Gazprom Pursues Russian Shale Boom Ambitions Amid U.S. Sanctions

OAO Gazprom Neft, the oil arm of Russia’s state-run gas exporter, said commercial production from its Bazhenov shale formations could start in three years amid U.S. sanctions limiting the transfer of fracking technology.

The company aims to produce about 40,000 barrels of crude a day from the deposits from 2018, Kirill Strizhnev, head of unconventional projects for Gazprom Neft, told reporters in Moscow. That’s about 2.7 percent of Gazprom Neft’s daily first-quarter output of 1.5 million barrels of oil equivalent.

Russia’s efforts to replicate North Dakota’s Bakken shale boom are being hindered by the U.S. ban on exports of equipment and technology after Vladimir Putin’s annexation of Crimea and the insurgency in Ukraine. While that has stalled ventures involving Exxon Mobil Corp., Total SA and Royal Dutch Shell Plc, Russia can still extract smaller volumes through hydraulic fracturing.

“Foreign companies are stronger in this type of drilling so it’s faster to do it with western help,” said Alexei Vashkevich, head of geological exploration and resource base development at Gazprom Neft. “Can they be excluded? Yes, they can. Can we do it without them? Yes, we can. It will be a little harder and will take a little longer, but it’s possible.’

Bazhenov is a layer of ancient organic matter that’s the source rock for most of the crude pumped in West Siberia. That gives the formation the advantage of being close to pipelines serving Russia’s largest oil-producing region.

Field Development

Gazprom Neft estimates that it has more than 70 million metric tons of potentially recoverable reserves from Bazhenov, Strizhnev said. Bazhenov as a whole could contain as much as 22 billion tons, according to Russia’s Energy Ministry.

The large players that control Bazhenov need to do a huge amount of ‘‘theoretical work” before they can show the layer is profitable to develop, unlike at Bakken, said Vashkevich, who worked in North Dakota before joining Gazprom Neft in 2013. Bakken has been drilled for about five decades because dozens of “Mom and Pop” firms took on the risks, he said.

The company, which has drilled nine wells at Bazhenov, expects extraction costs to be similar to those of conventional deposits, Strizhnev said.

Gazprom Neft may need to drill 20 to 30 wells and start developing one or two fields before devising a full investment program, Vashkevich said

There won’t be “quick victories” at Bazhenov, he said. “Everything should be done in right way this time.”

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