USSR: THE GROWING PETROLEUM PRODUCTION POTENTIAL OF THE PRE-CASPIAN BASIN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP89M00699R001701310017-9
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 15
• Document Creation Date: December 27, 2016
• Document Release Date: December 13, 2011
• Sequence Number: 17
• Publication Date: October 1, 1987
• Content Type: MISC

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CONFIDENTIAL
central IntdigFncc Ag ncy
DIRECTORATE OF INTELLIGENCC;
October 1987
J
USSR: The Growing Petroleum Production Potential of the
Pre-Caspian Basin
Summary
Sustaining a high level of oil production in the USSR has
become increasingly difficult and costly as production from older
oilfields declines progressively and the new, smaller fields
prove to have markedly lower flow rates and shorter longevity.
Articles appearing in Soviet media this year indicate, however,
that a period of respite may lie ahead. The Soviet statements
suggest that the Tengiz oilfield, located in the Pre-Caspian
Basin, may provide a bonanza that would be a substantial factor
in maintaining oil exports for hard currency.
From their ongoing reevaluation of the Tengiz field, Soviet
geologists reportedly believe that they have identified the
USSR's third giant oilfield capable of producing at the rate of
at least 1 million barrels per day (b/d). The Tengiz field is
located in the low-lying land around the northern rim of the
Caspian Sea (see map). Known as the Pre-Caspian Depression, this
area includes extensive salt-dome formations considered favorable
for the accumulation of crude oil and natural gas. A recent
Soviet press report asserts that the current oil potential of the
Pre-Caspian Basin could be equal to the original potential of the
Volga-Urals region, which has produced a cumulative total of over
40 billion barrels of oil since the 1930s.
We believe that the Soviet comparison with the Volga-Urals
region is overblown. Nevertheless, taking into account recent
Soviet statements about the size and production potential of the
This memorandum was prepared by Office of
Soviet Analysis. Comment and qucrons are we come and can be
directed to Chief, Economic Performance Division
SOV M-87-20103
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Tengiz field and considering the general geologic character of
the region, we tentatively conclude that the combined oil and gas
potential of the giant Pre-Caspian fields could be more than 28
billion barrels of crude-oil equivalent, sufficient to produce
roughly 4 million b/d oil equivalent (about 50 percent oil and 50
percent gas). The prospective production of oil from these
fields could range up to 2 million b/d after the turn of the
century. That level of output would be equivalent to about one-
sixth of the USSR's present production of oil and slightly
greater than its present hard currency exports of oil. If a
substantial increase in the region's production of oil can be
realized through vigorous development over the next 5 to 10
years, earnings from Pre-Caspian oil could become a significant
factor in maintaining the Soviets' ability to import agricultural
commodities and industrial goods from the West. Gas production
from the Pre-Caspian Basin will not only offset declining output
from Orenburg and the Central Asian gasfields but also provide
valuable byproducts such as sulfur and carbon dioxide.
Commercial exploitation in the Pre-Caspian Basin, however,
will be difficult and expensive. Well-drilling, both in the
exploration and development phases, is proving difficult because
of problems associated with the great depth of producing
formations, abnormally high pressures, and the presence of `sour'
(toxic and corrosive) gas. Western technology and equipment are
needed for many operations, and large purchases of such hardware
are being made for the drilling and completion of wells and for
processing output. However, both increased acquisition and
better assimilation of Western technology are essential if
exploration and development of this basin are to be
accelerated. Many of the wells at Tengiz and Astrakhan', for
example, are taking 1-1/2 to 2 years to drill and complete,
compared with ahnut 6 months for comparable wells in the United
The Soviets have been seeking to arrange joint ventures for
production of oilfield equipment based on Western technology. The
Western technology and equipment of primary interest to the Soviets is
for deep drilling, offshore oil production, and field processing for
the extraction of natural gas liquids and removal of impurities from
oil and gas streams prior to pipeline shipment. In addition to
discussing joint-ventures, the Soviets have been indicating interest
in Western technology through high-level attendance at international
petroleum meetings and exhibitions. Although switching equipment
procurement from direct purchase abroad to domestic manufacture by
joint ventures would probably mean short-run delays, it ^ay be seen by
Moscow as preferable to increased hard currency outlays for
importation of needed equipment. Obtaining more efficient equipment
through joint ventures could enhance productivity in the oil and gas
industries without large initial outlays of hard currency and, by
sustaining the volume of oil available for export, could bolster hard 25X1
currency earnings.
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Soviet Pre-Caspian Basin
40
Karachaganak
Pre-Caspian Depression KenI ak
Zhanazhol %
I Tengiz
`MsnyyshNk MninsW.
40 Oilfield
40 Gasfield
0 100 Kiiomslars
0 100 Miles
Caspian
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The Basin's Potential
1. Soviet geologists have long believed that the Pre-
Caspian Basin holds a large amount of oil and natural gas. A
recent Soviet press report equates its current potential to the
original potential of the Volga-Urals region, which has produced
over 40 billion barrels of oil since the 1930s. However, the
drilling of exploration wells necessary for a proper evaluation
of the basin's potential has been hampered by the great depth (up
to 6,500 meters) of producing formations and the related high
geopressures and geotemperatures.
2. From their ongoing reevaluation of the Tengiz field,
Soviet geologists reportedly believe that it is the third giant
oilfield in the USSR capable of producing at the rate of 1
million barrels or more per day 1
p (b/d). Soviet media state that
the geologists have identified an oil-prone zone many hundreds of
meters thick covering an area of several hundred square
kilometers at Tengiz (which now incorporates the Korolevskoye and
Ogayskoye fields). Consequently, they now believe that Tengiz
belongs in the super-giant class of oilfields, and that its size
may approach that of West Siberia's Samotlor. The Soviets
reportedly anticipate that production will reach 140,000 b/d in
1990. Production at the rate of 1 million b/d would, however, be
extremely difficult to achieve before the end of the century
1
By Western definitions, only giant oilfields are capable of producing oil
at this rate. A giant field has reserves of at least 500 million barrels of
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N V I I I I ? Y L. I\ I? rl I I
unless technology and equipment are acquired from the West. We
currently believe--assuming the Soviet description of oil
potential is valid--that the maximum crude oil production rate
attainable at Tengiz in the mid-to-late 1990s.is apt to be less
than 500,000 b/d in the event that such acquisition does not
occur. Full assessment of the Tengiz field is not expected
before 1995 because of the large area and great depth of the
highly fractured, porous-to-cavernous carbonate reservoir.
3. On the basis of information currently available to us
and consultation with oil-industry experts on the geology of the
area, we tentatively conclude that the combined potential of the
currently identified giant Pre-Caspian fields could be more than
28 billion barrels of crude-oil equivalent (table 1).2 If
reserves of this magnitude are proved and developed, they should
be sufficient to support production of some 4 million b/d oil
equivalent (about 50 percent oil and 50 percent gas). These
discoveries, together with related data released by the Soviets,
appear sufficient to justify the.growing interest of Western oil
executives in Pre-Caspian Basin oil and gas development
projects. US exploration experts view the Pre-Caspian Basin and
the Caspian Sea offshore areas as one of the world's best
remaining oil and gas frontiers.
2
Further research is being undertaken by CIA's Office of Global Issues to
provide an assessment of the Pre-Caspian Basin's potential.
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USSR: Oil and Gas Potential of Pre-Caspian Basin
Oilfields Billion Barrels Oil
Total 17.21
Tengiz 15.0
Zhanazhol 1.5
Kenkiak 0.2
Buzachiy Peninsula 0.2
Mangyshlak Peninsula (old) 0.2
Emba Region (old) 0.1
Gas Fields
Gas
(trillion
cu.ft.) +
Natural Gas Liquids
(billion barrels) =
Billion Barrels Oil Equivalent
Total 3
67.5
3.6
11.5
Astrakhan'
50.0
2.34
7.2
Karachaganak
17.5
1.3
4.3
1 The oil potential shown for Tengiz is highly speculative. It is estimated from
Soviet media statements that the oilfield is hundreds of square kilometers in area,
that the oil-prone zone may extend vertically some 1,500 meters, that the field may
ultimately produce oil at the rate of 1 million b/d, and that the size of reserves
approaches those originally at Samotlor (which may have been 15-20 billion barrels).-
2 Natural gas reserves are converted into oil equivalent at the rate of 5,604 cu ft
of gas (5.8 million Btu) per barrel of oil. At Astrakhan' the oil equivalent value
was reduced by 45 percent to eliminate the hydrogen sulfide and carbon dioxide.
Natural gas liquids (NGL) are defined here to include hydrocarbons such as ethane,
propane, butanes, pentanes, etc., that exist in a gaseous state in the reservoir.
In the West, these liquids are usually converted at the rate of 10 barrels per
metric ton of NGL. However, for our calculations we use a more conservative rate of
7.3 barrels per ton to calculate oil equivalent. This yields figures which more
closely match published Soviet data.
3 Estimated
quids 25X1
__
al -__
4 Indicates Karac+hananak i
h -oche- i
s muc
tur
li
n
than Astrakhan'. We have conservatively estimated 1.3 billion barrels of NGL and
condensate based on the planned output of 8 million tons annually over a 20 year
period.
3
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V V ... .- V 1\ I. 11{ 1 I
The Importance of Pre-Caspian Basin Petroleum
4. Moscow is pressing ahead with ambitious plans for the
development of Pre-Caspian resources. If Soviet assertions about
the size and productive potential of the Tengiz oilfield are
generally valid, the basin's prospective production of oil from
presently identified fields could range up to 2 million b/d after
the turn of the century. That level of output would be
equivalent to about one-sixth of the USSR's present production of
oil and slightly greater than its present hard currency exports
of oil. If this prospective output can be realized through
vigorous development over the next decade, it could become a
significant factor in maintaining Soviet ability to import
agricultural commodities and industrial goods from the West. Gas
production from the Pre-Caspian Basin will not only offset
declining output from Orenburg and the Central Asian gasfields
but also provide valuable byproducts such as sulfur and carbon
dioxide.
5. Production is declining in 24 of the USSR's 28 oil-
producing regions; and, though production is still rising slowly
in West Siberia, many of the giant oilfields there--including
Samotlor, Fedorovo, and Mamontovo--are in decline. The Soviets
are mounting a massive effort to exploit additional producing
horizons in existing fields and to tap peripheral fields. But,
because the new wells are generally characterized by relatively
low flows and short productive lives, well-drilling requirements
are doubling every five years--putting a premium on deposits of
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the size now claimed by the Soviets for the Pre-Caspian Basin.
6. Western petroleum geologists have assigned a high oil
and gas potential to the Pre-Caspian Basin, a salt basin similar
in some respects to Persian Gulf oilfields and to US and Mexican
producing areas on the Gulf of Mexico. The Soviets have mapped
400 to 1,000 salt-dome structures in the basin, many of which
could be highly promising traps for the accumulation of oil and
gas. Until the past decade, however, only small deposits were
exploited. At the end of the last century, oil production
commenced in the Emba region, about 400 kilometers northeast of
the Caspian Sea. Subsequently, about 30 small oilfields with a
combined output of less than 50,000 b/d were developed above or
on the flanks of numerous salt domes in the Emba and Kenkiak
areas.
7. Hampered by a lack of technology and equipment
appropriate for deep drilling into highly pressured formations,
Soviet exploration of the Pre-Caspian Basin proceeded slowly
until Western-type deep drilling rigs were obtained (many from
Romania) around 1970. The five best major oil and gas
discoveries made in the region during the late 1970s--Tengiz,
Astrakhan', Karachaganak, Kenkiak, and Zhanazhol--were in deeper
sediments below a thick salt layer along the rim of the Pre-
Caspian Basin. In addition, a cluster of shallow heavy-oil
deposits was discovered on the Buzachiy Peninsula. Deposits of
high-viscosity heavy oil, however, usually realize lower recovery
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vv .. .vin 1 a_. I
rates and are more difficult to extract than deposits of lighter
oil; consequently, they are of less economic value. Heavy oil,
moreover, is usually contaminated with vanadium and other trace
metals and thus requires special treatment for their removal
prior to refining.
Exploitation Technically Challenging
8. The Soviets are technically incapable of duplicating the
pace of Mexican development of roughly comparable petroleum
deposits in the 1970s. They lack the vital deep-drilling
technology, modern exploration theory, and geophysical
instrumentation for more rapid evaluation of the Pre-Caspian
Basin, as well as domestic capability to manufacture suitable
producing equipment for proper exploitation of the deposits
found. Soviet progress thus far in sour oil and gas development
could not have been achieved if only domestic equipment had been
used. Moscow has been spending about $100 million a year for
Western drilling and well-completion equipment. They have also
spent some $800 million to obtain four Western-manufactured gas
processing plants for the Astrakhan' and Karachaganak sour gas
projects. As the region is developed further, additional gas-
plant purchases from the West are likely.
9. The difficulties and delays affecting the pace of
exploration and development in the Pre-Caspian Basin are
primarily associated with the great depth of producing
formations, the abnormally high pressures and temperatures
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encountered, and the presence of sour (toxic) gas. The sour gas
reservoirs of the Pre-Caspian Basin have very high concentrations
of hydrogen sulfide and carbon dioxide (up to 24 percent hydrogen
sulfide and over 20 percent carbon dioxide). Both are very
corrosive and can destroy standard downhole producing equipment
in a few days. However, special high-chrome stainless steel
equipment can operate for 15 years without problems. It is
important that the internal working surfaces of all equipment
exposed to hydrogen sulfide be fabricated from this material. F
10. The inability of the Soviets to cope effectively with
this severe operating environment has led to drilling disasters
(blow-outs), toxic-gas leaks, explosions, and loss of life. In
1985, a Tengiz well blew out just as drillers were approaching
the producing horizon. The spray of oil and gas from the well
caught fire and burned with a 200-meter high flare for over a
year. It was finally extinguished after US experts were called
in. Damage was reported to livestock, wildlife, and the
environment within a 30-mile radius of the well. Problems with
collapsed well casings and tubing leaks have been reported at
Astrakhan', and pipeline leaks there have released toxic gases
and caused fatalities.
11. Despite the Pre-Caspian Basin's long (though thus far
relatively insignificant) oil-producing history, exploration of
its full potential has never progressed beyond the early
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stages. The geology above and below the thick salt bed appears
to be very complex, and exploration and production technology and
equipment of the sort available from Western firms is badly
needed.
Meeting Needs for Western Technology
12. Since awarding contracts in late 1986 to the Canadian
firm Partec-Lavallin for procurement of technology and equipment
to be used in development of the Astrakhan' and Tengiz sour gas
and oil projects, the Soviets have been seeking to arrange joint
ventures that would involve domestic production of oilfield
equipment based on Western technology. This would enable the
Soviets to upgrade oil and gas field operations without large
outlays of hard currency. Moscow's need to sustain oil
production and exports to bolster hard currency earnings is
undoubtedly a strong motivating factor behind its current
overtures.
13. Moscow's longer-term interest in using joint ventures
as a means to develop exports of Soviet-made products runs
counter to Western firms' interest in avoiding a glut in the
world petroleum equipment market. Nevertheless, joint ventures
with the Soviets might be attractive to Western firms if:
? Technology or equipment to be supplied through the joint
ventures would not otherwise be purchased by the USSR
because of shortages of hard currency and adherence to a
policy of reliance on domestic suppliers when possible.
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? All of the equipment manufactured by the joint venture
would be used within the Soviet oil and gas industries,
where demand for equipment has traditionally exceeded
supply by a significant margin.
? The Western participants in the joint venture would be
given sufficient cost and quality control over production
operations to assure them a profit.
? Transfer of profits to the Western participant would be in
hard currency (or, perhaps, in oil).
It is problematic whether Moscow would agree to a joint venture
arrangement on these terms. The joint venture concept as
currently described by the Soviets is vague in some respects;
basically it involves Western investment of capital and
technology for the production of oilfield equipment in the
USSR. Production-sharing and revenue-sharing from the export
sales of the oil, gas, or equipment produced are being discussed,
but only general guidelines have been issued covering issues such
as compensation, accounting, taxation, management, labor, and
equity. Where there is some urgency, the Soviets have shown
willingness to negotiate on these issues. They have discussed
more than 200 joint ventures with Western firms, but only a
handful of such deals have been concluded. In some cases the
negotiations have led to traditional procurement contracts.
14. Late last year, the Soviets identified three major
types of domestic oilfield technology and equipment that need
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immediate improvement: deep drilling (onshore and offshore),
offshore oil production, and field processing for the extraction
of natural gas liquids and removal of impurities from oil and gas
streams prior to pipeline shipment. A high-level Soviet
delegation attending the World Petroleum Congress in Houston in
April 1987 indicated that $1 billion had been earmarked for the
acquisition of Western drilling and producing equipment and
related technology. The same group paid a visit to the offshore
petroleum technology conference at Houston's Astrodome and
expressed great interest in deep-drilling rig assemblies for
offshore and onshore service, online systems for monitoring
drilling operations, Christmas tree wellhead installations, and
seamless tubular steel products (casing, tubing, drill pipe, and
drill collars). Most of these items are needed for both onshore
and offshore operations. The Soviets also have hosted numerous
Western petroleum equipment manufacturing delegations from the
US, Finland, Japan, Sweden, Norway, Canada, the United Kingdom,
Italy, France, and West Germany.
15.' In the short run, switching procurement of high-quality
petroleum equipment from direct purchase abroad to domestic
manufacture by joint ventures could result in delays to Soviet
petroleum exploration and development plans. Moscow's attempt to
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rely heavily on domestically supplied materials and equipment
thus far has not produced satisfactory results in the Pre-Caspian
Basin. Numerous equipment failures and at least three well
blowouts have occurred. Despite these difficulties, Moscow has
decided to rely heavily on domestically produced equipment.
Unless joint ventures or other arrangements with Western firms
materialize in a way that will substantially accelerate and
greatly advance the level of technology embodied in such
equipment, planned development in the Pre-Caspian Basin will
continue to suffer long delays.
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