Join The Discussion

 

Super PAC Men: How political consultants took a Fort Worth oilman on a wild ride

The head of a Texas oil dynasty joined the parade of wealthy political donors, aiming to flip the Senate to Republicans. By the time consultants were done with him, the war chest was drained and fraud allegations were flying

read more >

Bridge collapse on I-35 north of Austin

SALADO, Texas (AP) — Emergency crews are responding to a reported bridge collapse along an interstate in Central Texas.

read more >

Amazon begins Prime Now program in Dallas area

If you just have to have it now, as in one hour, you can, at least in the Dallas area, as Amazon.com Inc. announced Thursday it will offer Prime Now.

read more >

Latin-inspired restaurant set to open in downtown Fort Worth

Downtown Fort Worth’s dining scene is about to get spicier with the opening of a new restaurant featuring Latin-inspired coastal cuisine.

read more >

Texas jobless rate falls as employers add workers

Texas unemployment fell to 4.3 percent during February for the sixth straight month of declines, the Texas Workforce Commission reported Friday.

read more >

 

Russian $8.2 trillion oil trove locked without tech from U.S., Texas

Drill pipe sections lie stored near an oil derrick operated by Salym Petroleum in Salym, Russia. Even as the decision to stop gas supplies to Ukraine aggravates tensions with the U.S. and Europe, Russia still needs Exxon Mobil, Halliburton and BP to maintain output from Soviet-era oil fields and develop Arctic and shale reserves.Bloomberg News photo by Andrey Rudakov).

David Wethe
(c) 2014, Bloomberg News.
HOUSTON — Even as the decision to stop gas supplies to Ukraine aggravates tensions with the United States and Europe, Russia faces a dilemma: it still needs Exxon Mobil, Halliburton and BP to maintain output from Soviet-era oil fields and develop Arctic and shale reserves.

Russia will require Western companies to provide the modern drilling and production gear — and techniques such as hydraulic fracturing — that are essential to unlocking its $8.2 trillion worth of barrels still underground.

The cutoff to Ukraine's gas supply adds another layer of complexity for energy companies navigating a shifting geopolitical landscape in the search for new oil and gas supplies. Decision-makers from some of the West's biggest oil explorers are gathering in Moscow this week at the World Petroleum Congress to pave the way to new deals.

"There's certainly a prize there," said Alexander Robart, a principal at PacWest Consulting Partners, a Houston-based consultant that tracks fracking service providers. "For the big guys, it's certainly one of the top priority future growth markets they're looking towards, without a doubt."

Russia's latest aggression toward Ukraine can only heighten the political tensions companies already feel as they seek to justify broadening business ties to the country, said Fadel Gheit, an analyst at Oppenheimer & Co.

"It will move the scale a tad against Russia," Gheit said, raising the chance the U.S. and Europe will push for additional sanctions.

Sanctions have had no impact on working in Russia yet, BP Chief Executive Officer Bob Dudley said in Moscow Tuesday. The London-based company, which owns almost 20 percent of Russia's largest oil producer OAO Rosneft, signed a preliminary agreement last month to evaluate shale reserves in the Volgo-Urals region.

"There is shale everywhere," Dudley said. "There is only some good shale. It will depend on how the shale actually can be broken to see its productive capacity."

Russia already is the second-largest market outside North America for fracking, measured by about 1.1 million horsepower of pumps used to blast water, sand and chemicals underground to free trapped hydrocarbons. China ranks first with 3.1 million horsepower. North America is still the world's fracking king with 19.7 million horsepower.

Through its existing oilfields, Russia is the world's largest producer of crude, with daily output of 10 million barrels a day last year, according to the EIA. To maintain that, Russia will have to use the latest technology to squeeze oil out of shale rocks in Western Siberia, Bey said.

As a result, Russia's supply of rock-crushing gear is forecast to double to 2.3 million horsepower by the end of 2018, according to PacWest. That's assuming that engineers can "crack the code" on the Bazhenov Shale, a massive, hard-to-drain rock formation that lies under Western Siberia's decades-old conventional oilfields, Robart said.

In May, Total partnered with Lukoil, Russia's second-largest crude producer, to seek oil in the so called tight-rock oil of the Bazhenov area of Siberia. The deal followed Exxon and Statoil ASA, which already have tight oil ventures with Rosneft in Western Siberia, and Royal Dutch Shell, which partnered with Gazprom Neft.

"We need to bring mainly know-how" to drill unconventional deposits in Russia, Jacques de Boisseson, Total's head of exploration and production in the country, said in Moscow Tuesday.

Without Western expertise and technology, it's unlikely Russia could sustain its current production levels, much less increase them, David Pursell, an analyst at Tudor Pickering Holt & Co., said in a phone interview. The country has "zero chance" of exploiting deep-water reserves without Western help, he said.

Halliburton, Schlumberger and Weatherford are some of the energy service companies working to resuscitate aging fields and unlock shale formations in Siberia. They're counting on exploration and production companies to spend about $30 billion a year in Russia, James West, an analyst at Barclays Capital in New York, said in an email message.

Joao Felix, a spokesman for Schlumberger, declined to comment. Susie McMichael, a spokeswoman for Halliburton, and Wuen Fung Hor, a spokeswoman for Weatherford, were not immediately able to comment.

Schlumberger, based in Houston and Paris, said in April it recently helped a major Russian oil company in western Siberia reduce uncertainty in drilling and field-development by using its down-hole sensors to map exactly where underground fractures were spreading in a horizontal well. Four frack stages were used in the well and monitored from a second well using equipment that hears subtle seismic events underground.

Sales in Russia this year are expected to be "somewhat lower" than initially expected due to a weaker ruble, while activity remains as projected, Schlumberger Chief Executive Officer Paal Kibsgaard told analysts and investors in April.

Weatherford, the world's fourth-largest oil services provider, has the most at stake among peers with about 5 percent of its sales coming from Russia, Scott Gruber, a New York-based analyst at Sanford Bernstein & Co., wrote March 3 in a note to clients.

In the Russian town of Bugulma, Geneva-based Weatherford announced a partnership last year with an electric-pump plant to make artificial lift systems, which are used to boost pressure and increase output from flagging wells.

Halliburton announced a partnership in February with Gubkin Russian State University of Oil and Gas to provide "state-of- the-art" support, including staff for technical boards and educational material for the school's unconventional program.

"Halliburton is certainly trying to make a bigger play" in Russia, PacWest's Robart said.

Russia has gotten more political attention for its natural gas production because it's the main supplier of gas to Europe through Ukrainian pipelines. But most of the nation's hydrocarbon revenue is derived from oil, Robart and Bey said.

Rex Tillerson, Exxon's chief executive officer; Dudley at BP; and Maria das Gracas Foster, head of Petroleo Brasileiro are among the many energy chiefs expected to speak at this week's conference in Russia.

After the uncertainty created by its conflict with Ukraine, Russia will have done all it could to make sure all the big players come to its conference, "in order to make a show that, 'Hey, we're serious about working with you guys,'" Robart said.

— With assistance from Eduard Gismatullin in Moscow.

< back

Email   email
hide
Catch
How 'bout them Cowboys?