Russia Begins Deepwater Drilling in Vietnam

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Photo from Rosneft press release

Rosneft has started exploration drilling off the south coast of Vietnam, the company’s press service announced today.

The release highlights that it is the company’s first time drilling an international well as a sole operator. The Russian company, which has previously only operated deepwater offshore drilling inside of Russia, is hoping the project will give the company experience to tackle complicated domestic shelf projects that rely on American technology. Cooperation with Russian companies in offshore, Arctic, and shale drilling are banned by Western sanctions.

“I am sure that the experience gained in Vietnam will be used by the company not only in its activity in the southern seas; these acquired skills will find application in planning and implementation of upstream projects in remote areas,” Rosneft CEO Igor Sechin said in the statement.

The expected recoverable reserves of natural gas are estimated at 12.6 billion cubic meters (bcm) with 0.6 million tons of gas condensate, according to the statement. At 162 meters sea depth and design depth of about 1380, the “deepwater” well wouldn’t be allowed inside of Russia under the current sanction regime.

The well is located in the Nam Con Son Basin, 370 kilometers off the southern Vietnamese coast and will be serviced by the USAt 162 meters sea depth and design depth of about 1380, the well located at Block 06.1, will be managed by US oilfield services provider Schlumberger.

At 162 meters sea depth and design depth of about 1380 meters, the well located at Block 06.1 will be managed by US oilfield services provider Schlumberger.

Rosneft – the world’s biggest producer at 5.1 million barrels of oil equivalent per day – gained access to Vietnam’s offshore blocks when the Russian company acquired TNK-BP in March 2013. Rosneft already jointly produces gas from two offshore blocks, also in the Nam Con Son Basin. Rosneft works in cooperation with state-owned PetroVietnam and India’s ONGC in Block 06.1 and is the project operator in Block 05.3/11.

The gas fields in Block 06.1 Lai Tay and Lan Do, had an initial estimated 68 trillion cubic meters in gas reserves and condensate deposits. Drilling is carried out along with Japan Drilling Company (JDC).

Rosneft is the biggest gas producer in Vietnam, and in 2015, the gas produced in Block 06.1 satisfied 12% of Vietnam’s energy demand, and since it started pumping gas in June 2015, has produced a total of 46 billion cubic meters.

The foray into Vietnam should surprise no one, as Russia has long been building energy ties in Vietnam. As a token of partnership, Rosneft rival Gazprom Neft offered Petrovietnam partnership in an Arctic project. Beyond hydrocarbons, Vietnam has commissioned Russia to build the country’s first nuclear power plant.

Gas fields in Western Siberia – which helped make the Soviet Union and later Russia an energy power – are fast depleting, and projects in Vietnam and elsewhere are seen as cushions to keep both Rosneft and Russia’s oil output stable.

Louise Dickson

Lukoil First Russian Oil Company to Enter Iran after Sanctions

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Russia’s second-largest oil producer, Lukoil, has reportedly signed a $6 million contract on two exploration and projects in Iran’s southern provinces, and word is already under way.

The news was reported by Iran’s Press TV, citing Hormoz Qalavand, the director for exploration affairs of the National Iranian Oil Company (NIOC).

The two exploration projects are located in the country’s southwestern oil-rich Khuzestan province, situated on the Persian Gulf and sharing a border with Iraq.

The Russian energy group is exploring the hydrocarbon reserves in Dasht-e-Abadan in Khuzestan and in the northern parts of the Persian Gulf, according to Press TV.

This isn’t Lukoil’s first venture into the Islamic Republic of Iran. Lukoil has worked in Iran since the early 2000s, and began work on the Anaran oilfield in 2003 as a minority partner along with Norway’s Statoil, but had to cease operations in 2010 when economic sanctions were imposed.

The Anaran oil field, which is located near the Iraqi border, has an estimated 2 billion barrels of recoverable oil reserves.

Anticipating the imminent lifting of Western sanctions against Tehran over its nuclear program, Lukoil reopened its office in Iran in April 2015.

Iran is home to the world’s fourth largest reserves of oil, which is very cheap to produce – only $10 per barrel.

Sanctions linked to Iran’s controversial nuclear program have barred it from developing or exporting oil or gas in recent years. Iran’s oil exports have dropped from 2.5 million barrels a day in 2011 down to just 1 million barrels in 2014, according to the US Energy Information Administration (EIA).

Until the lifting of sanctions exports, which went mainly to tChina, Japan, India, South Korea, and Turkey, amounted to about 1 million barrels a day, compared to pre-sanctions crude output of 3.6 million barrels per day in 2011.

Iran's oil exports

Iran was allowed to resume selling oil to the US, EU, and its allies in January, after it agreed to take steps to wind down its nuclear program.

According to statements by the Iranian authorities, in the next six months, the country has the ability to bring 500,000 barrels of oil per day to market, and in a year, 1 million barrels of oil. The draft budget for 2016 provides for the export volume of 2.25 million barrels of oil per day.

Iran’s President Hassan Rouhani has repeatedly said that Iran will need foreign companies to invest billions into his country’s economy in order to give it a boost start.

Vagit Alekperov, Lukoil’s chief executive officer, has kept close relations with his Iranian colleagues, most notably the country’s oil minister Bijan Namdar Zanganeh.

The Kremlin has a soft spot for Iran, which up until January, had been subject to Western sanctions, bringing its oil industry to a near standstill.

Sanctions against Russia have its own economy hanging on for dear life. As a result, Moscow will have to make cuts and adjustments across the board, including, as noted by Deputy Finance Minister Sergei Storchak, loans to other countries, with the exception of Iran.