- Mr. Govzich, in 2015 Salym Petroleum Development (SPD) declared that it would stop the production decline rate on the fields it developed and would come into growth. Following up on last year’s results, this goal was achieved. What are the key reasons for this achievement? 

- Following up on the results of 2016, SPD has produced 6,166 thousand tons of oil at the Salym group of oilfields. Not only have we outperformed the annual production plan but we have also increased its volume by 56Kt vs. 2015. Figures are not as important here as is the fact that after a five years’ period of production decline we have managed to turn this negative trend around and come into growth again. You know perfectly well that a situation like that is not typical for mature oilfields in the 3rd and 4th stage of development. 

Achieving this goal has not come easy to us. As a confirmation, I will quote the following fact. Nearly half of SPD’s production is assured by thirty wells. According to statistics, they must fail for some time at certain periods. Downtime of such ‘golden’ wells strongly affects performance of the overall production plan. Therefore, our team faced an ambitious task indeed: not only to reduce production decline rate but also come into growth. This required mobilization of our internal resources, improvement of integration between specialists in various technical disciplines, and a true teamwork, no matter how conventional it might sound. 

The SPD team synergy, is in fact, the main prerequisite for having successfully turned the production trend around. Thus, our operational specialists worked on enhancing production efficiency on the existing producing wells, including optimization of the servicing operations. In 2016 we started large-scale implementation of innovative submersible equipment, having installed 60 new generation pumps. In this area we were largely supported by the Smart Fields technology which makes it possible for us to monitor and control, in real time, all Salym oilfield wells which has already exceeded 1100. 

On the other hand, SPD drillers, geologists, and reservoir engineers have successfully implemented a set of well interventions (WI’s) and revised the drilling sequence. Active implementation of the horizontal well construction technology had an important role to play in production rate increases. In 2016 the company started construction of this type of well for the first time in its history. Last year SPD has drilled 28 horizontal wells; on two of them we applied the multi-stage hydraulic fracturing technology. Moreover, we implemented several activities to reduce well hookup time in the course of converting them to injection wells. This made it possible for us to complete the program of well conversion to injection ahead of schedule, enhancing the water management systems efficiency, and saving about 60 million RUB. The overall effect of the implementation of this program was over 100Kt of oil. We produced a total of over 1 million tons of oil through implementation of WIs in 2016. 

- Along with the increase of produced oil volume, the total amount of fluid produced from the formation increases as well. How prepared is the Salym oilfield infrastructure for changes like these? 

- In 2016 we have actively continued the programs for upgrading of our operational infrastructure that we started a year before. We are now finishing expansion of the multi-phase pumping station at Upper Salym; we will also complete construction of a dehydration plant there this year. These facilities, along with new oil pipelines and trunks, will make it possible for us to increase throughput of our pipeline system and continue increasing the production volumes.  

In a parallel with the construction of new facilities, we paid careful attention to the infrastructure already constructed, issues of process safety and operational integrity. In particular, we have inspected, jointly with the equipment manufacturer, the integrity of the Central Processing Facility (CPF), our key infrastructure asset, last year. As a result, both the current and future CPF working envelopes have been confirmed. In 2016 we confirmed the calculative level in MI&E of operational equipment. Our company has been successfully audited by Shell, and demonstrated compliance with the safe level of management of change in safety-critical issues. In terms of availability level of critical pump and compressor equipment we have reached an indicator that exceeds 96%. For several years now we have managed to keep the equipment availability factor at a very high level (over 96%), and 2016 was no exception. 

In 2016 we continued implementing the program to reduce the number of alarms to the operator control panel, and reduced the number of alarms by a factor of 6 times (from 250 to 40). We have restored intelligent pigging capabilities on the export pipeline which has made it possible for SPD to organize the work for maintaining the safe state of the pipeline. Furthermore, our company has increased the scope of internal and external diagnostics of the pipelines by 20%, identified and eliminated 860 defects (twice as much as the planned scope) which may have potentially caused leaks. We have continued improving the corrosion inhibition of the pipelines, and also completed the program installing the expansion bends on oil gathering pipelines which operate at high temperatures. 

Along with infrastructure development, SPD is also actively working on improving efficiencies in other areas. In particular, in 2017 we are executing several projects aimed at enhancing energy efficiency, improveming the processes within the scope of repair and maintenance, as well as construction and delivering new wells and higher quality and efficiency within drilling waste management. In fact, both short and long term performance indicators will depend on execution of these projects. 

- Why are SPD planning to continue increasing production? What are the key areas for development of the company’s resource base? 

- Regarding the resource base development, I will specify four areas. The first one is bringing into development the conventional deposits within the framework of the Salym group of oilfields and continuing to implement our exploration strategy. Last year we continued to appraise the Cherkashin formations at the junction of West Salym and Vadelyp. The data demonstrates the high potential of the reserves in this area. The exploration well drilled this year at Upper Salym has also confirmed prospects of the Upper Salym South East. This area, was the named the ‘South Hub’ in the company. It will make it possible for SPD to achieve 7+ million tons in 2020 and beyond, which is the company’s strategic goal. For the purpose of gathering additional information on the deposits the company will drill two exploration wells in 2017 and 2018. Alongside this work, our specialists are working on the operational infrastructure development for this territory. The successful execution of the South Hub project shows that we are confident about our future. 

The second area in our plan to develop resources is bringing deeper horizons on stream – in particular, the low-permeability Achimov deposits. Last year SPD constructed two horizontal Achimov wells using multi-stage hydraulic fracturing technology. The research conducted confirms the promising outlook for the Achimov formation. Moreover, we started a project studying the outlook for the Palaeozoic formation which lies even further beneath the Achimov deposits, at a depth exceeding 2,800m. In the course of the work performed we have determined the location for the well to study the outlook for oil and gas reservoirs in the granite block of the pre-Jurassic. 

The third area is our so-called non-organic growth – obtaining new license areas. In 2016, for the first time in our company’s history, we have obtained a new license area in South Yamskoy for exploration and appraisal. Within the scope of geological exploration the company plans to drill a well to confirm presence of oil in the survey target – BS8 formation. SPD has also augmented the territory of the West Salym oilfield with the East Shapsha area of the unallocated subsoil fund. 

Last but not least is the implementation of an enhanced oil recovery technology based on the injection of alkali, surfactant, and polymer (ASP) mixture into formation, which we launched last March. We are truly looking forward to the results of the ASP pilot, which should confirm the efficiency of the technology. In 2016 we carried out a series of studies, constructed the ASP plant and put it into full production. 

- How does such intensification of SPD’s activities affect other aspects of the company’s operations – for instance, the operational and environmental safety indicators? 

- In fact, this has been a priority for your company, hasn’t it? Yes, you are absolutely right. Since the first days of the Salym project, SPD has been paying close attention to operational, occupational, and environmental safety issues. We see these issues as an integral part of successful business operations. So I am very happy with our success in this area, and with last year’s achievements in particular.  

As early as the end of 2015 we decided to approach the issue from a different angle. We started paying more attention to personal safety, and decided to appeal to the hearts of the people working with us, and embed the culture of care. We started doing more on an emotional level, and this method has worked. In 2016 we have worked without a single injury or disability for 274 days, i.e. nearly 8.3 million man-hours, an absolute record in the entire history of our company’s existence. 

Following up on last year’s results, SPD has achieved a lost-time injury frequency indicator of 0.2. This is another historic record for the company. We have also improved many other occupational and operational safety indicators. Thus, SPD has reduced the number of violations of key rules by a factor of 4 vs. the year before last. 

Notwithstanding the safety indicators which are outstanding for SPD, we have many plans and a lot to do in this area. The key component in the implementation of our strategy in this area is the implementation of the Incident, and Injury Free Program aimed at building a safe operational culture. Alongside the development of a safe operational culture and enhancing contractors’ level of management of occupational and operational safety issues, we systematically work on simplifying various procedures in this area, – in particular, by automating processes where possible. As an example, last year we launched the electronic permit-to-work system, implemented the electronic journey management system, and rolled out the information system for contractor employees’ HSSE competency monitoring. We have also achieved great success in the domain of environmental safety. In 2016 SPD has for the first time achieved an associated gas utilization level of 98%. 

We have received an updated license for hazard class I-IV waste collection, transportation, treatment, and utilization, which made it possible for the company to continue waste management operations without restrictions. 

All in all, our success in 2016 has become an excellent foundation for the implementation of SPD’s key projects this year and the company’s further development. The employees see the company changing, feel they are one team again, and believe that they can be the best in the industry and achieve what seemed impossible a couple of years ago. And I share their certainty of the fact that our truly unique and highly professional team will achieve even greater success and records in the future.

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