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Integra brochure
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April 22, 2008

Roads and staff: will Russian problems be resolved by the Chinese?

Two classical Russian problems become unusual if they are considered as part of seismic prospecting in Eastern Siberia: nobody will transport seismic facilities without roads at cost.  It looks like prospecting companies that operate in this region have gotten accustomed to the idea of resolving the transportation problem independently.  Towards this end, the Ministry of Natural Resources will have to raise oil recovery rates.  It may to some extent resolve the personnel issue against the background of expanding seismic prospecting in this region, although this issue cannot be resolved through direct financing.  As long as a winter road is covered with ice, the Chinese can walk into the region, because they have no personnel problems. They have great determination to enter new markets at all costs and to resolve technical issues without delays.

By Grigory Bystritsky

Chief Geological Physicist, Honored Geologist of the Russian Federation, Candidate of Geological Sciences

Presently, 2D-seismic research is conducted in poorly investigated areas, and the Ministry of Natural Resources acts as the customer.  Oil companies are less interested in 2D research performance.

We take 2D seismic research conducted by Gazprom in Yamal peninsula.  3D seismic research is conducted  within licensed areas that have multiple prospecting wells drilled.  In this event, 3D seismic research is ordered by oil companies and oil fields are examined.  The 2D/3D research ratio is hard to identify due to the unavailability of information.

In the short term, we may project an increase in the number of 2D assignments that will be performed in new regions that are potentially rich in oil reserves rather than in the main oil and gas areas, where recovery will go down soon.  For example, Eastern Siberia and Yakutia may have hundreds of thousands of kilometers of space to conduct 2D research.  It is most likely that in some time the  Ministry of Natural Resources will have to reconsider its 2D seismic research payment strategy due to the lack of any infrastructure.  These assignments are capital intensive, and now they are paid for at costs.

Integra performs seismic research in 50 places within one season.  According to our estimates, the market research share of the company reaches 48% in the Yamalo-Nenets Autonomous Area, 26% in the Khanty-Mansiysk Autonomous Area, 100% in the Krasnoyarsk Territory, the Tomsk Region and newly licensed sites in Africa.

Neither roads, nor staff

Sad as it may be, there is no transportation market for seismic prospecting purposes.  Transportation companies that operate in this market niche are rare.  Our company has to create this market independently, and this is a tough undertaking.  Any requests addressed to foreign companies (subcontracting and auxiliary operations) come to a dead end: no one wants to operate in the region that has  no roads (or has poor roads).

The other problem of domestic geo-physics is a well known issue of personnel.  Russian seismic research, the main part of geo-physics, needs personnel.  Unfortunately, we are not speaking about office workers and professionals; there is a great shortage of workers.  In this respect, forming a new seismic research team is more of a personnel problem than financing.  For this reason we cannot incorporate any new seismic research sections.  Our main objective is to improve the efficiency of our assets.

Speaking of seismic prospecting rates, they always follow the inflation and fuel, metal, equipment, etc.  So far, rates for new projects have been moderate, but they will go up in the future.  Hard to access regions will raise the rates.  Projects that consume complex technologies will also become more expensive.

Will Russian Service Companies Have to Step Aside?

The issue of competition is unclear, particularly in terms of the competition between Russian and foreign seismic service companies that are making attempts to enter the Russian market. Chinese contractors, who are already aggressive in Kazakhstan and Uzbekistan, deserve special attention.

We have to admit that the Chinese may cause trouble for Russian geo-physics research companies, although so far no pressure has been exerted by Chinese companies on the Russian market.  Their dumping policies implemented at biddings and further hikes in their rates is a well known trick.

At the same time, Chinese geo-physicists may provide high quality services.  At least, they have no personnel problems, and their strong determination to strengthen their positions in foreign markets will make them competitive.  They produce outdated equipment based on outdated technologies, its quality bears no comparison.  Nevertheless, if Chinese geo-physicists adapt to our environment and play fairly, Russian companies may face the worst days of their existence.