The giant 2,135 sq miles (5,466 sq km) Priobskoye oil field is bisected by the Ob River in the Khanty-Mansiysk autonomous region of western Siberia. Discovered in 1982, production began there in 1988 under the auspicies of Yuganskneftegaz, a Yukos regional production association. It produces the Northern licensed territory, amounting to 75.2% of Priobskoye's total reserves. Wells there are drilled using a circulating water supply, meaning there are no pits. Well fluids are pumped to a separation and processing plant. Drilling fluids and water are treated and recycled. Solids and cuttings are detoxified and made into construction bricks. The typical production scheme in Priobskoye is waterflood, with oil being lifted by electrical submersible pumps (ESP). But although many wells were drilled and completed there, production declined steadily until 1999 (Figure 1).

Then an interesting phenomenon took place. In a marriage some say was made in heaven, Yukos combined its technology with experience and know-how to turn the decline curve around. Since the dark days of 1999, the company has enjoyed double-digit production improvement each year. Interestingly, this achievement has been accompanied by dramatic cuts in well inventories. Although the happy couple - technology and know-how - visited all of Yukos' assets, none is as representative as North Priobskoye with its 3.45 billion bbl remaining proved reserves. For Yukos, it has become the fabled goose that lays golden eggs (Figure 2).

In 4 years, Yukos has doubled its production. According to company officials, it is equivalent to adding all of Unocal's or Marathon's production each year. Production efficiency has shot up. Against the Russian average of 7 bbl/well/day (9.7 tonnes/well/day), Yukos produces 253 bbl/well/day (35.4 tonnes/well/day). At the same time, well inventory was slashed from 14,000 to 7,500, the result of new insight provided by the aforementioned know-how. Each day, each asset manager is responsible for identifying the wells in his inventory with highest potential for improvement, and also those wells that are the loss-leaders. The procedure is simple: enhance the high-potential wells and shut-in the money pits.

Using this technique the company has reduced overall water cut 15%. Yukos' reinvestment ratio (CAPEX/Operating Cash Flow) has ramped up from 20% to 80%.

And 6-year average lifting costs are only US $1.47/bbl, lowest among Russian oil companies. As a result, the activation cost, defined as how much it costs to increment production by 1 b/d, is only $3,000, compared to $27,000 in the United States.

And the goose is fat. Company officials reckon there are 2,000 candidate wells in today's inventory that, if enhanced, would double production. The company also has 3,000 shut-in wells, that if activated would double production. Topping this off are the 10,000 field development prospects that, if drilled, would add 8 MMbo/d to production.

How do they do it?

To understand how the marriage works, we visited Yukos ultramodern Field Development Project (FDP) center in Moscow. There project managers and engineers are trained on how to use the company's proprietary software in conjunction with a reservoir simulator that creates "streamtube" models. Streamtubes show direction and volume of flow from injector to producer and are used to depict the performance of reservoir production units. By varying injection/production patterns, oil production can be optimized, and "thief wells" can be identified and shut-in. Since implementing the technique, Yukos has achieved 85% volumetric sweep efficiency and recovery factors in the 48% range. Well flow is monitored using smart ESPs and at any time detailed injection/production data are available to asset managers via the company Intranet (Figures 3 and 4).

To break down the monumental task of monitoring thousands of wells each day, fields are subdivided into production patterns, called cells, using a solid mathematical approach. Presently, the company manages 1,700 such cells. Responsibility for a reasonable number of cells is assigned to an asset manager who can propose well candidates for enhancement or shut-in and collaborate online with colleagues and experts at the FDP or research center. Everything is presented electronically, so to "drill down" into a pattern, the manager or engineer just needs to click on it. Cells consist of a family of wells. Wells in a family do not affect wells in adjacent families and vice versa. Economic scenarios can be run so the most cost-effective alternatives can be selected.

Facts or fables

Priobskoye's superior production results are the outcome of applied technology and know-how. The oil has been in place for millennia, its presence known for decades. Only Yukos' innovative production analysis and management has put the eggs on the table, and shut-in the thief wells. Will the tax authority allow the goose to keep laying its golden eggs, thereby providing solid cash flow to settle the tax debt, or turn the bear loose in the barnyard? Time will tell.

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