OREANDA-NEWS. July 07, 2009. Interview with Sergey Ostapenko, Vice President, Exploration, TNK-BP.

The financial crisis made oil companies cut their expenditures for geological exploration, which has become the subject of numerous concerns among officials and officers. Sergey Ostapenko, Vice President, Exploration, TNK-BP, told about the funds spent by TNK-BP for exploration, current activities of the company, and plans for future.

— In March, the company declared about additional allocation of approximately 1 billion rubles for geological exploration works. How much will the company spend for financing these works in 2009 and in future?

— Approximately US350–400 million will be invested into geological exploration works annually in the nearest 10 years. Most of these funds will be spent for implementation of new projects, such as the Uvat project and development of the Bolshekhetsky, Astrakhansky, and Timan-Pechora license areas. Other new projects will possibly emerge in this period. Still, we are not forgetting the old regions and are actively working in the Orenburg Region, Khanty-Mansi Autonomous Area, and Samotlor field. We do not hope to discover any large fields there and just want to find small deposits development of which could be started in the nearest year or two.

—Which territories are interesting for TNK-BP?

— Western Siberia, including the Yamalo-Nenets Autonomous Area, Khanty-Mansi Autonomous Area, and southern Tyumen Region, remains to be very promising for us. I think that the potential of Western Siberia is far from being exhausted and active geological exploration works can ensure the increment of reserves required for maintaining the production in this region. There are still considerable undiscovered reserves here, and we are going to find and develop them. Apart from that, modern technologies help us continue our search of hydrocarbons overlooked in old fields. The upper parts of the geological section remained under-explored in the soviet period. We are now returning to the upper parts of the section and finding additional sources of reserves in them. This is how we are working in Western Siberia and the Tyumen Region.

The Orenburg Region is very important for us. In spite of financial difficulties, the company acquired three more new licenses in February for development of fields in this region. Moreover, recently TNK-BP got new license areas in the neighboring regions – two areas in the Samara Region and one area in the Saratov Region.

In previous years, the company exerted considerable efforts for acquiring new licenses and laid a good groundwork for future. We are following the publications of the Ministry of Natural Resources on new tenders and planning to take part in them if the offered licenses are interesting for us.

— What geological exploration works are performed by TNK-BP abroad?

— We have a project in Venezuela with deposits of heavy oil. A year ago, we signed a contract with the state oil company PDVSA for joint exploration of the Ayacucho-2 block in the Orinoco province. We are keeping track of all events throughout the world and analyzing possibilities of acquiring new projects in the near and far abroad.

— What is the progress of geological exploration works in the Timan-Pechora and Astrakhansky license areas recently acquired by the company?

— In one of the Astrakhansky license areas, we have completed seismic exploration works and are performing such works in the other two Astrakhansky license areas. In late 2010, we will start drilling of an exploration well there. In Timan-Pechora, where we have four licenses, the situation is similar, and the works are in their opening stage. We are now holding a tender for performance of seismic exploration works here. In 2010, these territories will be covered by 2D and in some cases 3D seismic exploration works.

— In June, TNK-BP sold its oilfield service enterprises to the American company Weatherford. Did this fact have any impact on the geological exploration activities of the company?

— No, hardly any impact at all. First, our contacts with the sold oilfield service enterprises still remain in force. We have the right to contract Weatherford for provision of drilling rigs and advanced technologies. Second, geological exploration works in the fields and license areas of TNK-BP are performed by the winners of tenders. Our role here is to provide statements of requirements, sign contracts, and control their execution. For us, actual safety standards is one of the most important criteria for selection of contractors, followed by the price and quality of works.

— Do you prefer Russian or foreign companies?

— Russian service companies prevail. The main reason behind this trend is high prices of foreign companies. Contemporary Russian seismic exploration companies made a huge progress in recent decades. They all use western equipment, know western technologies, and are quite proficient in industrial safety and environmental protection. We would like to invoke more western companies for performance of seismic exploration and drilling works, but right now they have to cut their costs to compete with Russian companies. The only foreign company working with us that managed to compete with Russian enterprises and win several tenders is the Chinese company BGP. Western companies are fairly competitive in processing and interpretation of seismic exploration data, and we are actively cooperating with WesternGeco (subsidiary of Schlumberger), CGG Veritas, Fugro Jason, and other world leaders in this field.

— Will TNK-BP continue replenishment of its reserves at the level of 100% in 2009?

— I think it will. The company has a large portfolio of assets and makes sufficient investments into geological exploration and development to compensate the production.

— Do oil companies need a support of the state in geological exploration? Is it necessary to create a governmental structure or, for example, a state corporation to handle geological exploration problems?

— In their license areas, oil companies perform geological exploration works with their own forces. The problem is intensification of geological exploration works on new territories, such as Eastern Siberia, northern regions of Western Siberia, and Far East. The risks there are high, and the costs are hefty. The state should probably provide preferences for working on these territories and, most importantly, participate more actively in regional activities to prepare regional geological foundations. What does this mean? Discovery of new fields is preceded by prospecting and exploration of resources, and here the role of regional governmental structures should grow. The Ministry of Geology will definitely not be restored, but some kind of state participation is absolutely necessary.

One field needing state support is education. TNK-BP is helping many higher education institutions. The problem, however, is that the industry is still based on scholars and instructors of the previous period. It is necessary to invite the new generation and talented people into universities and colleges, and this should be the state policy.