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CENTRAL INTELLIGENCE AGENCY
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MEMORANDUM FOR: Jeffrey R. Cooper
Assistant to the Secretary Department of Energy
Update of2 Task Force
Report on petroleum and Petrochemcials
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Attached is the update of part of2 task force report on petroleum and petrochemicals which you requested. No attempt was made to recast the piece, only to make it correct and current while maintaining ao much of the original language as possible. If you have any additional questions, feel free to contact
Office of Economic Reseaich
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8
Update ofask Force Report on Petroleum and Petrochemlcalc
USSR Crude Oil Position
The USSR ia the world's largest producer of crude oil with an outputillion tons (See Plans call for crude, oil production toillicn tone West Siberia isillion tons Production in the West Siberian region is, and will continue to be plagued with problems and high costs because of the permafrost, extremes of climate, difficult terrain, shortages of equipment and labor, and poor transport and supply facilities. Chronic shortages of suitable drilling rigs, automation equipment, all-terrain vehicles, earthmoving equipment, and building materials exist. There is Inadequate planning for construction of roads, railroads, pipeline, or electric power facilities before the fields are developed.
Even if tho USSR imports equipment and technology from the West,0 production goal probablybe attained. Production is likely to peakrobably at lessillion tons.harp decline toillion tons is likely This supply of oil would be inadequate to meet all domestic needs, provide the necessary oil required by the East European countries, and still leave substantial quantities for export to the Free World and to other Communist countries. 5 although Soviet oil production and consumption may be roughly in balance, continued Soviet oil exports to the other Communist countries would have to be covered by imports from the West.
Soviet exports of oil to the Free World have been the largest single source of hard currency earnings in recent years and have been used to acquire machinory and equipment from the West. (Seeor Soviet trade in oil) Moscow's hard currency oil earnings, which5 billionere up more thanercent76 billion.
In the Soviet Union and in Eastern Europe there has been some bolt tightening in anticipation of possible future shortages of oil. Moscow has doubled tho internal price of gasoline and has steppedampaign for the conservation of energy resources, especially hydrocarbons. The USSR has approached Iran
rnMQt^KrriAi
CONpDBriTlAt
Table 1
Production of Crude Oil in the-
and
tons)
Plan
Germany
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i
Including gas condensate.
2. Data for Eastern Europe are estimated.
CO^mTJERtWL
Table 2
Soviet Trade in Crude Oil and Petroleum6
f
(Million metric tons)
Total
Exports toi
Free
Communist
Eastern
Far
Imports from:
Othor
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!
coppsemTAt"
and possibly other OPEC countries to discuss possible crude purchases and has advised its East European CEMA partners to begin to look for alternative sources of crude oil supplies.
Substitution of natural gas cannot be expected to relieve the pressure on the Soviet oil industry. Despite the publicity given to large Soviet reserves of gas and to recent Soviet sales of gas to Western Europe, the problems of the gas industry are large. It is unlikely that gas production will reach the upper limit of05 billion cubicutput is more likely to be inem range Production growth throughoutrobably will be constrained by West Siberianand by declining extraction rates at aging fields elsewhere in the USSR. Gas output5 is now projected to becm.
It is, of course, quite feasible that underof extended conventionalombination of damaged oil fields and transportation and with increased demand for petroleum products arising from rapidly increasing military and military-relatederious shortage of crude oil would occur in the USSR. Although seme relief might be obtained from cutting back drastically on non-essential civilian consumption, this cushion is believed to be relatively small. Some further relief, of course, could be obtained from eliminating exports of crude oil and petroleum products to the Free World, but elimination of exports to other Eastern European countries (if they remained in the Soviet orbit) could be self-defeating, at least in part.
It has been estimated that military consumption in peacetime tends toercent of domestic consumption. Under conditions of extended conventional warfare, military use alone generally rises five- or sixfold. Applying these rough measures* to the5 apparent consumption of oil products ofillion metric tons would give aboutoillion tons consumption for peacetime military use. Multiplying those figures by the loweror wartime wouldange ofoillion tonsercent of5 total consumption for only military use. When the highered, the range jumps tooillion tons orerc^nt for only military use. Whether
as an added demand against the current resources, or more importantly against any of tho severalof reduced petroleum availability (except that of radically reduced refineryuch demandubstantial component in the 3Upply/demand picture that could be offset by aboutercent by elimination of exports to the Free World. These calculations do, cf course, exclude that important sector of wartime demand which would undoubtedly increase substantially over itslevelthe military-related needs of industry. It is reiterated that the preceding analysisonly the roughest of estimates which could vary significantly.
Oil and gasital oil industry activity, depends largely on the seismic process to provide the basic data from which the shapes, attitudes, and structural relations of subsurface rock strata are determined.
Because of damage already done to the older oil fields in the USSR by improper management, poortechniques (such as extensive use of water flooding, overproduction,s well as other poor management and logistics aspects, the Soviets must look to finding new reserves by deep horizon drilling of old fields or by exploiting the West Siberian and Central Asian fields. ajority of the more obvious oil structures have already been located and now fields are likely to call for deep horizon seismic exploration and further exploration of the permafrost and the offshore areas.
Deep horizon seismic exploration can take place on land origital seismic acquisition system is constructed to operate in any environment whether jungle, marine, arctic or desert climates. Its use varies from one operation to the other. It is, ruggedly constructed to withstand vibrations as well as physical shock when transported or operated in aircraft, marine vessels or terrain vehicles.
The area of seismic data processing and interpretation may be divided as follows: (a) the hardware, which generally constitutes Office Playbackomputers, plottei and other peripheral equipment and (b) thj software which involves the computer programming essential for theand interoretatlon of the data obtained during field exploration activities.
.ecognizeddigital computer technology and itsso ionic data processing. This claim isby the fact that US companiesf the seismic equipment used in the
Free World. The Soviets do not at this time have an adequate inventory of modern digital seismic survey equipment. Tho digital method provides the ability to delineate deep geologic sub-surface features such as stratigraphic traps much raoro accurately than is possible with the previously conventional analog methods. The effectiveness. unilateral control of digital computer technology and hardware for data processing is open to question because French. West German, and UK firms can supply comparable equipment.
oes axist, however, in the areasoftware for processing andseismic data. In recent years, there has been
a growing interest in the subject of digital processing of seismic data. Unfortunately, the accent has been on the "digital" part ofubject, whereas, the real value of the new system lies in the "processing" part, and what it can do with the seismic data.
Software is the key ingredient in converting field recorded seismic data into meaningful geologic data by its efficient processingigital computer. It is essentially theprocessing of data by meansigital computer. Software, as hardware, undergoes several generations of updating. Each new generation software package is an order of magnitude better in sophistication than the previous, and each package is specifically designedivenrctic and permafrost, offshore/marine, or land.
In the field of land gravity meters and certain proton magnetometers,. possesses effective control. The former aro particularly important for deep horiion exploration of the salt dome oil deposits in the Caspian embayment. The latter are useful in exploration of vast areas by means of airborne techniques. They also have significant usefulneso in marine exploration activities. But such equipment is already under control to Soviet bloc areas for militaryrather than*
Various other specialized electronic systems are also valuable, particularly for relevant marine exploration purposes, but this equipment and technology are also already under. unilateral control for purposes other than petroleum exploration. Included among such equipment are:
Satellite and Doppler Sonar navigation and
positioning systems Stablized platform marine guidance and
navigation systems Certain high precision gyro compasses Certain buoys and hydrophones, and Certain Radar equipment.
Thus, looking at the problemhole, it appears that the USSR exploration problem, in terms of envisaged conventional warfare needs, might be solvableeasonable time period by the deep horizon seismic technology available to the USSR from. sources, particularly France, although such equipment and technology would not be equal to. equipment. This would be particularly advantageous because the further exploitation offields near the refinery and usage centers could be achieved. However, this other availability would help to'solve the USSR curde oil problem only if the USSR satisfactorily resolved its deep well drilling and production problems. Otherwise, principal reliance would have to be placed on even further increases in production* in West Siberia and Central Asia and possible Arctic sources. All of these latter alternatives represent difficult exploration, drilling and transportation problems.
The above technical comments and judgments are equally applicable to exploration for natural gas.
Drilling *
Drilling for oil or gas is important both in exploration and exploitation of crude fields. The USSR has emphasized turbo-drilling rather than rotary drilling which is used by most of the rest of the world. Turbo-drilling (employing high speed of the drilling bit) functions by having the drilling fluidsown-hole motor (turbine) and bit, while tho drill pipe remains relatively stationary. Turbo-drilling has been found to be particularly good for shallow and hard formations, such as those in the Urals-Volga region. In geological structures requiring drilling deeper0 meters, turbo-drilling has proved to be less satisfactory, in^ait formations turbo-
drilling below such depth is very inefficient. Turbo drills are usod in. primarily for directional drilling. Although deeper drilling is becoming necessary in both the older producing fields and the new areas being developed, the USSR still uses turbo-drilling inf its drilling oportttions. Soviet data reveal that typicallyonths or more are needed toellepth0 meters, compared. practice of one month. It is also known to require four years in the USSR to0 meter well,imilar well in the United States takes only about six months.
In the Free Worldf the drilling is done by rotary drilling. In rotary drilling the entire drill column and the bit are rotated from the surface by motors. Slower rotational speeds, increased torque and reduced axial loads, and wear on bits represent the chief economic advantages of the rotary method. Of equal importance, the rotary drilling technique has proved to be excellent for soft rock formations or for drilling more deeply0 meters.
USSR experts have advocated that the USSR moveombination of turbo-drilling (toeters) and rotary drilling beyond that depth.
USSR total drilling for exploration and development of oil and gas fields rose9 million meters02 million , the oil ministry alone must drillillionear and it is highly unlikely that this objective will be reached. The principal obstacle to pffective rotary drilling and real exploitation of deep horizon oil and gas reserves is the USSR lack of the following equipment and related technology.
. Rotary drill rigs (including automated rigs) designedotal continuous inputorsepower or over, and lift capacity of ISO tons and over, and arsociatcd equipment. . High quality drill pipe
Certain dtill collars and jointsafety and telescoping type)
Rock drill bits, reamers, and hole" in diameter and larger
Blowout preventers and chokes with rated capacities in excess0 psi
Mud pumps,siMP dischargep and over triplex, quad-
Downhole surveying and testing equipmentell-logging and recording units, drift indicators containing gyros and cameras, formation testers, Downhole flow and drilling control equipmentars, packers, fluid accelerators, subs, cutters, overshots, baskets and other fishing tools and specialized downhole equipment)
Specialized equipment and techniques for Arctic drilling. insulated casing) Offshore drilling rigs (monopod, jack-up, tow barge, submersible, semi-submersible, or drillship types) for deep0 ft. andnd associated equipmentubsea control systems, motion compensators, riser systems, dynamic positioning systems,ith the exception of high-quality drill pipe, the above equipment and technology are basically under effective. control.
In the case of high-quality drill pipe,. drill pipe has always dominated the field. Currently. producesf Free
World output. Three West European firm? produce
less0ear. The quality of the pipe produced in Western Europe is inferior. pipe in terms of durability. . drill pipeour-year life.
Some qualification on deep water offshore drilling rigs is also necessary.
limited to
Offshore technology in the USSR is far behind that developed in the United States, and in use throughout most of the waters cf the Free World. Petroleum deposits located offshore in the Caspian Sea in water depths exceedingeters have been inaccessible, except by directional drilling from either onshore locations, or by drilling from man-made offshore islands which are connected to the mainland by trestle-supported The Soviets have no experience with floating type, and very limited experience with jack-up type, drilling rigs. he Soviets* had only two
the drilling of shallow walls no moro0 meters doep in up toeter water depths. ho Soviets completed construction on their first modern jack-up, "thend the following yearecond modern jack-up, theostillion from the Netherlands. Both the Khazar and Baku are able tometer wells in water depths ofeters. However, maintenance of the Khazar equipment has proven difficult and prevented optimal performance. econd modem Soviet-built jack-upth Anniversary ofas completed and thisodern seml-cubmersible (imported froms being fitted ouc. By0 the Soviets expect to have five modern jack-ups and three "semis" working in the Caspian. The import of additional rigs from Western suppliers will be required to reach this goal. . industry possesses offshore drilling rigs (jack-up, drillshlp, submersible, and semi-submersible types) which operate throughout the world and hold most ope reting records.ey element. jack-up rigs lies in the jack-up devices and techniques. . components in the floating rigs include the mooring system, the riser, the sub-sea control system, the drilling controls, and the vessel itself. In the more important other platformson-jack-up types) key elements are the stabilization systems.
The lack of much of this equipment and technology, whichigh drilling safety factor, undoubtedly causes severe losses of drilling equipment and entire wells in the USSR in addition to the other economic and time costs involved. As wells go deeper, such losses are expooted to increase. Even in the Free World, where this equipment and these techniques are well known and widely applied, such losses are Btill significant.
Tho general USSP deficie-ry in the rotary drilling area will limit its ability to drill faster, more deeply and more efficiently and will, in time, limit the amount of oil and gas reserves that can be explored and exploited in the USSR without disproportionate increases in
In sum,. dominates the world market for petroleum industry equipment and technology, especially in the drilling area. Without high quality drill pips and special Arctic drilling equipment and tcchnol-gy, the growth and offoctivenocB of USSR oil and gas drilling in deep horizon, deep wator offshore and Arctic oil and gas exploration and development is severely constrained. Over time, the USSR could conceivably increase investment in an attempt to overcome this technological backwardness in this area, but it would be very costly for them to do so and their level of success would not be certain.
Production
Production operations in oil and gas fields in the USSR would benefit most from the acquisition of automated producing equipment such as Lease Automated Custody Transfer Systems, multi-zone reducing equipment, high temperature centrifugal downhole pumps, certain associated gas processing plants and low temperature separation equipment, certain pumps and compressors, certain Christmas tree and wellhead equipment (including all valves in excessC psij, oilfield desalting arid dewatering equipment for field processing of crude oilermetically-sealed storage tanks. In offshore operations the USSR lacks certain underwater wellhead equipment as well. In the future, for its West Siberian and Arctic permafrost operations, the USSR will be needing tho automated and sophisticated producing equipment essential for such production. Of particular significance here, will be the special wellheads, pumps and valves, gathering systems and tank batteries. In most of these items and technology. has supplier control. The important exceptions
Automated surface control equipment Shallow depth gas lift equipment . Certain wireline equipment
Low pressure non-retrievable, retrievable, and safety valves.
Although not directly related to tho petroleum equipment issue, it should be noted that production in the West Siberian region is, and will continue to be, plagued with problems nnd nigh cost because of the permafrost, extremes of climate, difficulty of torrain, shortages of equipment and labor, and poor transport and supply facili^KtfnT. The lack of produc-
tion equipment suitable for use in Siberian conditionsajor bottleneck. In addition to the petroleum equipment already noted, there are chronic shortages of all-terrain vehicles, earth-moving equipment, and building materials. Most of the Soviet oil tool manufacturing industry is located far from Siberian activity and has been slow to meet the needs of this region. There is inadequate planning for the construction of roads, railroads, pipelines and electric power facilities before the fields are developed. In many instances, equipment must be delivered by helicopter.
Transportation
As noted under the earlier discussion of natural gas, the principal oil and gas transportation problem in the USSR lies in its huge demand for pipeline and related equipment, primarily for the large-diameter gaslines. il pipeline construction was planned to increase moreimes over what was accomplishedut actual construction only doubled. Construction plansall for an0 kilometers of crude and product lines to be laid. Construction is behind schedule so far this year. The oil pipeline program must compete with gas line construction for funds, labor, and pipe supply, which is inadequate for the total program. The USSR technology for large diameter pipe and related equipment (primarily modern compressors) lags .substantially behind that in the West,.but. does not have an effective supplier control in this area. It should be recalledultilateral control over large diameter pipes was dropped several years ago. Most of the USSR's pipeline requirments can be met from. sources.
.'Under conditions of extended conventional war, it is realized that pipelines and pumping stations (particularly unburied ones) are subject to severe damage and disruption. Moreover, other forms of oilailroads, barges,ay also be severely damaged.
Original document.
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