlt period for Moscow to balance ibese competing demands will be tbe, when the oil industry will be stepping up in vestment in West Siberia while building substantial infrastructure in the Nortb Caspian. The Sovicu perceive an urgeot need to maintain oil production but will be hard pressed to find sufficient resources to support both projects. If the Soviets allocate whatever investment is necessary for both, we estimate that oil industry investment would rbcleast on the order of IS percent per year through the, compared with annual growth of aboutercent. By ihe, annual oilinvestment could be as much asillion rubles, compared with roughlyillion rublesbe share of oil Industry Investment in total investment would almost certainly rise from its current level oferceni
of the Noeih Caspian will come on top of resource requirements in eiisting oil regions, where the Soviets are trying to moderate declines inIf Moscow transfers resources from lhc older regions to support development In the North Caspian, output probably will decline fasier in ihe olderIn ai least one case, reassignment of workers from an older field lo Tengjr reportedly caused produciion to decline in tbe older field. West Siberia, in particular, has acute shortages of infrasiruciure and will fall further behind il ihe lion's share of available resources is allocatedhe Norih Caspian.
The Soviets have few prospects for shifting resources from other energy sectors to oil developmenl
Maintaining growth In natural gu supplies isincreasing inveslmenl for gas pipeline con-slroction, for gas storage facilities, and forconsumers from oilu.
Increasing electricity supplies by utilizing coalin the eastern USSR will require sizable inveslmenlevelop and implement technology for using low-quality coal and iransmlttini power over long distances.
Gelling (he nuclear program back on Hack in lhc wake of die Cbcinobyl' accident it requiting, among other (hints, increased spending lo improve safely.
installing equipment in (he processing planis needed lo lemove high concentrations of hydrogen sulfide from North Caspian oil and gas.'
the post, when investment loquiieaKnls for the oil industry have risen tharply, the Soviets have held back on invesiment in Ihe coal Industry. Even If ihe Sovieu decided to cut coal investment substantially, Ibe amounts made available would be much loo smalt tooubling of oil industry investment
Acquiring the necessary rraouroc* from other sectors rat the economy is equally persMcnuiic. Gorbachev'* topat ion and improving consumer goodsvery large investment requirements Ultimately, Ibewill have to choose between maintaining oiland keeping commiimenls to modernization and lo ihe consumer
esult of these problems, Moscow hat spent more than S) billion for ihe North Caspian fields over ihe last ihree years on Wesiern equipment for drilling, producing, aad rxoeessing operations The Soviets turned to Western supplien for high-sirength, eorto-iioo< resistant drill-pipe aad wrllarther. more, lhc USSR hat imported from ihe Unitcc* Kiragdom and West Germany nearly all of ihe corro-saca-resritant. high capacity wellheads used alanda addition, ihe Soviets harearge number of highlyound* per square inch and greaier) blowout
The USSR has relied eaclutively oo Wesiern firms to build pipeline gathering sysiems:
Fqtalpttttnf and Techno logy: Kiscatial Ingredients
Much of available Soviet equipment and technology for extracting and processing oil and gai is inadequate lor ibe great depths, high pacsaurca, and atrerady corroaive conditions of the North Caspian Basin. During ibe, for eiample, drillingat Astrakhan' reportedly were often delayed because domestic drill-pipe and well casing was not sufficient'* rorrrstion resistant and leaked frequently. Sovkl-rnade wellheads and blowout preventers have also provedccording7 pressspecially designed" wellhead manufacturedaku oilfield equipment plani failedue to corrosion liven the best blowout preventers in Eastern Furope, furthermore,not be adequate and would probably lead lo ncmercKit btowejuis. lost -ells, and perhaps even fatalities The Soviets have also had gieat disrkwlty fabricating and
*aad la emiiMn-ewni. li
ef aei'rduK nirei it.ii ca> he iSeaed iindli
he USSR tadtinuewr in. ox at Mubaetl tn Ccmril Am and tin second il
the plant at Mubarak -ai built In therelatively eld Soviet leehncaoay ejfuble erf handling only low levvti
of hydrogen incite tin thann addition, thercrnm thai Initial itanspepceitioni mi bent hiOndbwf.ir-.nl teco'cfcair the war gai plant rrcm
ihe FreiKti raaineericis Sew Teelinlp. probably because of carlte* proWeam ai Miibttet. ike needvoccu tarter aoiumei ol |ai
hifhei eoncaimlon ol hydeoten lutMe it Orenburg,act al cmriditee In Sovirl lechmaogy.
" Dei (We regaled liwrm. the USSKar torehaied only aIromhinu. Mow olthc duplies imtnncd om lhc paneanotnr Iroaa Romania aad are reronedty capable oldntlat to IWOnemiSoviets,hue eecently oigaBScd dniitiillctiii" with the Refluaian rip-In October Ihey approachedinu abw tbe fonrH ol
ioiM vcnuir io miaufaetu'en additioa.ilK Seaieii are purchasing Writers -ckoiet ilfii uied lopafl
g aad conducta-ilminii-.il unable olio6,KO
melee depiai It" ft InairUn Ruin
" The Smeri hire alio porehiiedlirgcof wall-eompte-
ouipaiem Itr Toigiranit Aunthese pvrchaics Include
-to-Moli nmiH uied to priloni'imi euuiiment to ieil otl the rollingronfiotinrndattraiWie. in cnnit nl prcdocimri from lie
Tabled
Western Petroleum Treelants In Ike North Caspian Badn
Under these cooiraets. the Soviets receive well-site lesl separators, central gathering; stations, fathering lines linking Ihe wells, laigei lines linking central gathering stations to the processing planla. and com-municaiion sysienis thai monitor and control the cnlire network.
The Soviei* have also relied exclusively on Western firm* lo build oil- and gas-processing plants (tecfter purchasing the first Tengii
be Soviets indicated Ihey would construct subsequent plants tberrtsdves, bul they eventually lurned to Western suppliers. Purine initialfor ihe second treatmenl plant at Tengiz. Soviet negotiators began by insisting on using as much Soviet equipment as possible As the negotiations
progressed, the Soviets iequated Western contractors to supply more and more of tbc processing equipment.
The Soviets, however, appear to bein operating the planis built byAlthough ibc Soviet press reported that lhcplaniat AstrakJun* was completed inpress reports allude
only part ol" tbe fadlifyeToperating. Despite the use ol Western equipmeni. lax tafety standards haveto plague the project. An ei plosion in7 at an underground gas coodensale storage fadli* ly. for example, killed four people and resultedemporary shutdown of Ihe gas-processing plant.
s-om
Soviets will have to continue these imports, creating substantial trade opportunities Toe ihc West over the neat decade. There aiefiimt outride of Western Europe and North America that can supply Ihe ecjuiproeii Ihe Soviet! need lo develop lhc North Caspian. Over the neat decade, Ibe Soviets aie likelyward contracts worth billions ol dollars.
Furthermore, ibe Soviets appear to see little threatembargoes fiom West Europeanthousands of West lluropean jobs dependentorders, Moscow may hope ihat Weslwill be reluctant lo agreeSthat run counter to Soviet interests."may perceive, moreover, that Westget comparatively fast approval fot'he Soviets
purchased some geophysical
oquipment1rench firm because the French were able to obtain export guaranteesof the computer equipment
Nortb Caspian Production Prospects
We eslimate that, in the most favorable circum-sunces, the North Caspian Basin could produce as muchn thendn thesee inset. "Estimating Oil Produclion in tbc Northver the next decode, most of Norlh Caspian oil produclion Is likely to come from Tengii. Given Ihe very slow pace of exploratory drilling the discovery and delineation of olher large fields mil require several years. (Tbc Soviet press reports that Tengii itself will nol be completely delineated until Ibe)
probably will continue in award most of the large Contracts for oil treatment facilities to French and West German firms, bul US firms will still have opcoclunittcs to participate as subcontractors in ihe construction ol ihose plants. The Soviets see several advantages to dealing with West European suppliers. First, firms from Francey are already on lite nnd arcumber of oil and gas treatment plants. The Soviets have awarded ihem subsequent Conlraels fOi additional treatment plants The Soviets may want lu continue dealing wiih these firms to facilitate assimilation of this technology
Given Ihis production outlook for Ibe Norlh Caspian Basin. Ihe Smieis would need production fromoil regions ofn thendn theo meet their produciion goal ofver the not decade In our best rase scenario, wc assume the Soviets are successful in elforu iq moderate Ihc
l ilnse Winii(il lOOOl andmar bctamtm>|Vupon iltm FW iiiwii.rtrnili nliletlitiipaMW(in roiiM. SS rxmni of Dr -ilt>ipOtli miln USiH in nil. rnniio'iO -nh IISfoitc
IS
Estimating Oil Production ia the North Caspian
Our first key assumption In deriving best easeIs that production trends In the North Caspian Basin over the nextears will be similar to production trends In the Volga-Urals and Westduring Iheir firstears of production. These three oil regions have In common key factors that determine Oil production:
The amounts of potentially recoverable oil are very forge. Our medium level of confidence estimate of aboutillion barrels for the North Caspian Is close to the Initial >olgn-Urats reserves of about SO billion barrth.
A substantial share of the basins recoverable oil is located In one oilfield. Tengis, withoercent of our estimate. Is similar in Importance toand Samotlor.*
Domestic priority for development Is high. The Soviet press has repeatedly Indicated thaiof Ihe oil resources of the North Caspian Is vital to the economy. The Volga-Urals and West Siberian regions received similar priority during iheir firstears of production.
For our best case scenario, therefore, we assume that the North Caspian will be producing In thebout the sameercent) of the basin's recoverableillion barrels) as was produced in the Volga-Urals and Wat Siberiaears after production began:
For ih, VotfJJnt, tryo SO
pmmi ofWnt Slherl, Samoilor. -li*
HlltMo,ofte-ji )f
UU total' ril'naivd Ittirvtt
'Although well flows, especially ai Tenglt. are likely lo be higher lhan in the other regions because of high permeabilities and high formation pressures, we art assuming ihat this plus will be offset by slow drilling and the need to build oil treatment plants.
Even so, our estimates assume that the Soviets will improve iheir ability to cope with the technical challenges of the North Caspian and reduce the three to four years now needed lo drill and complete wells to onealf to two years. We believe thai this would be difficult but nol Impossible, as even these reduced drilling times would still be very long by Western standards
Finally, we assume that the Soviets will add oil-processing capacity fast enough to keep pace with Oilfield development. In recent negotiations for the Tengii II and Tengis III plants, the Soviets have
Quill
16
SeettA
flfiRatssssu^na^
Projecting Oil Prodmetion ii ExitlUg Region! Btu Case Assumptions
For this scenario we assume that Well Siberian output peaks then declines slowly Int an average annual rale of 2half the rate observed In the Volga-Urals region after output peaked there. Nearly evenhlng goes writ in West Siberia production from older fields declines slowly while new fields are belter than anticipated; sufficient Infrastructure and personnel are available to service and repair on enormous Inventory of older wells; and transportation bottlenecks to developing an escalating number of fields are ameliorated.
In addition, the Soviets are successful In their efforts to stabillrt the produetloi* decline in other regions Output Ineclines at an average annual rate ofercent, compared with the observed dj^crcenl annual declinend theercent annual decline.
assume that the quality of newterms of site and wellto worsen; production from fields commissioned In thealls sharply In, al the rate observed at Samoilorransport bottlenecks and equipment shortages hamstring Soviet efforts tonew fields andigh share of the well Inventory properly maintained and operating; and the frequency of ruptures and the need to replace Inter-field gathering pipelines Increases, halting production temporarily at some fields.
In addition, the Soviets are unsuccessful tn further slowing the decline In ouipul from other regions. Output In these areas continues to decline at the rate observed In ihe, aboutercent.
We also assume that growth In oil Industry Invest' mem stays al or near current levels.
further assume that the Soviets Increase oil Industry Investment to whatever level Is necessary to carry out this program
Wont Case Assumptions
In our worst case scenario. West Siberia output falls at the same rate as ll did In thee
the Sovtra irwloted thr mUilr Ob'frUiiberiaatter rate andtore hophaiord* manner thanla ihe Votf-Urali region. Wen StterU* ewpiii opals'ner nee than Vatga-Urali aeodtfton
we cannot rule oui Ihe possibilityajor discovery in existing ret tons that would substantially improve production prospects, we believe it it unlikely over the next several years. Nevertheless,arge region, and exploration is not complete In their efforts lo maintain oil production in this region, tbe Soviet* will move exploration northward, but the trend toward smaller and less productive fields is likely to continue
Implication*
Soviei oil production inill be well short of plan targets unless ihe program to develop the North Caspian Basin succeeds. If output from existing oil regions falls sharply over the next decade, production from Ihe North Caspian will have to rise rapidlyeep Soviei oil output from sinkingevel that
4*
would undermine domestic economic growth orpreclude exports by the. Curtailing exports, in turn, ultimately wouldevere reduction in the bard cut ency earning* needed to sustain Imports of Western grain and machinery and would risk devastating the already fragile economies of Eastern Europe
Western equipment and technology have already proved vital in developing North Caspian oil resources and will continue to be essential in. The Soviets have few prospects for nKidcrriizing andtheir oil equipment Industry rapidly enough to meet tbe demands of the North Caspian in the next decade. Tbe industry historically has been slowevelop new equipment and make qualityTo fill roqubrcjocnts of tbc North Caspian, Moscow would have to design, develop, androad range of advanced. corrosion-rciiHantof high quality and precision wilh sophisticated control systems. Given the currcel state of Soviet manufacturing technology, auch an effortumber of year*
A cutoff in the supply of Western equipment would stymie development of the region's oil potential. Tbc Soviet* would eventually make gains tn manufacUtr-ing tbe needed equipment, but this would probablyajor shift of resources from other sectors of the eexmomy. In the interim, oil wells would take much longer to drill and complete and tbe likdihocd of blowouts would increase. Moreover, the use of Soviet processing technology in lieu of Western oil treatment plants would substantially slow the addition of processing capacity and increase the risk of leaks of toxic gases and fatalities. Growth in production would have to be slowed to match available processing capsdt,
Even with Western equipment and technology, the Sovicu probably will find it difficult to achieve quick gains in production from the North Caspian. Our best
-ciimfc iherVc0 develop and peoduee
d gii-lin eedpmcM 'hit "as wtcnllr needed In Wen Siberia. The pctrutemmini"'! >n> Uwnril)
erlHel led foe Urn delay
case production estimate for the North Caspiansubstantial rcduciion in the time needed for drilling oil wells and building oil treatment plants. So lar. however, continued difftculty In drilling deep wdls aod building the processing plants suggest that tbc Sovicu could face substantial delays In developing ihe North Caspian's oil reacniroes. Drilling oil wdls. building Ibe gathering pipeline network, and adding oil treatment plantt masl be well planned andDelays io any ofctt ofwould hold back growth in oil production. '
By Ihehould become clear how successful Soviet development of tbe North Caspian is likely to be. Current coniracu for oil treatment ptanuroduction Urget ofrom Tengiz alonef tbeSovieu fail to achieve this produclion Urget and realize that tbey areorst cose productioo scenario for, they may feel considerable pressure to seek joint venture* with ihe West to obuin management and operating expertise
North Caspian development would be an idealfor joini ventures because its product could be readily sold for bard currency. Furthermore, there are many Western firms, paiticularly in the United Sutes, with experience in dealing with ihe kinds of technical challenges found In the North Caspian Basin. Indeed. Moscow has alreadyestern consortium, whkhajor US oil company, about joint explorationield near Teagiz.eal is finalized, the US company reportedly would be allowed to export oil from tbe USSR in order toard currency fund from which consortium members would be allowed toprofits
Western management would ceminly improve effi-ctency and reduce operating costs In addition, the coordination of different aspects of development would improve: drilling times would be reduced and
production would probably Increase. Wc believe,thai lhc North Caspian development program would hove lo fail dismally before Ihe Soviels would be willing to bring in Western management expertisearge scale:
A joint-venture arrangement probably wouldabout half of ihe oil output to the Western partners For the Soviets lo perceive lhaias advantageous, they would have to believe that peed net wo would more ihaa double.
Bringing ia Western management to operate moreew fields fas tha North Caspian would isscrease Soviet dependence oo the West lo newituation thai Mratcow probably is anikwi to avoid. To minimise economic vulnerability, the Soviets would almost oertaialy warn strongagainst equipment embargoes.
If North Caspian development moves slowly and the Soviets decide against large-scale Wesiernthey will face the prospeci of either masting do wilh less oil or directing enough investment into the
oil industry lo keep produclion up. Programs now under way to motlerniie oil reAaerica, increase subtli-tutton of gas for oil, and wean client slates frora Soviei oil eaports would, il luecessful. makedecline* in oil output leas durupCive. Prospects are poor, however, for Implementing conservation pro-grama inhat would substantially reduce the cconorny'i oil requirementThan, if large decline* ia oil output were lo ocoir rarer (ha wtit decade, they would mem likely cause aevere economic disruptions and bring economic growthall.
If Moocow cbootcsain cil output al aay con, Ihe drain ia im eitmcit rcaoarcr* probably tvcaald undermine goals for economic growih and imprewc-ment in conivmer welfare, and thereby perciprtate bolter dispute* inoreover, ligbl supplies of both oil aod investment rr*ourcc* are likely to tempt policymakers to returnheir role* as strong centralhereby undermining, or at least distorting, Oorbacltcv'a reform agenda
a
Appendix A
Prospects for Other New Regions
Barents Sea
Geologic analysis of Soviei technics! reporting indi-csitj thli tbc Barents legion could eonlsin IS-JO billion btrreU of recoverableespite thisthe Soviets have yet toajor,onshore oittVetd ia the Bateau Sea. (Pescfeanco-rtrsi, primarily an onshore held tea tod on Kcdfuvcv lslaod, has been ocoducing small aovonats of oilhe Soviets have been actively exploring this region since the, but nearly all discc-rerici reportedly contain predominantly natural gas.with the lack of progress in Barents Sea exploration resultedajor reshuffle ofew years ago. According lo recent Soviet press reports, deficiencies in Soviet geophysical equipment and offshore drilling operitioni In arctic waterslo impede Soviet exploration efforts, and the Ministry of Geology and the Ministry of the Petro-kum Industry arc blaming each other for the limited success
Even if Moscowajor oilfield in the ncil few years, substantial production would be unlikely until at least theong lead timesfivee required for majortlcvclopcacnt. The Barents Sea poses fcmucUbie etiatvenges to say oil devcaaprnent effort. Storms, high seas, fog. snow,someack ice would hamper development and would increase the dii.icu!iy of maintaining drilling and pumping equipment. Even under the best of conditions, this oould entail an effort far offshore in arctic water- scale never before attempted by the Soviets
peicent of local reservesexploration activity remainsmallhe geology of thb region is pariieailarly eeenplex. la contrast io West Siberia, where many peUoacurn deposits are large aodsimple. East Siberia contains much smaller, tbio-ncr. and more emenples dridt>1Vc*use of the distance to iradostrialieod centers, ihe corarstciity of theand the severe climate and terrain, il is doabtful thai the Soviet* will mount any major effort to develop East Siberian oil before Ihe next cenlury.
Offshore Sakhatiii
Renewed exploratory activity is under way offshore Sakhalin Island. Previous discoveries oflshore turned oui to be predominantly gas and gas condensate with limited oil reserves. For example, reacrvca for two offshore belds discovered inere reportedly estimated at roughly JCO million barrels of oil andillion barrels of oil equivalent in natural gas. However, later discoveries, according to Western businessmen, hive been mostly oil. The Soviei* have iccenily approached Western firms aboui jointof ihese new fields. Although wtvditions off Sakhalin Island are severe, some Wesl era firmsthai ejcv-esopenenl weald be profitable even with oil price* of SIO per barret. Even SO, Ihese fields arc reportedly small, and Sakhalin's contribution io the overall pa-vWtion effort will most likely remain
-.ia oi
NQ, SrptfMb* Itfl. CanDmHum Uriarnvri. (ul
East Siberia
Significant presdueiion from thisIs unlikely in. The Soviets have, to date, discovered only limiiedI billion barrels or roughly 2
"Dl Reteaecb PaperI00S1 iSeerel Nf NtA*vl(Iht Oil Poirmttt oT iht tWrwi Sea. tut
Untttr
Appendix it
Potential Oil Resources of Ihe North Caspian Basin
Assenting tbe petroleum potentialedimentary basin raises technical problems aa well as analytical issues. Even though tbe North Caspian Basin has produced oil from shallow reservoirs for manythe tower section of thb ervormously deep basin can be considered virgin territory, an oil frontier. Detailed geological and geophysical data arc far mote limited than would be the case in the West, but fairly abundant compared with data on many other areas in the USSR. Because of tbe general lack of hard data from actual drlling, our analysis of the oil potential of tbe North Caspian Basin relied on geeehemlcal theory toramework for assessing the basin's oil resources
The primary dement of the methodology used was geocnetnkal analysis of source rocks. This analysis yields ibe likely volume of oil generated by, and expelled from, rocks that have proper gcochcmical characteristics. Becausemall portion of the hydrocarbons generated by the source rocks will ultimately be recovered for commercial use, several steps are needed lo arrive at an estimate of the potential reserves of theeries of calculations determines the likely amount of oil or gas generated by the source rocks that gathers In cornitswcial-stied COTCcnlrations, known asecovery factor Is then applied to the arnount of trapped oil. which reflects the best estimate or tbe quantity that can uliirnaldy be extracted from the oilfield." .
Hydrocarbon Generation
The North Caspian Basin is rich in rocks that arc buried deep enough to generate petroleum. Typically, these "source rocks" are organie-rich black shales(foieatones) deposited under shallowconditions and chemically altered by heat afler burial. Both carbonates and shales are present in the North Caspian Basin: by some accounts these two
types of rock make upercent or more of ihe volume in the section below the sail layer. Western and Soviet geologic literature indicate thai six major source rock uniu may exist in the North Caspian Basin, ihree below the prominent salt layer and three above it
Oil ts formed by ihe chemical clccomposition of organic matter in the source rock. The complex molecular chains that make upprimarily of hydrogen, carbOD, and oxygen, bulmany otherbroken clown, orhen subject to heat. This process yields hydrocarbons (simpler molecules obtaining onlyand carbon) as well as several byproducts such as sulfarous gases. As the source rocks arc buried deeper, the rate of formation of hydrocarbonssome experts believe the rate may double wilh ewy lO-degroe (Centigrade) inaeaue InForiven volume of source rock lyingeter depths may produce one band of oil per year, but rock0 degreesproduce two baneb per year.ule, high temperatureshort time have oa effect oo hydrocarbon production similar tooflg lime. In any case, an enormous length of lime is needed to successfullyignificant quantity of hydrocarbons. For example, some of the most significant source rocks of tbeWest Siberia, the Middle East, and theillion years old. Time is also critical after hydrocarbons are formed. If ihe generated hydrocarbons are not expelled from the source rock inio surrounding rock layers, tbe beat will continue io crack Ibe molecules until only gas and carbon residue remain. Therefore, given theof ibe sourcearrow range of time exposures exbis for the optimal formation of each particular type of hydrocarbon.
aadare not incUded in tMt *efo"
TabkS
Estimated Potential Oil Resources o( lb*aspiaaslu
rclale (be limetemperature roiiuiied io form hydrocarbon! io the cate of thr Norlh Caspian Buio, weethodology baaed on ihcIndexethodology proposed by Russian scientists and developed by US gcaxhemist* in. The TTl formula combines geologicand timeingle indicator. Ranges of these indicator* are necessary for (be geneiaiion of different kinds of hydrocarboni Tbe indicators for eachsource rock anil arc plotted on mapa of the North Caspian Basin to identify specific areaseologiconsilientthe generation of oil or gas. Combining Ihese areas *iib estimates of source rock thickneaa and (tensity, we estimated ibe emantity of potential source rock present
mall fraction of this sourcerganic material. This percentage it reported in technical literatureew case*upported by examin ing the likely eavironrrsnti of depoaition and by drawing analogies wiih present environments, giving an estimated perceniage of deposiied maierialrganic in nature. This material, stored in iheas they are buried io greater depth, is called total organic carbon (TOC) and can range0ercent ot more of Ihe rock weight We indued likely TOC values In the North Caspian Basin souice rocks to beerceni
ortion of this organic maierial has Ihc biochemical characters ka necessary to becomeupon beating and aging. Thofenerauve capacity of theby examining the environment at Ihe lime of deposition sad the likraty type* of organic material deposited in such an emironmenl In thb assessment, conservative values of the generative capacity were used, which ranged from the minimum capacily that lots been scientifically verified to slightly abovecapacity
the h'oimatlen of Oilfields
The expulsion, migration, and trapping pcocesse* thai forr r. wcrable oil deposits are poorly understood, but capers* generally agree thai they are very ineffi-caeet.etell,mall percentage of tbe oil ferserated ia the source rock will ever br recovered for commcrcial use. bet estimates of this perceniage varyew researchers bebeve as much aserceni or more of the generated oil Is trapped in structures, ai least in certain basins where fewand faults exiit thai could serve ai conduits for
hydrocarbon seepage and lost Bui moti eapert*lhai. in an<rr*gc basin, no morenull percent of (be genetsied oil will ever be recovered Bccauie of ihii Urge uncertainty, made conscrva-lirerapt tons, thereby limiting Ihe chance of ever-cs lima ting actual recoverable leaourcet
Claysoct*:rcf orfanic material* lhai could laier become source locks are deposited on Ihe sea-Boorater-rich niatrU. As the ledirnenl is progressivelyils organic material lo the greater depths needed to teneraie hydrocarbon* -water Is squeezed out and the clay rs compacted, losing considerable volume. Since ihe process ofgeneration does not begin until thehave esperienced nearly all ihe compaction iheyever undergo, hydrocarbons muss escape tbe source rock by methods otber lhan compaction itself. This can occur through volume cipansion ofgalea and liquids and Ihe natural gravitational tendency foe lighter oil and gas to migrate upward under pressure from the heavieronsiderable percentage of generated hydrocarbons will always remain in the source iocs, however, especially If Ithale, and will never be recovered
Megrarloa
Once the oils and gases have been rape!led from ihe source rock, they begin migrating laterally andfollowing Ihe easiest routes Along the way. some of ihe fluids are tosi. Some fluids are swept along by underground waters ia lhc beds into wbich they have migrated, where they remain inconcealrstiont ot are carried la surface springs and dispersed, tn tome strata, oil may be lost to commercial capfaiiation because it clings, in the formhin film, to ibe surface of Ike grams thai make up the rock. But moat is probabl) lost liiroragh seepage When ihe hydrocarbon fluids reach fractures or faults or strata that arc not sealed by anlayer, they migrate upwardhe surface and seep away. Seeps are quite common and to that day are one of the easiest-to-ine* ways of erjssdring for possible new oil regions
Trapping
Because of the losses during migraiion,ortion of the hydrocarbon fluids will migrateoint where ibey can go no farther bocaatc of aabed above and on like tide* of the structure. At these locations the fluid* are said lo be (rapped, and they accumulate in pool* that we commonly recogniic as reservoirs, oreservoir* coessisi or poroua rocks in which fluids occupy tbe poic space and can be sandnd otber lypes of rock. They can hold oil, condensate, or gas. and typically contain tome amount of all three.
Rccovtry
The percentage of oil trappedeservoir that will be eitiacted for cornrnercial use i* rxobtematicrecovery cap, in (he e* weave, be a* Utileew percent or more thanercent;angeoercent is more common US operator* average only aboulercent using itaic-of-the-art equipment and lechrioiogy and water flooding
Primary recovery factors for fields io the North Caspian Basin are likely to be aboutercent. Never the leas, our methodology is designed lo arrive al caw livethis case ashe amount of cat thai might be recovered in the long run. including secondary and tertiary" 'he North Caspian Basin study, we asaomed aboutercent fot ultimate recovery bated on the type* of fields that have been found io date and their analogies elsewhere. This percentage, though realistic for tbe
-ealaa ailracwf aai^awiH adwMaaal ihi a* ad itmt*
ihiiwel'iey "eihoOi n
UiK indiWr'i iwnv laiill aererraaie notnu Hr vwjndary ercevrry* percent-
onu Im iniiaiy eeeovttyeaaonable appraath
of Ihis study, may prove somewhat conscrva-live in ihe Ions run. Much will depend on (he Sovieu' abiliiy io install gas injociion facilitiesaintain reservoir pressure andonitor gas-oil and oil-waier contacts throughout (he Held as well a> (heir eipenisc at modeling (he tweevoirvoid leaving oil behind. Id (he history of Ihe Soviet oil industry, there is liitle to suggest the Soviels are capable ofery efficient gas injection infrastructure, en pedal ly in fields as large, complicated, and overpreasurcd atin the North Caspian Basin. Nevertheless, the Soviets have, to date,niqueup by money for Westernto develop the North Caspian Basin with the utmostIf Ihit sort of determination spills overoncern about maximum recovery, achieving recovery' factors of aboutercent should present few techni-
problems, although it will certainly require large ,
outlays.
Appendix C
Tengiz,SupxTgiant Oilfield
calculations, based ondata
from Soviet technical journals, indicate that Ten*ii is one of the USSR's largest discoveries, rivaling Santot-tor in Wesi Siberia- Soviet statenvenu tend to confum this finding. For example, tn8 Soviet Oil Minister Dinkov stated that Tengii contained roughly II billion barrels of oiL He did not specify wbeihcr this figure refers to oil in place or to actualreserves. We believe the figure refers lo reserves, pertly because it falls roughly in the middle of our estimaied range4 billion barrels for recoverable reserves, and pertly because Soviet press reports continue to suggest thatupcrgiant cril-field.
Reserve* at Tengii can only be estimatedery wide range because Tengiz is not yet fully explored and becausecymogeoeous reservoir. Such critical factors as poroiiiy and initial waterwhicbajor impact on calculations of reserves, vary throughoul the reservoir aad are often rsresentcd at ranges in Soviet data. We haveontour map of the Tengiz reservoir and believe that our estimate for total volume of reservoir rock is fairly accurate (see figureut, because of uncertainly in estimatesorosity and initial water saturation, we can only roughly approximate reserves.
Another favorable characteristic of Tengii rarobably will be comparatively high well flows. Soviei technical journals indicate that tbehicketers) and that in many places petnveabfflties. due to fracturing nnd secondary porosity, arc high. In addition, tbe high formation pressures will provide substantial force to push the oil to the well bore. Some similar deposits in Mexico achieved average well flows of.
We cannot be certain, bowever, lhal high pcrmeabili-ty exists throughout the entire reservoir because the Tengizot uniform. For example,analysis of the field frequently refers to three
different types of reservoir rocks. I'orosities andvaried significantly, depending on the presence and extenl of fracturing. Indeed, extensive fracturing is critical to achieving high well flows.tity and associated permeabilities (an order of magnitude lower) are so low that well trows are subsUntially reduced in areas without fracturing. Final evaluation of the extent of fracturing will have" to wall for more extensive drilling. Moreover,journals report lhal tomeout of the oil byIn some areas of the reservoir and constricts now channels.
Tbe Soviets also face challenge* and addilionalin managing the oil recovery process. Technical journals indicate that gathe natural mechanism that will bring Tengii oil to the surface. Tbe reservoir pressures will facilitate tab process la the early years of production, presently, there is substantial difference between formatioo pressure and bubble pointpoint where gas comes out of solution and the fluids lose much of the energy necessary for peodBctico. Every barrel of oilreduced, however, will bring up tome of ibe gat and eventually deplete tbe natural drive energy. As the amount of oil lefl In tbe reservoir decreases through production, decreasing pressure srill allow free gns to form and the free gas will flow preferentially through lhc fractures io the wells, leaving oil behind. lTiere-fore, reinject ion of the produced gas into tbe reservoir is absolutely essential if the natural producingIt to be preserved. Otherwise, the loss of pressure will necessitate the installation of expensive pumps. Even to, injecting gat into the reservoir will require targe compressor nations and related manifolds and pipeline infrottructore. The Soviets will have to bear these added costs, or production at Tongix will suffer.
: asss^rssSaslla^aaissassss^^rlm
"Srtf*r
Appendix I)
Drillinfc Jn (be Northook af Two Fields
great depththe North Caspian
retionsubstantially more main on equipment and increate* (be likelihood of breakdowpj andFo* caa triple, the pump* roost eirx-iU'e drilling fields (brooch as rrrochile* or rrtore of vcrtieal drill pipe. Tbe great depth* also decrease (he service life of Soviei drilldditional timeeeded lo change drill bits and make repair* to machinery and equipment that fail becauac of use at high men levels. I'unhermoce, development drilling In (he North Caspian is cornptlcaled by tbe thick layer of salt lhai ovcaiiet the prcdwdog formation Thb salt layer red ooe* ibe chemical iaicarrity and usability of tbeng mud andekierioos effect on the cenicaisedeal formations. Because Ihe salt can also behaveluid, it seeksill (he open ipace* created by chilling. Special effort* are neededrevent the collapse of (be well cuing To uxueacy in drilling into deep, highly prevurrdc have analyzed inat twoi-
trakban* and Teragir.
number of drilling crew* had doubleda total ofella had beco drilled.f which had been completed and were capable of producing.
J
aboutonth* k* now required toell atnother three to foarrobably required to Install well bead equipment and an on-site separator and flare stack and to connect the well to (he gathering system. Thus, we estimate (hat about iwo year* I* needed to drill andeD at Astrakhan'. ITsl* represent* substantial improvement from lhc raie achieved daring the caploratioa and early devetdpcsent stages.
Even with not recent iarsprovesiseai in drilling rales. Astrakhan'hreeour years behind schedDle PIf tbe development program, which beganalled for the completion ofdlse estimate that (he Soviets will probably not achieve thb target until
Until recently, the Sovieu had littleeters Consequently,and initial development drilling atvery slowly-
at leastrilling rigs were located al the aame well ailea athb fact, combined with ibe reported number of exploratory wells completed, implies an average annual panelrate ofeters per rig Al thai rale, we estimate that three to too- yean were required lo complete lhc hist wells at Astrakhan'. In contrail. US miclcontineni or Teaas Gulf coastwould be able toeter well in lessear
Tengii
Drilling atroceeding even more slowly than at Astrakhan*C
J^the Scrviets required roughly two toon average to drill and complete thewdb al TengisIn arxne
case*iheook five
to ai* years Allhough Tengii was prududrignB.lready aboul Iwo years behind schedule. Unless development accd-eraies sharply, the Soviets are unlikely to meet0 plan
We believe (hai ibc icoatee depths andfor nn (ion pressures arc responsible for Iheal Tengii Depths ai Tengii exceedcomparedeters al Astrakhan'.one
first wdl. at Tengii encountered reset .oir pressures exceeding0 pounds per square Inch, aboutercent higher than at Astrakhan'.'
Metkodoloo
Drilling times (or allboth exploratory andtime (or site preparation, rigging up, drilling, and anxillary drtWiag operations sack as ceoaentint and togging, time speM waiting foror repairs, and time for tating formation fluids Drilling time for production wells also includes timecompleting (he well, but not for attaching the flow fine.
Original document.
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