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Russian-Japanese JV Find Oil and Gas in Irkutsk

Source: 10/25/2010, Location: Asia

At a joint press conference in Irkutsk, Mr. Hirobumi Kawano, President of Japan Oil, Gas and Metals National Corporation (JOGMEC), and Mr. Nikolay Buynov, Chairman of Irkutsk Oil Company, confirmed test production of oil and gas at three licensed blocks in the north part of Irkutsk Region where they jointly performed geological survey (“GS”).

GS is the joint projects as part of the promotion of collaboration between Japan-Russia private enterprises outlined by “the Japan-Russia- Action Plan” adopted during the Russia-Japan summit in January 2003 and “the Initiative for Strengthening Japan-Russia cooperation in the Far East and East Siberia” agreed by the countries’ leaders in June 2007.

In October 2007 and May 2009, JOGMEC and INK executed two agreements on joint exploration projects, established two JVs, ‘INK-Sever’ and ‘INK-Zapad’ (with INK and JOGMEC respectively holding a 51% and 49% stake in both companies) and implemented GS. It can be claimed that the Russian government’s decision to construct the East Siberia-Pacific Ocean (ESPO) pipeline along its current route has been enhancing greatly to these joint projects’ economic enchantment.

In this occasion, the licensed blocks encountered oil and gas discovery are three licenced blocks located in the north of Irkutsk Region and called at Severo-Mogdinsky, Zapadno-Yaraktinsky and Bolshetirsky block.

At the Severo-Mogdinsky block, crude oil inflows were confirmed at the first well (Well # 301 – testing is underway) spudded during June 2009and the second well (at Well # 302 214 tons per day, or 1,585 bpd) spudded during April 2010. JOGMEC and INK currently estimated the recoverable reserves of crude oil at the south-eastern part of the aforementioned block at 14.8 million tons of oil (110 million barrels). On October 19, 2010, the results, including current reserve estimates, were submitted to the Federal Subsoil Agency’s State Reserves Commission (Rosnedra) for approval.

The Severo-Mogdinsky block is located in the north neighboring of the East Siberia oil and gas province, where commercial development has started quite recently. The discovery of oil at comparably lowly explored area like this block has significant implication.

At present, the Severo-Mogdinsky block has been explored only its part. According to preliminary presumption by some geologists, the Severo-Mogdinsky subsoil as whole could contain up to 50 million tons of oil (370 million bbl). It is planed to name the new field after renowned geologist Boris Sinyavsky (September 17, 1939 – January 26, 2007), one of the pioneers in exploration in the region who made many discoveries in Eastern Siberia, including the major one – the Verkchnechonsky field.

As for the Zapadno-Yaraktinsky licensed block, gas production was confirmed during testing at the exploration well (Well # 311, spaded in April, 2010) as a gas-flow rate of 117,000 cubic meters per day and gas condensate rate up to 27.4 tons (243 bbl) per day.

Exploration drilling (Well # 11) is underway at the Bolshetirsky block. This well also shows hydrocarbons inflow.

The quality of the crude produced is good in comparison with the crude produced in the Middle East, as being light and sweet.

Going forward to launch commercial production, the partners plan to delineate the field by conducting further exploration including drilling wells for appraisal. The estimated amount of investment for exploring these blocks is some USD 300 million through 2014, while during the production stage the amount of additional investment could increase considerably. Once commercial production is started, the crude produced is expected to be transported to the Japanese market and other Asian markets through ESPO.

In addition, the study is underway on the applicability of Japanese high technologies to gas treatment, including technology for the gas processing plant for producing various synthetic fuels in Russia.

Although East Siberia is a strategically important region because of its adjacent geographical location to Japan and its expectation of abundant oil and gas reserves, due to the severe natural environment and inadequate infrastructure, the subsoil of East Siberia remains lowly explored and the resources development have been delayed. However it is expected that new discoveries of oil and gas will prompt oil companies of Russia and Japan to speed up geological exploration. If these discovery run on the commercial crude production at the blocks in the future, for the Japanese side, the pumping of oil through ESPO will mean saving time for import crude transportation and contributing diversification of supply source, and for Russian side, contribute ensuring supply source of ESPO filling crude, diversifying hydrocarbon markets, creating new employment, and increasing government revenue for both federal and regional.

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