What is Rosneft trying to find in Brazil?

March 21, 2017 Kira Kalinina, RBTH
RBTH talks to Chris Einchcomb, Director for Upstream International Projects at Rosneft
Chris Einchcomb
Chris Einchcomb, Director for Upstream International Projects at Rosneft. Source: Personal archive

On Feb. 17, Rosneft Brasil (RNB), a subsidiary of Russia’s largest oil company, revealed plans to drill its first oil well in Brazil. Chris Einchcomb, Director for Upstream International Projects at Rosneft, spoke to RBTH about what the company is planning to find in Brazil, possible integration with its projects in Venezuela, and cooperation with U.S.-French service company Schlumberger (SLB).

RBTH: Due to the U.S. sanctions, many American companies with advanced technologies were barred from providing some services to Russian oil and gas companies. Notwithstanding this fact, you’ve teamed up with U.S.-French service company Schlumberger to perform the drilling at your Brazilian project in Solimoes. Does this mean that sanctions are geographically limited to Russia? Is this cooperation a sort of hidden technology transfer?

Chris Einchcomb: Sanctions do not limit cooperation with service companies outside of our Russian upstream operations. The Solimoes Project is a conventional, onshore oil and gas exploration project and therefore, even in their broadest form, is not subject to sanctions. It must be noted that Schlumberger’s parent company was chosen on an open tender basis to provide Integrated Project Management (IPM) services for our drilling in Solimoes, their bid was the most economically attractive for the company. Both Rosneft and its contractor regularly review services and contracts to ensure their compliance with sanction restrictions before signature.

Of course, by partnering with other companies – irrelevant of where their geographical location – you will always raise your expertise and boost your capabilities, and that refers to all the participants of the project. But we are not talking about technology transfer – the technology we are implementing in Solimoes is no different to the technology we utilize daily in our conventional Russian onshore operations. Rosneft is a leader in the Russian oil-service market and the company is a significant in-house operator of drilling and support services and already possesses the technologies being implemented in Brazil. Contracting Schlumberger, as already noted, is just about the economics of the project.  

RBTH: How many wells are you planning to drill in 2017, and what are the timeframes of the works?

C.E.: Along with Schlumberger, Rosneft Brasil contracted Queiroz Galvão Óleo e Gás (QGOG) for an onshore drilling rig and associated rig services, the digging of which began in February. We hope to start a second well in 2017.

Rosneft Brasil is planning to drill at least four wells within the upcoming drilling campaign with the scope of obtaining valuable geological information and confirming the exploration potential and hydrocarbon resources in the Solimoes Basin.

The high cost compared to operations in Russia is one of the reasons why RNB plans to drill multiple wells to optimize costs on logistics and supply of drilling operations. The estimated time for drilling is 60 days and an additional 23 days for testing and well evaluation, resulting in a total of 83 days.

RBTH:  Do you expect to find oil or gas?

C.E.: Geological modelling studies conducted on the Solimoes Basin pointed to a frontier area with the potential to find both oil and gas. Whatever the output of the well, it´s results will have a major impact on the technical understanding of the Basin and will guideline future exploratory work in the area.

Although, the challenges of development in Solimoes are not dissimilar to the challenges of developing remote areas of Russia, Rosneft has significant experience in developing onshore oil projects and this can influence the design and nature of any future development in Brazil. We envisage the use of extended reach drilling and horizontal wells to minimize the surface footprint of any future development.

RBTH: How are you planning to monetize gas from the Solimoes project? Is Rosneft studying the use of gas tank barges (LNG barges) to bring the gas to market?

C.E.: Rosneft has elaborated some scenarios for the monetization of gas from the Solimoes project. We completed two years of joint co-operation with Petrobras, which highlighted LNG and gas to power options for development. RNB is now progressing with these ideas independently but openly discussing opportunities with Petrobras and other third parties on upstream and downstream collaboration to select the best option for monetization.

As for LNG barges, it is only one of the options on the table, although today we are leaning towards traditional gas to power options. Petrobras’ former experience indicates that initial production export via river barges is feasible, as a short-term solution for oil monetization, and for a long-term solution to export oil and gas through multiphase pipelines from jungle to the market in Manaus. 

RBTH: Do you plan to integrate the development of the Solimoes project with your assets in Venezuela?

C.E.: The Solimoes Project is very much in the exploration stage whereas Venezuela is a progressing project and involved in production. By its nature, the drilling campaign is stand-alone and therefore there is limited opportunity to integrate the two projects. Any success in Brazil will allow us to reanalyze the development strategy of the project.

Of course, we would like to increase our Latin America presence and the Venezuelan assets and experience with those in Brazil (and Cuba), but there are different ideas on the table.  The most attractive option for future integration may be in the provision of drilling and constructions services where the leverage of multiple assets could lead to optimized costs and design.

RBTH:  Given the slight rise in oil prices, some companies are actively increasing the investment in expensive projects, such as deep-water, offshore ones. Are you evaluating the possibility of exploring Brazil’s offshore?

C.E.: Being a major international oil company Rosneft is always analyzing the possibility of efficiently increasing its portfolio of international projects. Brazil plans to hold a license round in 2017, which includes offshore opportunities. RNB will review these opportunities to assess their attractiveness and make appropriate recommendations to senior management.

Read more: Did Russia play a role in OPEC's decision to cut production?

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