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with Dmitry Bolotnik , Managing Director Russia and CIS, Roxar

29.08.2011 / Energyboardroom

Since it started operating in Russia in 1998, Roxar has become one of the leading software suppliers to Russia’s oil and gas industry with more than 400 installations in Russia and the CIS. Would you begin with a brief presentation to the readers of OGJF of Roxar’s role in Russia’s upstream industry?

Roxar is specializing in integrated management systems for the control of production. This means that Roxar has developed technology for intelligent control of hydrocarbon field – turning it into a smart field or perhaps an i-field. We can combine our hardware and software solutions to form an integrated system. In terms of hardware, Roxar produces different kinds of pressure and temperature gauges. We also have elements of smart well technology including managed downhole sleeves to control inflow from intervals of well completion individually. Finally, we manufactures various meters including the multiphase flow meter which Roxar originally pioneered. All these technologies are about accruing real time information about reservoir and pipeline. On the software level, Roxar produces data acquisition software. We might call this low level software. As well, Roxar developed geomodelling and flow simulation tools providing nearly real time (right time) support for decision making in field. Roxar has officially operated in CIS since 1998. Before this there was a joint venture between Russian shareholders and Roxar. Currently the company has five offices around the CIS with a head office in Moscow, and branches in Tyumen, Nizhnivartovsk etc. Roxar is well known in Russia for its software and most of our revenue still comes from software. However our hardware unit is growing year by year due to active promotion. Now we are moving towards a model whereby we are not just selling the hardware or the software, but by provide the solution as a whole. Furthermore we know that Russia has a lot of fields with a complex oil formation. We believe that our software and hardware technologies are able to help companies to better understand their assets, and maximize their recovery. Our clients in Russia are major oil and gas companies like Gazprom, Gazprom Neft, TNK BP.

One of the major success stories of Roxar’s establishment in Russia was the company’s early and long standing software partnership with TNK-BP in 1997. How has this partnership enabled Roxar to grow its business throughout Russia and CIS and prove your capabilities in the Russian market?

When we had just started the business our first deal in Russia, was not with TNK, but with PermNipiNeft which is R&D institute of Lukoil and was our first software client. From tThat moment, Russian companies had just started to assess which software they should use for modelling their reservoirs and there were lots of very top level discussions if these solutions are useful at all. An the end, everyone came to the conclusion that reservoir modeling software must be used at least as part of field development planning process. Roxar started to supply the market from this point. The first major contract was with Nizhnivartovsk NefteGaz which was a sub-sidiary of TNK, which was an independent Russian company at the time, without the influence of BP who set up TNK-BP later. NizhnivartovskNefteGaz was the operator of the Samotlor field which has about 18,000 wells with 14,000 of them are still in operation. They were looking for the technology that would allow them building a model of this giant. They looked at different software tools and decided to choose ours as their preferred solution.

You are expending into hardware but you were known in the industry for software among many large Russian and international oil and gas companies. What is the impact your software has had on modernizing Russia’s E&P industry in the last few years?

If you take the traditional practice of reservoir management in Russia, the contractors will have a field development plan but of course the level of uncertainty concerning such plan is always high. Even at the final stages of field life we have no exact knowledge of what was between the wells. Therefore, when you ask different people their opinion about a certain field, you receive different answers. This is not to say that someone is right and someone else is wrong, it just means that based on the current knowledge of the reservoir there can be different ways to interpret the data. Roxar’s software can analyse the model to asses the subsurface uncertainty and minimize its impact on filed operations. Moreover, Roxar has developed real-time technologies. For example, we can build a model of a reservoir, design the well and then to monitor drilling data in real time to extract geological information as soon as possible. Based on that we can therefore adjust the trajectory of drilled well according to the incoming data. This makes the process very efficient especially when drilling a horizontal wells or sidetracks. At the moment there are many Russian companies drilling horizontal wells including Lukoil, TNK-BP, Gazprom Neft and so on. They are drilling these horizontal wells because the oil rate from them is much higher than that from vertical wells. Roxar’s software reduces the risk in horizontal drilling. It is also important that we are not just selling the software; we provide service. We can send our specialists to work together with our clients. We have a long history of success with TNK-BP our joined service projects for their Samotlor filed were started in 2004. After the success on the Samotlor we extended this to other TNK-BP’s fields. This service approach allowed TNK-BP to increase recovery for both mature and new fields.

When we interviewed Mr. Grachev of SPT he said he encountered problems explaining to Russian majors about his technology and that there was no “flow assurance culture”. What problems did you face in bringing high tech solutions to a traditionally low-tech industry?

I would not agree in full with his position because based on my experience a lot of managers in Russia (including those from international companies operating here) understand the benefits of modern technological solutions. A problem that we have experienced is that sometimes an operating company gets no clear idea how technology can bring benefits to their projects. Comparing Norway and Russia one should mark a large difference in the information available. Companies like Statoil have used geological modelling for a long time and the first models were built around 1980. Norway has much less wells than Russia. In fact the total amount of wells in NCC is approximately 3,000 whereas one field in Russia, Romaskinskoje, has some 30,000 wells. However the quality of data in Norway is much better than in Russia. One of the important things Roxar did was adjusting our technologies to Russia – making it more accessible. Roxar established a software development group in Russia with developers in Moscow and Tyumen. We therefore tuned the software to account for lower quality of the initial data. Also the reporting has been changed to be inline with Russian standards concerning the hydrocarbon reserves evaluation process which is different from those used in the West. This helped Russia to use our technology widely. Some 50% of our success in implementing our technologies comes from our support back up. Our support structures in Russia is more engaged in Russia than in any other part of the world where Roxar operates. When we sell software we provide not just standard online support and phone services. We have highly qualified specialists able to assist clients to use the software in their real operations optimally. These specialists have at least 5 years experience in the modelling business.

The industry is looking for new places for production, how does this affect the type of specialists that you need to employ?

I would not say that new regions of exploration are significantly different from what we already have on existing fields in terms of geology. Our technology is in fact highly applicable to new fields because of the need to maximise the long term cash flow. Same time there is a necessity to minimise the payback period. In a new field there is much highera level of uncertainty compared to mature fields. For such case we can help to find the optimumal production strategy. We help the company to understand the risks and plan field development to minimize their impact. Are there some companies that stand out and try to implement the new technology or is this a growing trend across the industry? Right now the largest oil companies do integrate the new technologies into their work . processes. For example, if you take ten biggest Russian oil companies, seven of them will be our corporate clients. Of the rest, two of the ten use our software to some extent and just one company does not use our software. Companies like Lukoil who has their Korchagin and Filonovsky fields use our technologies because they see the real benefits of them. I should stress that this is not just for green fields. Tatneft for example, has most mature fields and seeks to maximize its oil recovery. This company examines new technologies and invests significant amounts of money into their own technological development.

What are the new elements of hardware you are rolling out at the moment and which you expect to transform the market?

If we take the SAGDI projects which for heavy oil fields like those Lukoil has in Komi republic, they use steam injection through injection wells and to increases the temperature inside reservoir. There is high probability of steam and hot water breaks by high permeable layers and this would increase water production. We can install hydraulic sleeves capable to in control individual intervals of well completion. Each interval has temperature and pressure gauges and the operator can play production scenario within modelling software. When the temperature jumps significantly in some interval this indicates a break and operator can press a button to close this interval for a period of time until the temperature normalises. We also have multi-phase meters which measure three phases of flow in real time. Other systems use a separator and measure the flow after separation into gas, oil and water phases. However this never tells you composition of the flow. Furthermore there can never be complete separation of these phases. There will always be gas in both the oil and water. With our technology we do not need to separate the phases. This is of special benefit for the new fields where there are high oil rates. All of these hardware technologies can be used on their own, in combinations or together with our software. Worldwide Roxar is one of the leading companies in the multiphase business because Roxar established this business. If we compare the multiphase meters and separators operated in Russia we will find that number of multiphase meters is small. This business is only establishing itself in Russia, but technology will be taken onboard by operators very quickly as it delivers real benefits to them. The cost of drilling has gone up rapidly which gives logical benefits to using our technologies. Companies are coming on board with the idea of changing their approach and Roxar Russia is here to assist them in finding the optimal solution for their best performance.

You said that you joined the company back in 1995, and you have been here with the company throughout its establishment in Russia introducing new technologies into the Russian market. What would be your advice on bringing in new technologies to the Russian industry?

Russia is different from other emerging markets because historically the level of expertise here and the number of specialists have been pretty high. Russians do not like to be presented with a black box we want to understand how it works. If you would like to enter this market you should be prepared to be open, explaining technical details and principles of your solutions. Also sometimes the companies coming to Russia expect to get an immediate return from the market. Russia is a very large market and at the same time it can’t be very fast market. If you are going for it you should prepare yourself to sub-level initial investment into your products and should not expect to recover costs at initial stages. In Russia you should neither sell hardware or software – you must sell a solution. You should understand, which problems your potential clients have, and go to the client saying you propose to fix his problem with your technology. Russian clients are very open for this type of dialog. This is not a product market, this is a solution market.



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