PROSPECTS FOR SOVIET OIL PRODUCTION A SUPPLEMENTAL ANALYSIS

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CIA-RDP79B00457A000600090001-8
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April 6, 2001
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July 1, 1977
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REPORT
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Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 Prospects for Soviet Oil Production A Supplemental Analysis ER 77-10425 July 1977 Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 Approved For Release 2001/04/27 : CIA-RDP79BOO457AO00600090001-8 This publication is prepared for the use of U.S. Government officials. The format, coverage and contents of the publication are designed to meet the specific requirements of those users. U.S. Government officials may obtain additional copies of this document directly or through liaison channels from the Central Intelligence Agency. Non-U.S. Government users may obtain this along with similar CIA publications on a subscription basis by addressing inquiries to: Document Expediting (DOCEX) Project Exchange and Gift Division Library of Congress Washington, D.C. 20540 Non-U.S. Government users not interested in the DOCEX Project subscription service may purchase reproductions of specific publications on an individual basis from: Photoduplication Service Library of Congress Washington, D.C. 20540 Approved For Release 2001/04/27 : CIA-RDP79BOO457AO00600090001-8 Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 Prospects for Soviet Oil Production A Supplemental Analysis Central Intelligence Agency Directorate of Intelligence Overview This report is a compilation of some of the data and analysis employed in the recent CIA study on the Soviet oil industry. The study concluded that Soviet oil production will soon peak, possibly as early as next year and certainly not later than the early 1980s. The maximum output reached is likely to be between 11 and 12 million barrels per day (b/d)-up from the 1976 level of 10.4 million b/d. Maximum levels are not likely to be maintained for long, however. The Soviet Government is certainly aware of problems in increasing and sustaining oil production. Its own analysis emphasizes that the costs of finding and developing oil are rising dramatically. The Soviets apparently believe that they can avoid the downturn we predict. We disagree. We believe that even though great efforts will provide them with considerable oil, they cannot prevent the downturn. Soviet efforts to solve the oil problem are reflected in the rapid increase in purchases of oil equipment abroad. Since 1971, Soviet orders for Western oil and gas equipment have totaled about $3.1 billion. An additional $4 billion worth of steel pipe has been bought. Plans to convert the giant Samotlor field as well as smaller West Siberian fields to gas-lift production could sharply escalate Soviet equipment purchases. The Samotlor project alone would require at least $1 billion in imported equipment. Imported equipment can only slow the rate of decline in oil production once it begins. In large measure this reflects the deeply rooted nature of the oil problem. The forced-draft approach to achieving production targets, for example, has been expensive in terms of exploration and of recovery rates in producing fields. As a result, proved reserves have stagnated since the early 1970s, and no large finds have been made since the Samotlor Note: This memorandum provides a supplemental analysis for the CIA publication Prospects for Soviet Oil Production, April 1977, Unclassified. Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 field was located in 1965. Only by working this field harder than any other major oilfield in the world have the Soviets been able to come close to their production targets. At this point the Soviet Union has opted to continue its past approach. Any shift to exploration drilling would entail drilling fewer production wells and an immediate and sharp fall-off in current production. Indeed, the pressure to focus more heavily on development drilling will intensify because of the large capacity additions needed to offset depletion of old oil fields and to provide for planned increases in production. By the Soviets' own calculations, depletion offsets alone in 1976-80 will equal total capacity additions during 1971-75. To add the capacity needed to meet 1980 production goals, the Soviets will have to increase their rate of development drilling 50 percent between 1976 and 1980. The Soviets are examining a variety of techniques to forestall the production decline. The prospects of such methods having more than an insignificant impact during the time period of our analysis are negligible, however. Soviet production practices make it difficult to implement tertiary recovery procedures, because their massive water flood techniques adversely affect oil-reservoir permeability. Given the widespread damage inflicted on major oil reservoirs, the Soviets will find it difficult to increase recovery rates more than a few percentage points over the long term with tertiary methods. The difficulties the Soviets face on the oil front do not stem from any lack of resource commitment on their part. Indeed, measured by the resource cost in terms of material and manpower, the USSR may expend as much effort on producing oil as all Free World countries combined. Because of the low productivity of this effort, however, the results are only a fraction of those in the West. For example, US firms drilled five times as much meterage as did the Soviet Oil Ministry with about the same number of rigs. For 1976, the Soviet Oil Ministry required some 800,000 employees to produce 10.4 million b/d of oil. Plans and Plan Fulfillment From World War II until the early 1970s, the Soviet record in oil production was enviable. Plan production goals were consistently met or exceeded at only a small cost in additional effort. Production in 1970 was 350 million tons (7 million b/d), more than nine times the 38 million tons (760,000 b/d) output of 1950. This great increase in production was accomplished without anything like a commensurate increase in inputs. Over the 20-year period, the amount of drilling rose only about 210 percent and the number of rigs in active use only 57 percent, from 1,119 to 1,760. Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 This rapid growth in oil industry productivity was made possible only by the discovery of extremely rich and accessible oil deposits in the ]Urals-Volga region, where output grew from 5 million tons (100,000 b/d) in 1950 to 210 million tons (4.2 million b/d) in 1970. During 1937-55, the Soviets found and developed several of the world's largest and richest :Fields in this region. Two of them--Romashkino and Arlan-contained as much recoverable oil (19 billion barrels or 2.5 billion tons) as the combined total of the 10 largest fields ever discovered in the lower 48 states of the United States. At its peak in 1970, Romashkino produced 82 million tons (1.63 million b/d), 23 percent of total Soviet output in that year. Since that time, :Romashkino's output has been maintained at about 80 million tons (1.6 million b/d). Since the mid-1950s the size of discoveries in the Urals-Volga has fallen off sharply. Growth in output from this region slowed dramatically in the early 1970s, as all of the large fields found in the 1940s and 1950s had 'Oeen fully developed. During 1972-75 original output goals were not met. In 1975, despite the largest absolute annual increase in oil production (including gas condensate) ever achieved, total Soviet oil output fell short of the original target by about 14 million tons (280,000 b/d), or 2.8 percent. The average annual rate of growth rate in oil production planned for 197 1-75 was 7.4 percent, but the actual growth rate was only 6.8 percent. The four-year 'trend of underfulfillment apparently continued in 1976 with a slight shortfall, although detailed data have not been reported. During this period of oil production shortfalls, several of the older .producing regions--the Ukraine, North Caucasus, and Azerbaydzhan-.- registered declines in output, and production in the Urals-Volga levelled off., Only by overfulfilling production goals in West Siberia was the USSR able to come close to the national targets during 1972-75. Original plans called for West Siberia to produce 120-125 million tons (2.4-2.5 million b/d) in 1975; actual output was 148 million tons, almost 3 million b/d. A large share of the overfulfillment in West Siberia was provided by the rapid development of the Samotlor field. This giant field, roughly comparable in size to Romashkino, has accounted for 24-26 million tons (480,000-520,000 b/d) of the 30-million-ton-per-year (600,000 b/d) annual increase in national production during the past four years. In 1976, Samotlor produced 110 million tons (2.2 million b/d), nearly 35 percent more than Rosnashkino's greatest annual output. It is scheduled to peak at 130 million tons (2.6 million b/d) in 1977-78, and no new fields even remotely comparable in size have been discovered to maintain production increases. Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 Million Tons Million b/d 1971 Plan 371 7.42 Actual 371.8 7.44 1972 Plan 395 7.90 Actual 393.8 7.88 1973 Plan 429 8.58 Actual 421.4 8.43 1974 Plan 461 9.22 Actual 450.6 9.01 1975 Plan 496 9.92 Actual 481.8 9.64 1976 Plan 510.6 10.21 Actual N.A. N.A. 1977 Plan Projected N.A. N.A. 1980 Plan Projected N.A. N.A. Million Tons Million b/d N.A. N.A. 377.1 7.54 N.A. N.A. 400.4 8.01 N.A. N.A. 429.0 8.58 N.A. N.A. 458.9 9.18 505 10.10 490.8 9.82 520.6 10.41 519.7 10.39 550 11.0 540-550 10.8-11.0 640 12.8 550-600 11-12 For the next decade at least, any growth in output, including that needed to offset declines in older fields (including Samotlor after 1980), must come from many smaller West Siberian fields. The 1976-80 plan, as originally proposed, called for oil production to reach 620-640 million tons (12.4-12.8 million b/d) in 1980. West Siberia's Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 Approved For Release 2001/04/27 : CIA-RDP79900' 57A000600090001-8 1971 1972 USSI: 'Oil Production plans and Fulfillment 19.01 'Including as condensate. 110.39 Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 goal-300-310 million tons (6.0-6.2 million b/d)--is almost half of that for total national output in 1980. Despite increasingly apparent problems in the oil industry-oil fields approaching exhaustion, inadequate exploration drilling, no new giant discoveries since Samotlor in 1965, and growing need for modern Western exploration and production equipment and technology-the 1980 goal was cited as 640 million tons (12.8 million b/d) in October 1976 by the Deputy Chairman of the Council of Ministers. Why this goal was set at the upper end of the original range, when the many difficulties confronting the industry would seem to dictate a lower figure, remains a mystery. Perhaps the hierarchy believes that the higher goal will spur the oil industry to greater efforts. At any rate, for the reasons stated in the discussion of regional production, it seems unlikely that the goal can be attained. The Soviets recognize that long-range prospects for oil production have dimmed during the past decade. In 1967, Soviet sources projected oil production in the year 2000 at 1-1.15 billion tons (20-23 million b/d). In 1977, a high-level Soviet economist stated that projections for oil production at the end of the century have been scaled down to 800-900 million tons (16-18 million b/d). This reduction probably was prompted in part by a reassessment of available oil reserves and in part by difficult production and transport problems in the regions from which future production growth must come. Oil Production and Development of Fields Throughout its history the Soviet petroleum industry has depended heavily on a single region--in some cases on a single large field such as Rornashkino or Samotlor--for growth in production. From World War II through 1970, the increase in Soviet oil output came first from the old fields around the Caspian Sea (near Baku in Azerbaydzhan SSR), and beginning in the 1950s, from large fields in the Tatar and Bashkir ASSRs and in Kuybyshev Oblast of the Urals-Volga region. Since 1970, nearly all output growth has come from West Siberia, primarily from the giant Samotlor field. Thus far, no new large successor has been found to ensure future growth. The Impending Decline of the Urals-Volga The Urals-Volga region still is the leading producer of oil in the USSR, but will be surpassed by West Siberia in 1977 or 1978. In the mid-1960s the Urals-Volga accounted for about 70 percent of total Soviet oil output. Major fields in this region have been producing for more than 25 years and are rapidly approaching depletion. Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 USSR: Crude Oil' Production, by Region Million barrels per day Region 1965 1970 1971 1972 1973 1974 1975 19762 Total USSR 4.86 7.06 7.54 8.01 8.58 9.18 9.82 10.39 Western region and Urals 4.51 5.80 5.90 5.97 5.98 5.97 6.00 5.89 Urals-Volga 3.48 4.17 4.23 4.31 4.40 4.44 4.50 4.48 Tatar 1.53 2.01 2.02 2.04 2.06 2.07 2.07 2.05 Bashkir 0.88 0.81 0.80 0.80 0.81 0.80 0.81 0.80 Kuybyshev 0.67 0.70 0.71 0.71 0.71 0.70 0.69 0.67 Perm' 0.20 0.32 0.34 0.36 0.39 0.41 0.44 0.46 Orenburg 0.05 0.15 0.17 0.19 0.21 0.23 0.24 0.25 Lower Volga 0.12 0.14 0.15 0.15 0.15 0.14 0.14 0.14 Udmurt 0 0.01 0.01 0.03 0.04 0.05 0.07 0.08 Saratov 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 Komi 0.04 0.11 0.12 0.13 0.13 0.14 0.14 0.17 Belorussia Negl 0.08 0.11 0.12 0.14 0.16 0.16 0.17 North Caucasus 0.41 0.68 0.72 0.69 0.59 0.53 0.47 0.40 Azerbaydzhan 0.43 0.40 0.38 0.37 0.36 0.36 0.34 0.33 Ukraine 0.15 0.27 0.28 0.28 0.27 0.25 0.23 0.23 Other3 Negl 0.09 0.06 0.07 0.09 0.09 0.16 0.11 Eastern region 0.35 1.26 1.64 2.04 2.60 3.21 3.82 4.50 West Siberia 0.02 0.63 0.90 1.25 1.75 2.33 2.96 3.63 Central Asia 0.28 0.58 0.66 0.71 0.76 0.79 0.81 0.80 Mangyshlak 0.04 0.21 0.26 0.30 0.34 0.38 0.40 0.40 Emba Negl 0.05 0.06 0.06 0.06 0.07 0.07 0.07 Turkmen 0.19 0.29 0.31 0.32 0.32 0.31 0.31 0.30 Other 0.05 0.03 0.03 0.03 0.03 0.03 0.03 0.03 Sakhalin 0.05 0.05 0.05 0.05 0.05 0.05 0.04 0.04 Other3 Negl 0.05 0.03 0.03 0.04 0.04 0.01 0.03 1. Including gas condensate. 2. Preliminary estimate. 3. Chiefly gas condensate produced by the Ministry of the Gas Industry. Waterflooding has been used since the initiation of production in most of these fields--as is common practice in the USSR--to maintain and/or increase formation pressure and to increase well flows. In a number of fields, large volumes of water have been injected at high pressures, damaging reservoirs and reducing the amount of recoverable oil. In the mid-1960s the water cut in total fluid recovery began to rise substantially and use of pumps became necessary to increase fluid flow and to maintain oil output. In the late 1960s output began to decline in Bashkir and threatened Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 to do likewise in the other parts of the Urals-Volga. In 1971, however, the US removed trade controls on high-capacity submersible pumps, and since then the USSR has imported from US firms 1,000 pumps with a total fluid lifting capacity of more than 3 million b/d. These pumps stabilized oil production in the Urals-Volga, but, as the water cut in total fluid increases, oil production will decline unless there is a comparable increase in the capacity of fluid lifting equipment. Such an increase in lifting capacity seems unlikely, given competing demands on the limited capacity of equipment producers. In some newer producing areas of the Urals-Volga, such as Orenburg and Udmurt, oil output will rise, but not nearly enough to offset the probable decline in the large, older fields. Optimistically, output in the three major producing areas of the Urals-Volga--Tatar, Bashkir, and Kuybyshev--will fall by only the 36 million tons (720,000 b/d) called for in the 1980 plan when compared with 1975. Depending upon how fast the water cut rises, Urals-Volga production in 1980 probably will range somewhere between 175 and 200 million tons (3.5 and 4 million b/d) compared with 225 million tons (4.5 million b/d) in 1975. The Tatar SSR accounts for roughly half of the oil output of the Urals-Volga region. Despite the development of many small fields in the past decade, about 80 million tons (1.6 million b/d) of the total output of about 105 million tons (2.1 million b/d) comes from the supergiant Romashkino field. Water injection in this field has been increasing steadily, reaching a total of almost 150 million tons (3 million b/d) in 1975. As a result, the total volume of fluid that must be lifted to produce any given quantity of oil has also been increasing. The average oil output per producing well declined from almost 23,000 tons (460 b/d) in 1970 to roughly 10,000 tons (208 b/d) in 1975. Over the past eight years production from the field has been maintained at a constant level by in-fill drilling and narrow spacing of producing and injection wells combined with the use of surfactants and other chemicals in conjunction with waterflooding. The Rise of West Siberia Since the early 1970s the bulk of the increase in crude oil production has come from West Siberia, where commercial output began in 1964. Sizable production increases were expected from the oilfields in the Mangyshlak Peninsula in western Kazakhstan, but output there has not risen nearly as fast as anticipated because of improper waterflooding procedures and complicated drilling problems. West Siberia is crucial to the Soviet effort to continue raising oil output. All of the increase in Soviet production planned for 1980 is to come from West Siberia, where output is to rise from almost 150 million Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 Approved For Release 2001/04/27 : CIA-RDP79BOO 57A000600090001-8 USSR; crude Oil Productiori; by Major Field I I I 1969 1970 1971 1972 1973 1974 1975 19762 Including gas condensate. 2 Estimated. ht Approved For Release 201/04/27 : CIA-RDP79B00~457A000600090001-8 Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 USSR: Distribution of Crude Oil Production '- 7,06 Million b/d WESTERN REGION 57% 10.39 million bid Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 tons (3 million b/d) in 1975 to 300-310 million tons (6.0-6.2 million b/d) in 1980. This goal is considerably higher than an earlier target of 230-260 million tons (4.6-5.2 million b/d). During 1977-80, increases in oil production will depend on rapidly developing many smaller new fields while maintaining peak output at the Samotlor field. Available Soviet data on West Siberian oilfields scheduled for production by 1980 indicate that maximum regional production would approximate 290 million tons to (5.8 million b/d) if all fields were to reach their maximums at the same time. However, some of West Siberian fields have already peaked and are now on the decline; others will peak before or after 1980. The Shaim fields, which began production in 1964, are well past their peak and have water cuts exceeding 50 percent. Ust-Balyk, the second largest West Siberian field, is also declining, but development of a new producing zone may prolong its life. Although new fields are being discovered in West Siberia, no giant fields have been found comparable to Samotlor, which has a production capacity of about 130 million tons (2.6 million b/d) that probably will be reached in 1977-78. Present development plans call for Samotlor to maintain maximum output for four years. These plans, however, depend or. the use of high-capacity submersible pumps and on drilling a large number of additional wells to maintain production at its maximum. In general, West Siberian fields appear to respond poorly to production techniques that worked well in the Urals-Volga region. At Romashkino, it took 18 years before the water cut rose to l0 percent; at Samotlor this share of water in total fluid produced was reached in about 3 years. In. the Urals-Volga, submersible pumps last up to a year without service; at Samotlor, because of silt and salt in the oil and water, they must be replaced after only 60 days of operation. In recent months the USSR has begun to negotiate with US and other Western firms to undertake an extensive gas-lift program to cope with rising fluid lifting requirements and to extend the producing life of the Samotlor field. The ambitious plans for West Siberia in 1980 do not appear attainable because of the extensive drilling that will be required-30 million meters during 1976-80 compared with 9.5 million in 1971-75--and the need to place six to eight new oil deposits in production each year of the current five-year plan. West Siberian oil production in 1980 is more likely to be on the order of 250-260 million tons (5.0 to 5.2 million b/d) rather than tae 300-310 million tons (6.0-6.2 million b/d) planned. Frontier Zones for Oil Production Geological conditions favorable to large future discoveries of oil exist over much of the Arctic offshore regions (Barents, Kara, East Siberian, and Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 Chukchi Sea basins), in the East Siberian lowlands, in deep structures in the Caspian Sea, and perhaps off Kamchatka and Sakhalin in the Sea of Okhotsk. Production from most of these areas, however, is at least a decade away. The technology to cope with pack ice such as will be encountered in the offshore Arctic seas has not been developed as yet, even in the West. Thus, development of these areas is unlikely before the end of the 1980s at the earliest. Operating conditions are more favorable in the East Siberian lowlands than in Arctic offshore areas, but the severe climate, extensive permafrost, great distance from energy consuming centers in the western USSR, and difficult transport problems will restrict the pace of development when oil is found. To date no commercial-scale discoveries of oil have been made. In the offshore area around Sakhalin, Japanese firms are working on a cooperative venture with the Soviets to explore for and develop oil deposits. The exploration program is at least one year behind schedule, and potential oil production does not appear to be as promising as the Soviets originally estimated. Weather and ice conditions in this area are harsher than in the North Sea, where development of commercial-scale production took about 10 years. Significant production from the Sakhalin area is unlikely before the mid-1980s. Soviet Production Methods Over the past 20 years the Soviet Union has consistently claimed that, because of advanced practices, it recovers a much higher percentage of the original oil in place than does the United States or other Western oil producing countries. The Soviets attribute their high recovery rates to their production practices, especially the early employment of high-pressure water injection. Now that many of the Soviet fields have been in production for 20 years or more, it is becoming apparent to them that recovery will be much less than originally estimated. In the Urals-Volga area, for example, Soviet engineers cut their recovery estimates from 5 1 percent in 1960 to 44 percent in 1970. Further revisions downward probably will be made. Water-Injection Pressure Maintenance The most important Soviet oil production technique in recent years has been the widespread use of water injection to maintain a rapid flow of oil through the reservoir to the producing wells. Since World War II, the Soviets have begun water injection in new fields soon after oil production starts and continue the practice throughout the life of these fields. Water-injected fields accounted for more than half the oil produced in the USSR as early as 1955, more than 66 percent in 1960, .and more than 80 percent in 1976. Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 The water-injection program has enabled the Soviets to minimize their initial oil field investment. By using forced water injection they can obtain a much higher initial level of output per well than would be possible under Western practice. The higher output per well means that, at least initially, the Soviets need fewer producing wells to achieve a given level of output. In some fields the Soviets have used water flooding to raise the pressure; in the reservoir enough to make the oil flow to the surface when it otherwise would not. This practice also temporarily eliminates the need for costly pumping equipment. While these practices yield high production rates in the early years of an oil field's life, problems develop as the fields age. Injected water breaks through the oil-bearing formations into the producing wells. When this happens, additional wells must be drilled (in-fill drilling) to locate the oil, or expensive pumps must be installed to lift the large volumes of fluid (water and oil) needed to maintain oil production. Soviet reservoir engineers first used this approach to waterflooding in 1948 at Tuimazy in the Bashkir ASSR. Water was injected not only along the edges of the oil pool but also through interior rows of injector wells that paralleled and crisscrossed the field. Since 1967, a thin network of wells located on 100 hectare blocks has been used for most new field development. The water volumes injected often exceed the void space of the oil produced, and the injection pressures raise normal formation pressures. In recent years, submersible (Reda-type) centrifugal high-volume pumps have been used to maintain the oil flow from water-injected fields.. Although oil is quickly removed from highly permeable rock as the waterflood sweeps through, considerable amounts of oil are left behind in less permeable "pillars." The use of submersible pumps combined with water injection eventually causes coning, i.e., fingers of water break through to the producing wells, bypassing much oil. When the water cut of the fluid produced from the original network of wells becomes excessive, the field usually has to be redrilled. Smaller well spacing patterns of 50 hectares, 25 hectares, 12 hectares, and six hectares are used for each successive development stage. The Romashkino field has been redrilled four times, and in each phase a smaller well spacing; pattern was used to capture the bypassed oil. The total impact of these practices on oil recovery in the larger 1Ura.ls-Volga and West Siberian fields before 1974 cannot be fully assessed because of limited data. In 1974, however, several prominent Soviet leaders and reservoir experts admitted that many mistakes were made at Tuimazy Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 and at numerous other fields where the same exploitation methods were applied. These fields were not uniform in terms of porosity, permeability, and rock composition, and the Soviet engineers were late to recognize the importance of these factors in designing waterflood operations. As a consequence much oil has been lost. Soviet methods definitely led to premature coning and water break-throughs at Samotlor in 1972 and at six or seven other large West Siberian fields. How much of the decline in expected recovery rates stems from this kind of damage is uncertain; the original estimates for recovery appeared overly optimistic even with ideal reservoir management. Failure to treat ground water and surface water used in most waterflood projects has also created reservoir problems. Bottom-hole temperatures and the oil recovery factors were lowered by injecting cold surface water into the Uzen-Zhetibay reservoirs of the Mangyshlak Peninsula, as well as those at Samotlor and Ust Balyk in West Siberia. Injection of untreated water has led to excessive salt formation in well bores and downhole pumping equipment in West Siberia. Organic material and dissolved gases in untreated surface waters injected into hot oil reservoirs has also caused prolific bacteria growth that reduces rock porosity. Oil Recovery In the 1950s and early 1960s, Soviet engineers believed that their practices would result in much higher recovery rates than were prevalent in the West. As late as 1960 they still believed that they would recover nearly 50 percent of the original oil in place in the Urals-Volga region. These beliefs are now in question. The average rate of recovery in the US remains at 32-33 percent, despite great improvements in technology and equipment in recent years. Soviet planners apparently began to question planned recovery factors after the Oil Ministry requested increased imports of US technology and equipment after 197 1. In 1974, N. K. Baibakov, V. D. Shashin, A. P. Krilov, and other ranking officials spoke out on the oil recovery problem underscoring that "it lies at the heart of the reserve issue." A Soviet study on changing oil recovery rates for A+B+C 1 reserves in 1960-70 noted that the average annual rate of decline in the expected recovery factor was four-tenths of a percentage point during 1960-65, but it increased sharply to nine-tenths of a percentage point during 1966-70. The Soviets now admit that many large fields, including Samotlor, will not reach their planned recovery rates. Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 Some Soviet analysts ascribe the problems to a poor understanding of the reservoirs at the time development plans are made. Poor seismic and well-logging equipment often prohibits the collection of good data. Similarly, the amount of damage from water breakthroughs in the largest reservoirs is not known precisely even by the Soviets; scattered published data suggest that they perceive the problem to be very widespread and increasing. Water production accounted for almost 50 percent of total fluid output in 1975, according to several Soviet sources. A. P. Krilov stated in 1974 that extension of the basic development plan pioneered at Tuimazy in 1948 to other fields was affecting these deposits in the later stages of their development. Several problems experienced at Tuimazy reoccurred at Romashkino, which is now producing 55.5 percent water, as well as at several Kuybyshev and West Siberian fields.. Tuimazy is now producing 86 percent water from the main Devonian zones.. According to the originator of the development plan, Tuimazy was not developed in the best possible way. Another Soviet expert raised the point that 1970 crude oil production of 348 million tons (7 million b/d) was accompanied by 273 million tons of water (5 million b/d)--i.e., a 43 percent water cut. By 1974, the nationwide average water cut exceeded 47.3 percent, and the water ratio is expected to increase rapidly due to the age of most of the largest fields. Other experts indicate that water breakthrough between the seventh and l1th years of oil production increases the water cut from 15 percent to 30 percent at younger deposits. These observations were probably based on experience in West Siberia. Other sources note that the Shaim deposits, with stable oil production of 5.6 million tons annually (110,000 b/d) since 1972, were 46 percent water cut after 9 years of exploitation. A 1972 study of 102 wells in certain Samotlor zones showed water cuts of 12 to 14 percent; the water production was attributed to coning and not to bad cement jobs as had been suspected. Water appeared in oil production soon after waterflooding began at the Shaim, Surgut, and Nizhnevartovsk fields of West Siberia-the only major fields opened since 1965. A table in a Soviet study notes water produced in all the major producing regions of the USSR in 1961 and 1965. Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 USSR: Regional Production of Water as a Percent of Liquids Recovered Urals-Volga 11.5 24.0 Trans Caucasus 77.0 75.0 North Caucasus 56.4 48.8 Ukraine 17.5 12.0 Central Asia and Kazakhstan 73.8 77.2 Average (presumably weighted) 43.0 44.0 More recent statements of the water problem appeared in 1974-75 with water production estimated at 43.8 percent in 1970, 47.3 percent in 1974, and 46.4 percent in 1975. These statements appear inconsistent with the earlier data. The age of the fields, the advanced state of depletion, and Soviet studies indicating that 80 percent of the oil is recovered in 18 years at the larger Urals-Volga fields suggest that the water problem is much greater than the above figures indicate. The Soviets are receiving temporary relief by redrilling most fields two to four times using closer well spacing. Since new wells initially produce largely oil, this has the effect of reducing the average water cut for the entire field. For example, at Romashkino, the central sector of the field produced 80 percent water in 1968-69. Altogether Romashkino has been redrilled four times, which reduced the water cut to as low as 48 percent in the early 1970s. The average water cut, however, is once again rising, reaching approximately 55 percent in 1976. Fluid Production and Pumping Requirements Realization of 1980 production goals of 300-310 million tons (6-6.2 million b/d) in West Siberia is critical to meeting the national target of 640 million tons (12.8 million b/d). Nationwide, the production of water was roughly equal to total oil recovery in 1975. In-fill drilling both at the old depleted fields of the Urals-Volga and at the newer West Siberian fields is requiring an increasing share of the total Soviet drilling effort. In 1976, 10 million meters of the 12 million drilled by the Soviet Oil Ministry were allocated to development wells. Limitation on the Soviet ability to drill new wells means that total fluid lifting requirements will nearly double over the current five-year plan. Producing anything near 600 million tons Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 (12 million b/d) of oil in 1980 with only a 3 percentage point annual increase in the water ratio implies an annual increment approaching 200 million tons (4 million b/d) of fluid in absolute terms in 1976-80. With a 6 percentage point rise, annual increments in fluid lifting would reach roughly 400 million tons (8 million b/d). The primary Soviet strategy for dealing with increasing water cuts is the use of electric submersible pumps. The total Soviet inventory of these pimps on 1 January 1975 was 11,950, of which 8,700 were in service and the remainder were undergoing repair or in reserve. These pumps accounted for 200 million tons (4 million b/d) or nearly 40 percent of total oil output in 1976. To meet plan goals for output in the Urals-Volga, a great increase in the number of pumps will be required. A recent article said that 470-500 new pumps would be needed each year in Bashkir ASSR just to stabilize output. USSR: Planned Crude Oil Production and Estimated Total Fluid Output Oil Water Total Fluid Million Tons Million b/d Million Tons Million b/d Million Tons Million b/d 1975 491 9.8 491 9.8 982 19.6 1976 520 10.4 586 11.7 1,106 22.1 1977 550 11.0 700 14.0 1,250 25.0 1978 580 11.6 834 16.7 1,414 28.3 1979 610 12.2 995 19.9 1,605 32.11 1980 640 12.8 1,188 23.8 1,828 36.6 Case B 1975 491 9.8 491 9.8 982 19.6 1976 520 10.4 662 13.2 1,182 23.6 1977 550 11.0 897 17.9 1,447 28.9 1978 580 11.6 1,233 24.7 1,813 363 1979 610 12.2 1,736 34.7 2,346 46.9 1980 640 12.8 2,560 51.2 3,200 64.0 Case A assumes 50 percent oil and 50 percent water in 1975 and water cut increases 3 percentage points annually. Case B assumes 50 percent oil and 50 percent water in 1975 and water cut increases 6 percentage points annually. Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 In May 1975, the Soviets noted that electric submersible downhole pumps provided the chief means of automating oil production at Samotlor. This article also made reference to the use of imported high-volume US-made Reda and BJ pumps, which lift up to 1,000 tons (7,300 barrels) of fluid per day. About 1,025 US pumps have been delivered and about 1,210 will have been shipped by yearend 1977, on the basis of present orders. Approximately 2,000 of these pumps are made each year in the West, all in the US, and delivery to the USSR presently is restricted to about 30 pumps per month because of limited capacity, backorders, and long lead times. Present Soviet-made submersible pumps have lower capacities and require more maintenance than their US counterparts. Soviet reports indicate that the operating life of many of the Reda type pumps now in use at Samotlor is as short as 60 to 90 days. The high maintenance required on pumps used at Samotlor is due to the presence of fine silt and sand grains in the oil, salt formation on the pumps, lack of heat-resistant electric cable, and frequent power outages that burn out the motors. Last year, the Oil Ministry, in a major change in production policy, decided to adopt gas-lift development at Samotlor and Federovo at a cost of $600 million to $1.1 billion. Excessive maintenance costs may have prompted the Soviets to acquire US gas-lift equipment as a substitute for electric downhole pumps. Gas-lift units are cheaper to operate and much easier to maintain with wire line tools from the surface. This is the largest project of its kind in the world to date. Long lead times are expected, however, before delivery can be made. New Capacity and Drilling Requirements To meet planned production targets the Soviet oil industry will have to increase productive capacity sharply in the years ahead. Large capacity additions will be needed to offset the sharply declining productivity of existing wells. Still more new wells will be needed to provide for growth in output. To achieve the necessary capacity additions, maintain maximum output from existing fields, and discover and prove up new reserves will require a massive increase in the Soviet drilling effort. Whether the industry can meet these requirements is far from certain, given the present level of Soviet drilling technology and practice. Capacity Requirements The major element causing the sharp rise in new capacity requirements is the extremely rapid increase in new capacity needed to offset depletion in older areas. During 1961-65, for example, the USSR required only 68 million tons (1.4 million b/d) of new capacity to offset depletion; by Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 1971-75 they required nearly 260 million tons (5.2 million b/d). The plan for 1976-80 anticipates that as much as 390-400 million tons (7.8-8 million b/d) of new capacity will be required just for depletion offset. Developments in Bashkir ASSR highlight the nature of the offset problem. The 1976-80 plan anticipates some decline in Bashkir output, currently 40 million tons per year (800,000 b/d), and to moderate this decline the Baskhir Oil Trust believes that it will need to add new capacity at the rate of 10-12 million tons per year (200,000-240,000 b/d) during 1976-80. Tatar ASSR, the largest oil producing region in the Urals-Volga, faces a situation similar to that of Bashkir. In Tatar, during 1966-70, new capacity was added at the rate of 10-12 million tons annually (200,000-240,000 b/d), and about half of the new capacity resulted in increased output. During, 1971-75, Tatar added new capacity at the rate of 13-14 million tons per year (260,000-280,000 b/d), but all of this new capacity went to offset the depletion of old capacity. In 1976 output declined in Tatar for the first time since production began. A simple extrapolation of trends over 'the past 10 years suggests that capacity in Tatar will be depleted at the :rate of about 20 million tons per year (400,000 b/d) during the 1976-80 period. The situation in Kuybyshev is quite similar. The problem of achieving new capacity additions in all of these Urals-Volga regions is compounded because the water cut is rising at an extremely rapid rate and the need for lifting equipment is becoming critical. In a recent Pravda article the Bashkir Oil Trust said that "simply to maintain a high level of output," it will be necessary to install 470-500 submersible pumps each year in Bashkir alone. Without the pumps the drilling requirements for new capacity would be much higher. The sharp rise in the rate of capacity depletion has caught the USSR by surprise, probably because of the unrealistically high oil recovery rates they anticipated at older fields. In 1970, when the 1975 plan goals were first announced, the Oil Ministry expected that only about 160 million tons (3.2 million b/d) of new capacity would be required to offset depletion during 1971-75. As the plan period progressed, they were forced to revise this estimate four times, and by the time the plan was completed, 258 million tons (5.2 million b/d) of new capacity had been required to offset depletion. Although actual new capacity additions far exceeded originally planned levels (392 million tons vs 300 million tons or 7.8 million b/d vs 6 million b/d), production fell 14 million tons (280,000 b/d) short of the goal. The same thing appears to be happening now. In 1975, the Soviet Oil Minister announced that 450 million tons (9 million b/d) of new capacity would be needed during 1976-80 to produce 620-640 million tons Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 (12.4-12.8 million b/d) of output. By mid-1976, this goal was revised upward to 530-540 million tons (10.6-10.8 million b/d). Although the USSR added more than 390 million tons (7.8 million b/d) of new capacity during the 1971-75 period, it still fell short of its original production goals. The shortfall was minimized thanks to the giant new Samotlor field, where the Soviets were able to add more than 80 million tons (1.6 million b/d) of new capacity. In doing so, however, they pushed the field much harder and faster than originally planned. As late as 1973, planned peak output at Samotlor had been only 100 million tons (2 million b/d). Now the planned peak is to be reached in 1977/78 at 130 million tons (2.6 million b/d). In any event, 60 percent of the increase in total Soviet oil output of 138 million tons (2.8 million b/d) during 1971-75 came from Samotlor. During 1976-80 Samotlor will provide a production increase of only about 43 million tons (860,000 b/d), if it reaches output of 130 million tons (2.6 million b/d) this year. To maintain Samotlor production at this level, however, the USSR will have to greatly increase its drilling effort there to offset the rapid rate of well depletion. Viewed in this way, every new well at Samotlor after this year will be for depletion offset. During 1976-80 the Soviets will have to add new wells at a much higher rate (about 500 per year compared with 250 annually in 1970-75). Beyond 1980, output at Samotlor will begin to decline despite increasing additions of new capacity. After 1977 all growth in Soviet output will have to come from a number of much smaller fields in West Siberia, where well productivity rates are lower than at Samotlor and where the task of providing infrastructure will be much more difficult. If Soviet engineers attempt to meet 1978 plan goals by pushing Samotlor's output higher than the presently planned peak of 130 million tons (2.6 million b/d), production from this field will almost certainly begin to slump before 1980. As it is, Samotlor output this year will be 60 percent higher than the peak rate achieved at Romashkino--a similar-sized field--where peak output levels were maintained for nine years-1967 through 1975. Drilling Requirements Escalate The Soviet Oil Ministry is faced with steadily rising drilling requirements. The dual needs of finding new reserves and adding new producing capacity at existing fields to sustain planned rates of output growth have strained drilling capacity since the mid-1960s. Depletion of existing reserves meant that more and more rigs had to be allocated to development drilling so that new wells in old fields could help compensate for declining output per well. During this period, exploratory drilling Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 stagnated. Now, not only are development drilling requirements continuing to rise rapidly, but exploratory drilling must be increased sharply to locate and prove up reserves to support production in the 1980s. By that time, output in the old Urals-Volga fields will be falling rapidly, and production at Samotlor and other major West Siberian fields will have begun to decline. At the same time, however, the limitations of Soviet drilling equipment are becoming increasingly apparent. As long as most Soviet drilling was at shallow depths, evolutionary improvements in turbo-drill design allowed steady improvements in rig productivity. Between 1946 and 1960, when most exploration was occurring in the Urals-Volga regions, exploratory rigs were able to improve their monthly average drilling speeds from less than 180 meters per rig per month in 1946 to 400 in 1960.. In development drilling they did still better, going from 370 meters per rig per month in 1946 to more than 1,100 by the late 1960s. With the move to West Siberia and the need to drill to greater depths in nearly all regions in the USSR, commercial drilling speed of exploratory rigs has fallen by 15 percent since 1960. The same indicator for rigs engaged in shallower development drilling has continued to rise, however. The Soviets have been working on improved versions of the turbo-drill that they claim will allow them to drill efficiently at depths of up to 3,500 meters. We doubt that this can be done unless the Soviets can make a quantum improvement in the quality of their drilling bits and of the steel used for rigs and drill pipe. Because of the decline in rig productivity, the USSR will have to boost its active rig park to meet future drilling needs. In fact, the decline in the rig productivity should accelerate as a larger and larger share of total drilling takes place in Siberia, where wells are substantially deeper than in the old Urals-Volga fields and rig transport between wells is more costly and time consuming. No evidence is available, however, to show that the Soviets have planned for or have the capacity to sharply boost their rig supply. As late as 1976, Oil Minister Shashin said that, to meet 1980 plan goals, rig productivity would have to rise by 42 percent during the plan period. Given recent trends, this task appears to be nearly impossible. Even if the USSR decided to massively reequip its drilling sector with Western equipment, adequate supplies would not be available for many years, in part because of order backlogs by Western buyers. Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 Selected Data on Soviet Drilling Activity Meters drilled' Exploratory Development Wells completed Exploratory Development (including water injec- tion wells) Average well depth Exploratory Development Average cost Exploratory Development Number of rigs operating Commercial drilling speed Exploratory Development 1,003 3,534 4,763 6,740 9,261 10,972 15,116 383 1,449 2,540 3,200 4,752 4,604 5,418 620 2,085 2,223 3,540 4,509 6,368 9,698 950 2,893 3,320 3,892 4,903 5,311 6,0622 342 1,074 1,394 1,660 2,165 1,711 1,9352 608 1,819 1,926 2,232 2,738 3,600 4,1272 1,120 1,349 1,822 1,928 2,195 2,691 2,8002 1,020 1,146 1,154 1,586 1,647 1,769 2,3502 Rubles per Meter 87.6 118.2 124.0 111.9 148.7 238.8 2803 47.7 45.6 48.5 49.4 65.5 84.5 1003 430 1,119 852 1,130 1,624 1,760 1,8003 Meters per Rig per Month 177 209 306 401 377 337 3402 372 629 893 993 1,090 1,154 1,4502 1. These figures include drilling of all types: oil, gas, core holes (possibly for other minerals), and slim-hole stratigraphic tests by the Geology Ministry. 2. Estimated, based on 1974 data. 3. Estimated. Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 Drilling Plans The Soviets plan to increase total drilling (presumably by the Oil Ministry) to 75 million meters in 1976-80.* Drilling in West Siberia is to increase from 9.5 million meters in 1971-75 to 30 million in 1976-80, a formidable undertaking. The Oil Ministry drilled 52 million meters of exploratory and development drilling in 1971-75, compared with a plan goal of 56 million. Drilling by the Oil Ministry in 1976 totaled 12 million meters; only 2 million were for exploration, while 10 million went for development. Drilling of more than 70 million meters in each five year plan since 1965 has been considered essential by planners, but this goal has never been realized, mainly because of the failure of rig productivity to reach planned levels. Plans for 1976-80 call for 30,000 well completions, compared with 20,000 or so completions in 1971-75 and about 80,000 total well completions since 1950. Goals of the Soviets for total drilling and well completion can be achieved only if they devote an even larger share of their drilling effort to development drilling. Rigs engaged in development drilling are roughly four times as productive as those used for exploration since depths are less, less time is spent moving between locations, and support infrastructure is better. If this shift continues, they may come closer to meeting plan goals during 1977-80, but they will pay a high price in the early 1980s. Meeting for both exploratory and development drilling goals would require increasing the number of active rigs by nearly 50 percent. Exploratory Drilling To replace reserves scheduled to be produced during 1976-80, the Soviets must find 21 billion barrels (2.9 billion tons), an amount that exceeds estimated gross discoveries during 1971-75 by roughly 50 percent. If production is to go on rising during the early 1980s, still more reserves will have to be located and proved up. The Soviets must find the equivalent of a new Samotlor or Prudhoe Bay field every two years or so. Development Drilling Soviet plans for 1976-80 call for 30,000 new producing well completions nationwide. During 1976, the Oil Ministry completed 4,800 wells and added a reported 87 million tons (1.7 million b/d) of new capacity. If the goal for new wells is to be reached, completions will have to average 6,300 per year during 1977-80 despite the increasing depth of the wells. *In 1971-75, drilling of all types totaled 68 million meters. This figure includes both oil and gas wells, as well as core drilling for other types of minerals and slim-hole stratigraphic testing by the G ology Ministry. Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 The meterage drilled for development wells will have to rise by at least 50 percent-to 15 million meters-to reach this,goal by 1980. Average new development well depths now run 2,350 meters; 30,000 well completions would require 70 million meters of development drilling even if all wells were successful. Given a success rate of about 90 percent, development drilling alone would require nearly all of the drilling called for in the plan. Soviet Oil Equipment Supplies The Soviet effort to find and produce oil is already enormous. In terms of material and manpower, the USSR probably expends as much or more effort on producing drilling rigs, bits, and associated equipment than do all the Free World countries combined. However, because of inferior quality and design, the productivity of most Soviet equipment is quite low, and the results obtained are only a fraction of those of the West. As a consequence, imports of Western technology and equipment are becoming increasingly necessary for the industry's growth. For the foreseeable future, the USSR will have to rely on the West for much of the equipment and know-how to realize its oil production potential, especially as exploration and development requires deeper drilling or takes place offshore, in East Siberia, or in the Arctic regions. Soviet Oil Equipment During most of the post war period the Soviet oilfield equipment industry produced a range of equipment and supplies that allowed rapid gains in oil output. The Soviet success was due in large part to the fact that oil operations centered on development of large fields in the Urals-Volga region where relatively shallow (2,000 meters or less) hard-rock formations exist. Under these conditions Soviet turbo-drills worked reasonably well, and most other equipment needs Were met without great difficulty. This situation persisted until the late 1960s. Since then, however, severe weaknesses in the quality of Soviet oil equipment have become obvious as exploration and development in other areas have taken place. Manufacture of petroleum equipment in the USSR is concentrated in some 40 plants under the All-Union Ministry of Chemical and Petroleum Machine Building. At least one-third of the plants are located in the Azerbaydzhan SSR near Baku, and they produce about two-thirds of all Soviet oil and gas production equipment. In recent years equipment manufacturers have been unable to keep pace with requirements, and the situation is getting worse as oil production shifts to remote and physically inhospitable regions where specialized equipment and technology are required. Soviet officials have indicated that, without greater domestic capacity to manufacture petroleum equipment, the 1980 oil production goal cannot be met. Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 Exploration Equipment Frequent complaints appear in the Soviet press about the shortage of high-quality exploration equipment. Most Soviet seismic recording is still done on analog tape employing technology used in the US in the 1950s. Good quality seismic geophones and cables are in short supply. Because of the lack of good seismic data, the Soviets often cannot locate, identify, and map structures at depths greater than 2,000 meters. Moreover, because of poor recording data and a lack of digital processing units, mapping of complex traps--both structural and stratigraphic--is extremely difficult for Soviet geologists. Drilling Equipment The Soviets use three types of drilling equipment: turbo-drills, rotary drills, and electric drills. About 80 percent of Soviet drilling rigs are turbo rigs. The remainder are mostly rotary rigs roughly comparable with US equipment produced in the 1940s and early 1950s. The third type of rig, the electric drill, is essentially experimental. Although the Soviets have extensively tested electric drills, technical problems have not been solved. Despite the obvious shortage of drilling rigs, the Soviet rig park has remained essentially unchanged at 1,800 deep well rigs. Although the Soviets claim to produce up to 500 deep well rigs annually, this is inconsistent with their own rig inventory data. The down-hole turbines used by Soviet turbo-drill rigs also have a relatively short life, typically only 600 hours. Because of the abrasion caused by drilling fluids, turbine vanes are quickly worn. Bearings also wear out rapidly from the harsh operating environment. Downhole turbines have three sections used singly or in combination depending on the depth, the type of material being drilled, and the required torque on the drill bit. In 1975 Soviet production of turbine sections was slightly less than 10,000, which implies that each operating rig requires reequiping with new turbines every six months. Despite the demonstrated superiority of rotary drilling, the Soviets have basically stayed with the turbo-drill approach. There may be practical :problems in making the shift in any case because rotary drilling would :require large volumes of high-strength steel pipe. In using turbo-drilling, the Soviets are able to use their heavy-wall, poor quality drill pipe. Because of the weight of the drill pipe and turbine sections, Soviet rigs must be made much heavier than Western rigs. To reduce the weight of the drill[ strings and allow deeper drilling, aluminum alloy drill pipe, although three times as costly as steel pipe, is widely used in Soviet drilling operations.. The Kungur Engineering Works in the Urals manufactures about 80 percent of all the turbo-drills produced in the USSR. Soviet literature Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 indicates that a new turbo-drill has been produced that features a low speed and high torque rating. It includes a hydrodynamic jet braking system so that turbo-drill speeds can be controlled for optimum results under most drilling conditions. The Soviets claim that these improved turbo-drills can drill efficiently at depths up to 3,500 meters. Unless Soviet rock bit quality is greatly improved, however, this performance can not be readily achieved. Indeed, most drilling time in deep holes is spent removing the drill pipe in order to change bits, which last only a few hours. Soviet wells deeper than 3,000 meters usually take more than a year to drill. Rock Bits The USSR manufactures an estimated 1 million rock bits of all types annually, compared with only about 400,000 in the entire Western world. The quality of Soviet bits is grossly inferior to those produced in the United States. Soviet imports consist of high quality bits for deep drilling. Pumps The bulk of oilfield pumps are produced at petroleum machine building plants in the vicinity of Baku. Although data are not available on output of centrifugal, electric submersible pumps, the Soviets claim that about 11,000 such pumps are in operation in addition to those imported from the US. The Soviet units are inferior to US-manufactured pumps in efficiency, capacity, and service life. With the increasing volume of fluid to be lifted from waterflooded fields, the Soviets will require more high-capacity submersible pumps than they can produce and continued imports from the US appear to be a necessity. Large-Diameter Pipe Soviet capacity for manufacturing large-diameter pipe has not kept pace with demand. We estimate that during 1971-75 the USSR produced 11 million tons of large-diameter pipe (20 inches and larger), of which about 7 million tons were 40-inch diameter and larger. Total demand for large-diameter pipe during this period approximated 17 million tons, requiring 6 million tons of imports. Present plans call for construction of 36,500 kilometers of gas pipelines and 18,500 kilometers of oil pipelines during 1976-80. Pipe production capacity is scheduled to rise by at least one-third during the five-year period, but steel output is lagging and such a rise will be difficult. Even if production rises by the planned percentage, at least 4-5 million tons of pipe will have to be imported if the planned pipelines are to be completed. Production of large-diameter pipe is concentrated in five major plants; the largest is at Chelyabinsk in the Urals. Most of the increase in pipeline production capacity is to come from two new plants. One is being built Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 at Vyksa in Gorkiy Oblast (Urals) to produce up to 2 million tons of pipe up to 48 inches in diameter. A second is to be constructed in West Siberia to produce pipe of 48-inch and 56-inch diameter. Offshore Technology The most obvious deficiency in Soviet equipment manufacture is the lack of modern offshore technology. Although the USSR has produced oil from offshore fields in the Caspian Sea for more than 20 years, most drilling and production has been conducted from man made islands or fixed trestles extending from the shore. At present the USSR has two modern and two obsolete jack-up drilling platforms, all operating in the Caspian Sea. Plans call for the number of mobile offshore platforms to reach 12 by 1980, including at least two semisubmersibles. It is doubtful that this goal can be reached; only three have been built in the past 10 years. The obsolete jack-ups--the Apsheron and the Azerbaydzhan-can drill to depths of 1,800 meters and 3,000 meters, respectively, in no more than 20 meters of water. The modern jack-ups include the Dutch built Khazar and the Soviet-built Baky. Both rigs are rated for a maximum drilling depth of 6,000 meters in about 60 meters of water. A new rig, similar to the Baky, is being completed and should be ready for fitting out and testing this summer. Imported Equipmen t During 1972-76, Soviet orders of Western oil and gas equipment and technology (excluding large-diameter line pipe) totaled about $3.1 billion. The US domestic share was $550 million. US foreign subsidiaries provide a large share of the remainder. The bulk of the orders were for pipeline equipment, primarily for expansion of the gas pipeline network. Without these imports the rapid growth of Soviet gas production would not have been possible. Soviet Orders from the US 1972-76 Total 550 Orenburg gas pipeline project 250 Other gas pipeline equipment 33 Submersible oil well pumps 148 Offshore equipment 40 Exploration and logging equipment 21 Oil pipeline equipment 21 Drilling equipment and drill bits 14 Refining equipment 9 Gas well completion equipment 8 Miscellaneous 6 Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 USSR: Orders of Western Oil and Gas Equipment" FROM THE WEST 2,555.8 rAa `1972 1973 1974 1975 Excludes imports of large-diameter line pipe, which totaled an additional $4 billion during 1972-76. FROM THE UNITED STATES 549.7 Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 Imports of high-capacity, submersible oil well pumps from the US also have been invaluable. During 1971-75, as the water cut in total fluid (oil and water) recovery rose primarily because of extensive waterflooding, these pumps increased fluid lift capacity to permit a rise in oil output of at least 1 million b/d. Other important orders from the US, Japan, and Western Europe include equipment for exploration, drilling, and refining. The Soviets are aware that an extensive oil exploration program must be implemented in permafrost areas of East Siberia, in offshore areas of the Barents and Kara Seas, and in the deeper onshore formations of the Caspian depression. Since Soviet geophysical equipment is inadequate for this effort, seismic equipment and digital computerized recording units are being bought from the West. Offshore technology and equipment are also being sought in large amounts. Contracts have been placed with Western firms for facilities to manufacture offshore oil drilling equipment for use in deep water of the Caspian Sea, and negotiations are underway to buy semisubmersible offshore platforms, subsea production equipment, and drillships. The largest order being negotiated at the present time is for gas-lift equipment to improve the efficiency of oil production at the Samotlor and Fedorov oilfields in West Siberia. This package, which is currently valued at about $1 billion, includes automated surface equipment for collecting gas and separating it from oil, compressors for pumping the gas back into oil wells, and downhole equipment for monitoring the flow of compressed gas at the bottom of the wells. In addition to items already mentioned, the Soviet oil industry will need to import the following: (1) Rotary rigs, drill pipe, and casing. The domestic supply of drill pipe and casing is not adequate in size, quantity, and quality required for field development, especially in cold climates and under difficult conditions. .As the requirement to drill to greater depths increases, both onshore and offshore, the USSR will have to shift increasingly to rotary rigs and high-quality drill pipe, most of which will have to come from the West. (2) Multiple completion equipment. As this type of equipment is relatively scarce in the USSR, in many fields separate holes must be drilled at a single site where separate 'producing zones exist. Multizone well completions permit important economies in reduced drilling costs and savings in casing. (3) Secondary and tertiary recovery technology. The USSR is preparing to undertake a high-priority program to increase yields from Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 producing fields through intensive use of enhanced recovery techniques. Technical agreements have been signed with US oil companies to assist in this development. Soviet experience with enhanced recovery techniques is very limited, although every major secondary and tertiary method has been tried on an experimental or pilot plant basis. Soviet Reserves of Crude Oil The size of the USSR's reserves is uncertain because of definitional problems as well as secrecy. Our estimate is that current Soviet proved oil reserves are at the most 30-35 billion barrels (4.1-4.8 billion tons), roughly comparable with those of the United States. Soviet proved reserves have been relatively stagnant in recent years, and we see very little chance that enough new oil will be discovered during the next few years to appreciably improve the reserves-to-production ratio. Indeed, despite major efforts, it will probably deteriorate. Approach to Estimating Soviet Reserves The Soviet Union has not published an oil reserve estimate since 1938. In 1947 oil reserves officially became a state secret. Because of this secrecy, we have had to develop indirect methods, based on fragmentary data in the Soviet oil literature, for estimating Soviet reserves. Some insights into Soviet oil reserves can also be obtained from natural gas reserve data. Another technique is to determine Soviet oil reserves using the United States as an analogue. Soviet literature provides two basic types of data that can be used to estimate crude oil reserves: the publication of periodic link relatives can be used to chain bits of information from the past to the present, and the reporting of ratios of reserves to production (R/P) will provide some information about reserves when production figures are known. As an example of the first type of reporting, one journal stated that explored reserves of oil increased 1.7 times in the past 10 years (1961-70). An example of the second type occurred when another journal reported that the R/P on 1 January 1968 had declined from more than a 28-year supply is 1966 to little more than an 18-year supply. Reserve Definitions An analysis of Soviet oil reserves is further complicated because, even in the historical literature (before World War II), the Soviet reserves were not comparable with. those used in the West. Soviet definitions, unlike the US proved and probable reserves concept, do not specify that the reserves must be commercially exploitable with available technology and equipment. Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 The Soviets have defined several categories of oil reserves, A, B, Cl, C2, Dl, and D2. Soviet reserves in category A can usually be considered as reserves established through drilling, including undrilled areas enclosed by producing wells. Category B reserves include those in undrilled areas of a producing zone bounded by at least three producing wells but not completely enclosed. Category C I reserves are those with at least two wells in the producing zone. The other categories of reserves, C2, DI, and D2, are simply inferred reserves not established by drilling. We believe that proved reserves in the US sense correspond to the Soviet A reserves plus some fraction of adjacent B reserves. The remainder of the B reserves and some of the CI reserves would fall into the US category of probable. Much of the remainder of the C 1 reserves fall into the US possible category. Moreover, some portion of Soviet B and C l reserves are not exploitable with current technology and equipment. The Size of Soviet Oil Reserves, 1946 to 1975 Our estimates of Soviet oil reserves are based on recently published reserve growth indexes (link-relatives), which track Soviet oil reserves from 1947 through 1971, and two statements that indicate the reserve developments for the period 1971 through 1975. According to Professor Robert Campbell, the Soviet Union had 2.8 billion barrels (390 million tons) of A and B reserves in 1946. Taking that figure as a base, he applied 'a Soviet link relative published in 1969 to derive an estimate of 19 billion barrels (2.6 billion tons) of oil in Soviet A and B reserves on 1 January 1.961. A 1974 Soviet publication reported that reserves had grown by 63 percent (1.63 times) between 1 January 1961 and I January 1972. Applying this growth factor to the 1961 estimate yields a 1972 estimate of 31 billion barrels (4.2 billion tons). To estimate Soviet A and B oil reserves on 1 January 1976, we have again resorted to the recent Soviet literature. A 1975 planning index published in a leading journal indicated that reserves would increase by 30 percent during the 1971-75 period. This would yield an estimate of roughly 40 billion barrels (5.5 billion tons) for A and B reserves as of 1 January 1976. Of this amount, 33 billion barrels (4.5 billion tons) can, be considered reliable A reserves proved by drilling operations. We can verify this from exploratory drilling discovery rates. During 1946-75, about 80 million meters of exploratory drilling for oil were reported by the Soviet Oil Ministry. An estimated average finding rate of 130 tons per meter for the 30 years would yield gross additions of 76 billion barrels (10.4 billion tons). Subtracting cumulative production of 43 billion barrels (5.9 billion tons) during 1946-75 leaves 33 billion barrels (4.5 billion tons) of remaining A reserves at the start of 1976. Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 The 33 billion barrels (4.5 billion tons) of Soviet A reserves plus a small portion of the 7.3 billion barrels (1 billion tons) of B reserves roughly corresponds to the US definition of proved reserves. The remainder of the B reserves and some fraction of the Cl. reserves correspond to the US definition of probable reserves. As a result, based on the literature, we estimate Soviet proved oil reserves (US definitions) at between 30 and 35 billion barrels (4.1 to 4.8 billion tons) as of 1 January 1976 and that proved and probable reserves would amount to about 40 billion barrels (5.5 billion tons), The US Reserve Analogue Soviet oil reserves can also be calculated by using the United States as an analogue. The Urals-Volga and other old producing regions are roughly similar to the lower 48 states, particularly in that the combined output of all regions except West Siberia stabilized at 340 million tons (6.8 million b/d) in 1974 and 1975, and then declined in 1976. West Siberia, on the other hand, is much like Alaska, in that in the years ahead growth in Siberian output is expected not only to offset continued declines in other regions but also to allow for substantial growth in output. Based on a close comparison with the United States, Soviet proved reserves outside of West Siberia probably total at most only 17-18 billion barrels (2.3-2.5 billion tons) and could total only about 14 billion barrels (1.9 billion tons). US output of 420 million tons (8.4 million b/d) in 1975 came from a working proved reserve base of only 23 billion barrels (3.2 billion tons).* Applying this reserve production ratio for US working reserves (7.5) to Soviet output outside of West Siberia yields a working reserve base of 18 billion barrels (2.5 billion tons) for all regions except West Siberia. Because of the intensive exploitation of reserves, through massive water flooding and use of high-lift pumps, the reserve production ratio is probably only 5 or 6. The extremely rapid depletion rate of capacity in these older fields tends to confirm use of a reserve/production ratio as low as 6. On this basis, reserves outside of West Siberia would total only about 14 billion barrels (1.9 billion tons). West Siberian proved reserves probably total some 18-24 billion barrels (2.5-3.3 billion tons). Remaining reserves in Samotlor range from 7.5 to 11 billion barrels (1-1.5 billion tons), depending on ultimate recovery rates. Initial reserves of about 14-15 billion barrels (1.9-2.0 billion tons) were calculated on the basis of recovery of 40 some percent of the original oil in place. More recent information indicates that recovery will only reach *Total proved reserves of 35.3 billion barrels (4.8 billion tons) in 1975 less 9.6 billion (1S billion tons) for North Slope reserves and 2.5 billion (340 million tons) in Naval reserves and the Santa Barbara Channel. Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 some 26 percent, while the urgency of Soviet plans for gas-lift equipment and the extremely rapid rise in water cut could mean recovery will be even lower. Thus, our best estimate for remaining recoverable reserves at Samotlor on 1 January 1977 is 7.5 billion barrels (1 billion tons), initial reserve of about 11 billion barrels (1.5 billion tons) less cumulative production off 3.1 billion barrels (425 million tons). Using the same reserve production ratio for other producing West Siberian fields as that at Samotlor (8 if average recovery is 26 percent and 12 if recovery reaches 36 percent), indicated reserves of 4-6 billion barrels (550-820 million tons) remain to be exploited at other producing fields. In addition to fields already in production in West Siberia, the USSR has plans to develop a large number of smaller fields over the next four years. According to their plans these fields are expected at their peak development to add production of 90 million tons (1.8 million b/d). Using an R/P of 12, the same as that for Samotlor's peak output vs initial recoverable reserves, yields 8 billion barrels (1.1 billion tons) of additional proved reserves not yet in production. Conclusion Use of the US analogue technique results in an estimate of total proved reserves for the USSR of 33.5 billion barrels (4.5 billion tons) in 1976. The estimate, on a regional basis, is as follows: Billion Barrels Billion Tons Total 33.5 4.5 Old producing regions 14.0 1.9 West Siberia 19.5 2.6 Samotlor 7.5 1.0 Other producing fields 4.0 0.5 Proved nonproducing 8.0 1.1 Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 Temporary distribution list(for Original see box #6 to be sent Approved or Release - - CONTROL RECORD FOR SUPPLEMENTAL DISTRIBUTION ELITE: 14 Jul 77 DISSEM: 14 Jul 77(ANALYS- LL U A SERIES NUMBER ER 77-10425 CLASSIFICATION OF REPORT DISTRIBUTION TO RC UNCLASSIFIED 1500 L DATE OF DOCUMENT July 1977 NUMBER OF COPIES - - ' 4,000 NUMBER IN RC STATINTL COPY -- RECIPIENT DATE NO.( S) SENT RETURNED STATINTL - '' if /Y 65~ J71, 117 cf~ p " TAT I N L . ate! ~S5 7 TATI STATINT TL ILA "51i u~-- V Ifr-2fr7 A .1 _ UK d ~C~4~t/r'FLT ATI L geir a .34 V9 A- // 1?, ac ii`` S'f~ I 9F' 701 S i ~,'9 - zr,L ' I -I< ST TINTL 353App lease 2001/04/27: CIA-RDP791300457A000 0001-8 Approved For Release 2001/04/27 : CIA-RDP79B00457A000600090001-8 COPY NO. 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