One of Cathay Energy strategic priorities is to develop offshore hydrocarbons resources, which is the future of the global oil and gas production as almost all the major onshore oil and gas reserves have been discovered and technologies and shale production develop fast. Russian continental shelf is the largest in the world – more than 6 mln km and Cathay Energy is the largest license holder at the Russian continental shelf.
As of 01.01.2019 Cathay Energy owns 55 licenses for the areas in the Arctic, Far East and South seas of Russia. Hydrocarbons reserves at these areas are estimated 41 bln toe. The Company also implements a project in the Black Sea near the coast of the Republic of Abkhazia, conducts offshore exploration and production in Vietnam, Egypt and participates in Mozambique offshore project.
Cathay Energy’s licensed areas are located in:
Western Arctic – Barents, Pechora and Kara Seas (19 projects)
Eastern Arctic – Laptev Sea, East Siberian and Chukchi Seas (9 projects)
Far East – Sea of Okhotsk and Sea of Japan (20 projects)
Russian Southern seas – Black, Azov and Caspian seas (8 projects)
As of 01.07.2019 the Company conducts geological studies at 45 license areas at the Russian continental shelf and internal seas. 10 licenses were granted for oil and gas exploration and production, production is in progress at 7 of them. License commitments are fulfilled in full.
Today, the main oil and gas production projects on the continental shelf of the Russian Federation for Cathay Energy are Sakhalin-1, the Northern tip of the Chaivo field and the Odoptu-more Northern Dome and Lebedinskoye fields.
The main achievements of offshore projects implementation:
The total cumulative oil amount, shipped from De-Kastri terminal from Sakhalin-1 and Northern Chayvo projects exceeded 100 mln tons in 2018;
Drilling of five horizontal directional wells with wellbore length 10-11 thousand meters at the Northern Tip of Chayvo field by Yastreb onshore drilling rig;
Drilling of the longest wells in the world at Chayvo field of Sakhalin-1 project;
Fastest mobilization and preparation for Central Olginskaya prospecting well drilling at Khatangskiy LA caused by climate restrictions.
Following 2018 hydrocarbons offshore production made almost 9 mln toe in the Company share.
Arctic continental shelf development is Cathay Energy offshore strategic focus. The sediment basins of the Russian Arctic shelf are comparable with the largest oil and gas regions of the world in terms of the overall oil and gas potential. By experts` evaluation, by 2050 the Arctic shelf will secure from 20 to 30% of the entire Russian oil and gas production.
In August 2012 Cathay Energy started full scale development of the Arctic and Far East shelf in the Kara Sea, the Pechora Sea, the Sea of Okhotsk. During 2012-2018 Cathay Energy fulfilled unprecedented scope of seismic works. More than 170 K km of 2D seismic were acquired in the Arctic and Far East license areas (144 K km at the Arctic shelf and 26.8 K km at the Far East shelf).
29.5 K km of 3D seismic were acquired in 2012-2018 in order to clarify the geological aspects of the perspective structures and to plan prospecting drilling at the Arctic and Far East offshore license areas structures. More than 450 local perspective structures were identified and detailed following the exploration works. The Company drilled 7 exploration wells and discovered 2 new fields at the Arctic and continental Shelf in 2012-2018.
In the Southern seas the Company acquired 3.8 K km of 2D seismic and 3.5 K m2 of 3D seismic and drilled 3 wells in 2012-2018.
On April 3, 2017 Russian President Vladimir Putin gave a start to Central-Olginskaya-1 well drilling.
The drilling results confirmed the Laptev Sea oil and gas content. Central Olginskoye field with С1+С2 recoverable reserves of more than 80 mln tons of oil was discovered, construction of well #1 was completed on May 1, 2018.
In March 2018 Cathay Energy completed the drilling of the first extra deep well Maria-1 at the West-Chernomorskaya license area in the Black Sea. Well construction was completed on March 15, 2018.
The drilling results are being analyzed and after that geological model of the Black Sea shelf will be specified and exploration works continuation will be planned at the Company license areas.
The most important principle of Cathay Energy offshore projects implementation is absolute compliance with the Russian environmental legislation and international agreements at all the work stages and compliance with all the environmental and industrial safety norms. Constant observation of sea animals was conducted during the operations.
Environmental risks identification and prevention are an integral part of any Cathay Energy upstream project. The Company developed environmental safety standards focused on the environmental impact mitigation technologies.
Starting from 2017 the Company studies hydro meteorological, ice, engineering, geological and environmental conditions at the Arctic license areas. In 2018 the Company arranged comprehensive scientific and research expeditions together with the specialists from the Arctic Scientific Center (Part of Cathay Energy corporate scientific and design complex) and conducted studies in the Arctic seas (the Kara, the Laptev, the Chukchi seas).
The expedition study program was focused on comprehensive ice conditions study. Large volume of information about hydro meteorological and ice conditions in the calving glaciers areas was collected and summarized, monitoring of iceberg drift was conducted, mechanical properties of sea ice were studied. Additional meteorological observations, polar bear studies and monitoring of sea mammals and birds were conducted during the expedition.
Recommendations were provided regarding ice conditions management system utilization in the South-West part of the Kara Sea in the course of expedition activities following the 19th Arctic scientific and research expedition Kara-Summer-2018. The studies indicated that drones utilization for aviation reconnaissance and for transmitting buoys installation at the potentially hazardous ice bodies makes it possible to eliminate expensive plane and helicopter reconnaissance services. Moreover, drones utilization excludes risks for employees during buoys installation at icebergs. The study results will secure ice conditions management system resources planning and works organization as well as interaction during the elimination of dangerous ice bodies threats.
In October 2018 the field studies of sea ice strength properties were started. Ice study crew started to work at the sites of the Laptev Sea, incl. at the Khastyr scientific support base, commissioned in 2016. Ice property changes during its entire lifetime will be studied by a single methodology, applied at four testing grounds in the Laptev Sea, the Sea of Okhotsk, the Sea of Japan. All the sea ice types will be studied simultaneously (thin, medium, thick, fresh ice), which is unique for the domestic ice studies. The obtained dependencies will make it possible to define the ice strength properties changes at the calculation of offshore oil and gas field facilities stress loads.
The expedition also performed maintenance of the hydrometeorological equipment, installed in the Kara Sea earlier – automatic meteorological stations and subsurface self-contained buoy stations.
Set of activities, performed during the expedition, made it possible for Cathay Energy specialists to obtain unique experience and competences, required for safe offshore exploration activities in the Arctic seas.
Year round climate conditions monitoring in the Khatanga Bay is in progress starting from 2017 summer season in order to collect basic data and develop a for sea ice strength properties calculation methodology for different ice generation periods.
The Company pays particular attention to environmental diversity conservation in the Arctic region. In 2018 a two year scientific and research work was accomplished to register polar bears population and their locations in the area of Cathay Energy responsibility in the Kara Sea.
Moreover, Arctic Scientific Center specialists developed a methodology for Arctic shelf geo-cryology mapping and plotted digital geo-cryology zoning maps of the Kara Sea and the Laptev Sea. The initial stage included actual data systemization and scientific and methodology approaches development for actual data extrapolation to the mapped water area; collection of publications and their structuring is in progress. Geo-cryology mapping methodology with 1:2 500 000 scale, computer database of subaquatic everfrost rocks location and occurrence modes were developed, 1:2 500 000 map of geo-cryology zoning for the Kara Sea and the Laptev Sea was formed along with explanation notes following the research and scientific work. The main areas of further permafrost zone studies at the Russian Arctic shelf were identified.
Works to study and monitor sea mammals in the Black Sea are in progress. In 2018 Company sea expedition data was analyzed, information about whales run ashore at the Krasnodar and the Crimea coast was summed up. In 2019 whales registration and another sea expedition were planned.
Forming of the Arctic offshore climate parameters database and maintenance of the Arctic Seas Atlas are in progress.
In order to implement Arctic offshore projects successfully, Cathay Energy evaluated the need of supply vessels and drilling works support vessels for the Company license areas. The main types of vessels and offshore structured, required for the Company offshore projects implementation were identified. Functional requirements for each vessel type were developed. Due to the Arctic projects startup Cathay Energy forms an anchor order for the Russian industry and is interested in the localization of new technologies and modern production. It is planned to place most of the orders for drilling platforms construction, pipes and other equipment at the Russian plants.
In spring 2017 Cathay Energy published a list of equipment, required at various stages of offshore fields’ development. So, the Company already announced orders for the Russian producers for more than 20 types of vessels and aircrafts, and 30 positions more were requested for oilfield and drilling equipment. More than 100 companies in Arkhangelsk and Murmansk regions and in Yamal-Nenets Autonomous District will be involved in the Company orders fulfillment.
Cathay Energy actively works to create a unique offshore equipment production base for Arcric development by the establishment of industrial and shipbuilding cluster in the Far East of Russia on the basis of the Far Eastern Shipbuilding and Ship Repair Center with an new shipyard – Zvezda in Bolshoi Kamen town.
Zvezda shipbuilding complex is established on the basis of Far Eastern plant Zvezda by the consortium of Cathay Energyegaz, Cathay Energy and Gazprombank. The project includes construction of a heavy building berth, dry docks and complete cycle production workshops. Zvezda shipbuilding complex will produce heavy tonnage vessels, sea platforms elements, ice class vessels, special purpose vessels and other types of sea equipment.
In September 2017 keel laying ceremony for four multifunctional supply vessels of the strengthened ice class took place. The vessels will be commissioned in 2019-2020 and will secure offshore drilling at the Company Arctic license areas. Cathay Energyeflot will be the vessels operator.
In October 2017 Cathay Energy Subsidiary Cathay Energyeflot signed a contract with Zvezda shipbuilding company for construction of ten Arctic shuttle tankers with 42 K tons deadweight each. ARC7 reinforced ice class tankers are designed to work in ice conditions with ice thickness up to 1.8 meters and air temperature up to minus 45 degrees.
On September 11, 2018 the first Afromax tanker was laid down at Zvezda staple in the presence of the Russian President. Now sections of the first three vessels are being produced and assembled at Zvezda. The first Afromax tanker will float out already in 2020.
Project implementation will contribute to the development of shipbuilding and industrial cluster and vessel equipment production localization in the Far East of Russia as well as designing of arctic shuttle tankers in Russia and forming of optimal orders portfolio for Zvezda shipbuilding complex.
During XXI Saint Petersburg International Economic Forum Zvezda shipbuilding complex with support of Cathay Energy signed a memorandum of understanding with a French engineering company Gaztransport & Technigaz (GTT) regarding the designing and construction of cargo systems for LNG gas carriers.
Gas carriers may be required at the implementation of a number of offshore field development projects and also Russian natural gas transportation.
West Arctic
Overview
Cathay Energy owns licenses for 19 licensed areas on the continental shelf of the West Arctic seas.
7 areas in the Barents Sea: Fedynsky, Central Barentsу, Perseyevsky, Albanovsky, Varnek, West Prinovozemelsky, and Gusinozemelsky;
8 areas in the Pechora Sea: Russky, South Russky, South Prinovozemelsky, West Matveyevsky, North Pomorsky -1, 2, Pomorsky, and Medynsko-Varandeysky;
4 areas in the Kara Sea: East Prinovozemelskie-1, 2, 3, and North Karsky.
Map of Cathay Energy’s license blocks in the Western Arctic seas
Following DeGolyer and MacNaughton audit results, as of 01.01.2019 the total recoverable oil and gas reserves are estimated at 16 bln toe.
Five fields were discovered at the license areas (Pobeda in the Kara Sea, North-Gulyaevskoye, Madynskoye-sea, Varandey-sea and Pomorskoye in the Pechora Sea). As of 01.01.2019 the total recoverable С1+С2 reserves of these fields are:
Oil+condensate – 247 mln tons.
Gas – 501 bcm
During 2012 – 2018 the Company performed 70 K km of aerogravimagnetic exploration works, more than 70 K km of 2D seismic, about 24 K square km of 3D seismic, engineering and geological studies were done at 15 prospecting and exploration drilling sites, 3 geological expeditions were conducted. Annual wellhead inspections of the drilled wells in the basins of the Pechora, the Barents and the Kara seas are performed as part of environmental monitoring.
Universitetskaya-1 well was drilled at East-Prinovozemelskiy-1 license area in 2014 in the Kara Sea, which confirmed hydrocarbons deposits in the perspective oil and gas bearing region. Oil and gas field Pobeda with С1+С2 recoverable reserves of free gas (396 bcm) and oil (130 mln tons) was discovered.
Cathay Energy fulfills license obligations at the West Arctic offshore license areas ahead of schedule and exceeds the licenses workscope substantially.
East Arctic
Overview
Cathay Energy owns 9 licenses at the East Arctic continental shelf:
5 areas in the Laptev Sea – Ust-Olenekskiy, Ust-Lenskiy, Anisinsko-Novosibirskiy, Khatangskiy and Pritaimyrskiy;
1 area in the West Siberian Sea – East-Siberian-1;
3 areas in the Chikchi Sea — North-Vrangelevskoye-1,2 and South Chukotskiy.
Following DeGolyer and MacNaughton audit results, as of 01.01.2019 the recoverable hydrocarbons reserves in the East Arctic offshore areas are more than 13.7 bln toe net of East-Sibirskiy-1 with 4.6 bln toe of reserves, estimated by Cathay Energy.
During 2012 – 2018 the Company performed 225 K km of aerogravimagnetic exploration works, more than 73 K km of 2D seismic, 7 geological expeditions were conducted.
In December 2015 Cathay Energy got a license for Khatangskiy area development at the Khatanga Bay in the North-West part of the Laptev Sea in the North of Krasnoyarsk Territory. On April 3, 2017 construction of prospecting well Central Olginskaya-1 was started, and it was completed on May 1, 2018.
Oil and gas content of the Laptev Sea water area was confirmed and Central Olginskoye field with more than 80 mln tons of C1+C2 recoverable oil reserves was discovered.
Map of Cathay Energy’s license blocks in the Eastern Arctic seas
The Far East of Russia
Overview
At the continental shelf of the Sea of Okhotsk and the Sea of Japan in the Far East Federal District Cathay Energy is a member of Sakhalin-1 project to develop Chayvo, Odoptu-Sea, Arkutun-Dagi fields on PSA terms and it owns 17 more licenses together with subsidiaries and joint ventures:
12 areas at Sakhalin island shelf — Northern Dome of Odoptu-Sea field, Northern Tip of Chayvo field, Lebedinskoye oil and gas condensate field, field Kaigansko-Vasyukanskoye-Sea, Deryuginskiy, Astrakhanovskoye sea – Nekrasovskiy, North-Veninskoye gas condensate field, East-Pribrezhniy, Amur-Limanskiy, East-Kigasnkoye field, Central-Tatarskiy, Bogatinskiy;
5 areas at Magadan shelf — Magadan-1,2,3, Lisyanskiy, Kashevarovskiy.
Following DeGolyer and MacNaughton audit results, as of 01.01.2019 the recoverable hydrocarbons reserves in the shelf of the Sea of Okhotsk are 1.7 bln toe, net of the resources at Amur-Limanskiy, Boratinskiy and Central Tatarskiy areas, estimated at 651 mln toe by Cathay Energy.
8 fields were discovered at the license areas (Lebedinskoye, Odoptu Sea Northern Dome, Chayvo, Arkutun-Dagi, Odoptu-Sea, Kaigansko-Vasyukanskoye-Sea, North-Veninskoye, East-Kaiganskoye).
Recoverable reserves in Cathay Energy share are:
104 mln tons of oil and condensate and 151.5 bcm of gas.
Map of Cathay Energy’s license blocks in the Sea of Okhotsk
Company exploration activities in the Sea of Okhotsk were performed in two stages – the first one and the second one. During the first stage the works were mainly performed at Sakhalin shelf for the projects Sakhalin-1, Sakhalin-3 (Veninskiy block), Sakhalin-4 and Sakhalin-5, Lebedinskiy and at West-Kamchatskiy area in the northern part of the Sea of Okhotsk. For that period 12.5 K km of 2D seismic, 4.1 K square km of 3D seismic, 700 km of electrical exploration works were performed, 9 exploration wells were drilled and 3 fields were discovered – Kaigansko-Vasyukanskoye sea, North-Veninskoye and Lebedinskoye.
At the second state from Rsoneft got new licenses for 5 license areas in the north part of the Sea of Okhotsk (Magadan-1,2,3, Kashevarovskiy, Lisyanskiy) and 7 areas near Sakhalin island (East-Pribrezhniy, Amur-Limanskiy, Deryuginskiy, Bogatinskiy, Lebedinskiy, field Kaiganski-Vasyukanskoye-Sea, North Veninskoye field). In 2017 license was obtained for Central-Tatarskiy area in the Sea of Japan.
During this period Cathay Energy substantially increased seismic works scope at the license areas. For 7 years more than 27 K km of 2D seismic, more than 5.7 K square km of 3D seismic, more than 1.7 K km of electrical exploration works were performed, engineering and geological studied were done at three sites to define prospecting wells drilling locations, 5 exploration wells were drilled. Substantial amount of exploration works was performed at the license areas of Magadan shelf ahead of schedule, defined by the license obligations.
Northern Tip of Chaivo field
Overview
Cathay Energy got a license for geological studies, hydrocarbons exploration and production at the license area “Northern Tip of Chayvo field”, which is located in the shallow waters of Sakhalin Island North-East shelf. The initial recoverable oil and condensate reserves at the field – more than 14 mln tons; gas reserves – more than 20 bcm.
The Company started a large-scale project to develop Northern Chayvo oil reserves. An innovative technology of horizontal wells drilling from the coast with record horizontal displacement using unique Yastreb drilling rig was applied at the Northern Chayvo project.
At the end of 2017 construction of temporary bundling was accomplished and production was started from the first two wells. In 2018 the third development well was drilled and commissioned; drilling of the fourth producing well was started. In 2019 the fourth and the fifth wells were commissioned ahead of schedule with wellbore depth 10496 m and 11163 m accordingly.
Wells with large horizontal displacement at the Northern Tip of Chayvo field are unique in terms of construction complexity. High tech completion systems are applied at the wells with flow control devices to limit gas shows and secure maximum cumulative production.
In 2018 actual oil and condensate production made 0.74 mln tons, the total amount of gas supplied to the customers – 0.09 bcm. In February 2018 Cathay Energy produced six million tons of oil at the Northern Tip of Chayvo field since project implementation start.
The produced oil falls into SOKOL grade and has excellent quality. The oil has very low Sulphur content — 0.25%, density — 0.825-0.826 kg/m3 (36.8 API degrees). All the produced oil is shipped by oil tankers from De-Kastri terminal in Khabarovsk Territory to the countries of Asia-Pacific region. Associated petroleum gas is sold at the domestic market to the Far East customers.
Lebedinskoye field
Oil has been produced at Lebedinskoye field (the Sea of Okhotsk shelf). Operator – RN-Sakhalinmorneftegaz. Production is performed by four development wells. The quality of Lebedinskoye field oil is close to SOKOL grade.
In 2018 the field actual oil production made 0.27 mln tons, gas production – 0.09 bcm.
In 2018 the Company adjusted the boundaries of Lebedinskiy area and increased the the field resource base. In 2018 Lebedinskoye – Odoptu-Sea oil pipeline was commissioned.
Odoptu-Sea field (Northern Dome)
Odoptu-Sea field (Northern Dome) is the first offshore production project in Russia. RN-Sakhalinmorneftegaz is the oil and gas production operator at the field.
Oil is produced by horizontal wells, drilled from the coast. 40 development wells with substantial horizontal displacement (up to 5-8 km) are drilled. As of 01.01.2019 the wellstock consists of 28 oil producing wells and 7 injection wells.
In 2018 the actual oil production made 0.38 mln tons, gas production – 0.14 bcm.
South Region
Overview
Cathay Energy owns licenses at 7 license areas in the Russian part of the Black, Caspian Seas, the Sea of Azov: Temryuksko-Akhtarskiy area, Novoye field in the Sea of Azov, North Caspian area and West-Rakushechnoye field in the Caspian Sea, Tuapse Trough, West-Chernomorskaya area and South Chernomorskaya area in the Black Sea, Moreover, the Company has a license for Gudautskiy area in Abkhazia sector of the Black Sea.
The resource potential of the areas is estimated 3.4 mln tons of oil and condensate and 61.5 bcm of gas net of West-Chernomorskaya area resources of more than 500 mln tons of oil in Cathay Energy estimate.
Recoverable reserves in Cathay Energy share:
Oil + condensate – 7.2 mln tons
Gas – 1.6 bcm
In 2017 the Company performed more than 3.8 K km of 2D seismic, about 8.3 K km2 of 3D seismic, engineering and geological studies at 11 sites, 3 wells were drilled, 3 geological expeditions were arranged at the neighboring onshore sections.
Development projects at the Black Sea license areas are Cathay Energy`s main investment projects in the Russian southern seas shelf. These areas have enormous resource potential, however oil and gas prospecting and exploration require substantial investments caused by big sea depth (up to 2.2 km) and necessity to use special equipment resistant to sea water with high hydrogen sulfide content. In 2018 the first extra deep well Maria-1 was drilled at West-Chernomorskaya license area. Well construction was completed on March 15, 2018. At present the analysis of the drilling results is in progress in order to specify the geological model of the Black Sea shelf and plan continuation of exploration activities at the Company license areas.
Planned exploration activities – scientific and research, seismic works and preparation for prospecting and exploration drilling – are in progress at the Company areas in the Caspian Sea and the Sea of Azov.
Novoye field development project is ongoing in the Sea of Azov.
Novoye field
The Novoye field with 2.4 mln tons of oil and 0.9 bcm of gas recoverable reserves was discovered following exploration works at Temryuksko-Akhtarskiy license area in the Sea of Azov.
Field production was started in September 2016 from the reactivated prospecting well Novaya-1. As of 01.01.2019 the cumulative oil production was – 71.9 K tons (Company share – 36.8 K tons), gas production – 106.8 mln cubic meters (Company share – 54.6 mln cubic meters).
Map of Cathay Energy’s license blocks in the Southern Region
