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Interview

with Alexey S., General Director, Kashik, CGE

29.07.2010 / Energyboardroom

Alexey Kashik, General Director of CGE, was interviewed by Russiaenergy.com for Oil & Gas Financial Journal to discuss the unique history of the company, its transition to the new economic reality and its current and prospective projects.

CGE is an iconic player in the Russian geophysics sector since it was the company formed more than 40 years back to be responsible for migration of the country’s petroleum geophysics to digital acquisition (digital recording) and processing of the geophysical data in the Soviet Union. Could you introduce CGE’s unique history to our readers?

CGE was founded in 1967 by the decree of the Ministry of Oil Industry of the Soviet Union. I came here as the chief engineer in 1969 as I was attracted by the strategy of moving geophysical studies towards the digitalization of data and processing of all information collected during the surveys, in keeping with global trends of the time.

The first challenge we faced was to create an information ‘database’ which would unite all exploration data, and to develop respective geophysical software. The main objectives were to conduct surveys in search for hydrocarbon deposits and monitor large oil fields. In the 1970s CGE created new software to complete the task of processing and interpretation of all the data available.

It is important to take into account that during this period western technologies were not available within the Soviet Union, so we were developing this technology by ourselves. A system of 18 processing centers was set up all over the country which were all working based on the technology and software developed at CGE. At the time the institute had around 1,000 employees in-house developing the software, and we were processing 3% to 5% of the most complex select data available, which in itself led to significant new tasks and developments. We began to develop large capacity processing equipment, filling a 600m2 computer room, which nowadays amounts to the processing capacity of one good desktop PC, but it was groundbreaking at the time.

We did eventually have the opportunity to meet geophysicists from France and the USA, and I was less impressed than I had expected to be with regards to how advanced they were. Of course, they had larger processing capacities, but we were working hard at improving software algorithms for the same procedures to run on less powerful computers.

Starting in 1974 geophysical companies from Eastern Europe acquired CGE-developed software. There was a coordination center created to address the needs of petroleum geophysics in COMECON member-states, which existed for about 10 years. In that center we combined the forces of the scientists from different countries and everything related to the surveys were integrated in a very successful way. At that time there was a very high number of territorial research for the oil and gas fields boosted by governmental investments in hydrocarbon exploration.

How did CGE manage to adapt and transform itself after the disintegration of the Soviet Union and the Russian transition towards a market economy?

Before the collapse of the Soviet Union CGE gave its employees everything they needed: salaries were stable; there were no explicit commercial interests; and since there was no possibility of traveling abroad, everybody was content in concentrating on their scientific work. However, after perestroika people’s mentalities began to change and new trends developed – money became a serious factor in all personal decisions across the board. Many good scientists emigrated – first to Israel and then from there to other places, with many working in the USA, Canada, Europe, Australia and so on. On top of that foreign companies entered the local market and began to hire much of the local best skillful and talented employees. They proposed attractive high salaries so many young and talented people from Russian institutions left to join foreign employers. The saving grace was the fact that these foreign players imposed age limitations when hiring, refusing to employ those over the age of 40, so although many of the fresh young and talented people left, the accumulated experience and knowledge remained.
As it stands CGE didn’t suffer as much from this transition as others and we quickly adjusted ourselves to this new situation in the labor market. Our staff had a great deal of experience in all of the most complex fields of geophysics, so although naturally they were old, we were able to use them to train the new generation.

Nowadays CGE carries out up to 50 projects a year, creating seismic and geological models, through proprietary developments in design and mathematics. We develop and support our own in-house software. In terms of technology western software may be more advanced but our software is more oriented towards the depths of the processes. Since technology for oil production is constantly evolving you always have to look for new means of processing and our programmers are able to swiftly adjust the software according to the new conditions – this is one of our core strengths. We can accommodate all sorts of different solutions and needs to the satisfaction of our customers.

Today CGE is one of few Russian companies that supports its proprietary software products for geophysical modeling.

Starting in the 90s, CGE has developed a number of geophysical software systems of DV (Dynamic Viewing) family: DV-1 Discovery, DV-Geo, DV-SeisGeo, INPRES and others that have acquired a reputation as being good geophysical tools. Quite a few algorithms implementing paleo-tectonics analysis, paleo-sedimentation analysis, multidimensional interpolation and others that we were first to create have started appearing in western software packages too.

A few years ago we started and today have completed developing a versatile MDV (Multidimensional Dynamic Viewing) software complex that combines all the groundwork of the DV family systems and is designed for use in analyzing and predicting the development of complex systems regardless of their type and domain. For example, MDV shows up favorably as a handy tool of reservoir engineer.

The MDV technology is advantageous in that it allows rapid island-like display of desired data from the ocean of accumulated information, detection and assessment of trends in the development of complex systems, thus helping decision-makers to make well-grounded management choices and follow-up their implementation, as well as compare expected developments against the actual ones, etc.
In our view, the MDV simplicity and user-friendliness permit us to hope that it will be a success in applying to various areas of human activity.

There have been many innovations attributed to CGE over the years. Indeed you personally have more than 150 publications and over 50 patents under your name. CGE staff counts about 50 PhD and ScD employees. Hence, the academic and scientific lead that CGE has in the Russian geophysics arena is evident. But now that we are in a market economy, how do you manage to translate this expertise into CGE’s market position?

We manage to better position ourselves in the market thanks to our scientific background. Our clients recognize who they are dealing with. Of course we have been trying to deliver the biggest projects in the shortest amount of time, the main thing for us is the quality result. But given that projects in the oil business tend to be long-term, CGE has no great inconvenience in delivering studies and solutions in time. For the client, the most important factor in the billion-dollar oil field development projects, which can take up to five years prior to production, is to make sure no mistakes are made; it is through this promise of higher quality that CGE differentiates itself in this market.

The business is booming at the moment with a wave of publications and patents and CGE discovered some particularities of the geological framework that have not been discovered before with 2D seismic, but have only come to be revealed with 3D seismic. These include first of all strike-slip dislocations and others. Now we have many orders for the regionalization of these processes by a number of large oil companies.

As you mentioned, CGE carries out more than 50 projects per year and it has completed a total of around 300 projects in recent years. Which would you say are the main projects that reflect the expertise that you have built in reality?

For example, the Samotlor field project in West Siberia was a very big work involving almost 20,000 wells. A single geologic model was built for that field using our software. We had very good projects in Sakhalin, for instance, where we worked with both Chinese and western partners. We had a serious project associated with the White Tiger field in Vietnam. Having said that, I must highlight that all our projects are important; indeed sometimes a small field can take considerably more effort than a larger one. Therefore we don’t categorize our projects as more or less meaningful projects.

You named a few projects outside of Russia, how internationalized are CGE’s activities?

Our internationalization normally relies on the internationalization of our clients. In other words – we follow them wherever their projects take them.

However, in Kazakhstan, for example, our partnerships are not through private partners, rather they are through a state-state partnership for the reorganization of their geophysical data. We also work with Cuba now. In India CGE had a partnership with the state company ONGC. In China we also work with partly public companies, who buy the software and devices that we develop.

That said, this is still only a small part of our business. CGE works a lot with CIS countries as we follow our partners into regions where they have important activities.

Many say that the need for new geophysical studies is now concentrated in the frontier production areas of the Arctic and Eastern Siberia. With a wide knowledge already built in Western Siberia, where do you see the most potential for CGE surveys?

Now that Western Siberia is almost completely developed, companies are actively developing new and promising areas such as Komi Republic, the Arctic with its great untapped potential and East Siberia. However, unfortunately the development of these oil fields in the Arctic and Eastern Siberia remains extremely expensive.

Aside from these key areas which Russia is focusing on, there is another method to increase production. CGE is involved in secondary surveys of existing oil fields; many of these known reserves were exploited incompletely. Monitoring in these fields is very important. Now that the price of oil is stabilizing, we turn our attention to alternatives such as shale gas and coal methane, which might hold significant potential in Russia as well.

What role do you expect CGE to have in the future of the Russian Oil and Gas industry?

CGE’s unique mathematical and strictly scientific approach allows us to develop new geophysical solutions and apply them to new areas, such as ecological studies, and is a strong asset for our future growth and for the very future of the Russian oil and gas industry. Our continuous technological advances and extensive expertise will enable us to secure CGE a prominent role in the Russian oil and gas arena.

The company may change as it adapts to the future developments or additional sources of finance. We have always had and have now a good and in-depth scientific groundwork along more than one direction; and we are confident that they, if realized, will undoubtedly allow us to successfully go on with the work that we are fond of and devoted to.

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