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| Thu, 14th May 2020 17:03:00 |
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Why Russia Will Struggle To Meet Its Production Cut Quota |
The effect of oil well shut-ins on future production has become one of the main topics of discussion in the energy media lately, what with OPEC+ cutting millions of barrels of daily output to try and prop up oil prices. Russia, one of the world's top three producers, has to shut in the most oil output in decades, and this could cast a shadow over the future of production.
The problem is the length of well shut-ins, according to energy experts who spoke to Bloomberg. It is one thing to shut in a well for a few months, which is what producers do anyway for field maintenance. It is, however, completely different to shut in a well for two years, which is what many Russian producers would need to do as the latest OPEC+ agreement runs until 2022.
"Mass sealing of oil wells is a much more serious thing than short-term idling," an energy industry executive told Bloomberg, noting the harsh weather conditions in much of Russia’s top producing regions, all in Siberia. "It's by far not a given that after a well has remained shut-in for so long it will pump at the same levels as before," Evgeny Kolesnik added.
Not everyone agrees on the challenges caused by the weather, however. The New York Times' Andrew E. Kramer, for example, earlier this month wrote Russia was bluffing when it said shutting in wells in Siberia could take longer and be trickier than shutting in production in warmer climates. Kramer cited energy experts as saying there was no marked difference between shutting in a well in Texas and one in Western Siberia.
Agreement on the effects of a lengthy shutdown, on the other hand, seems wider. The longer a well does not produce, the more things can go wrong. Among these is a change of pressure in the reservoir rock, which could be beneficial—if the pressure rises—or detrimental, if it declines during the shut-in period. The mix of hydrocarbons in the reservoir is another thing that can change, changing the quality of the crude produced from the well. There are also problems specific to horizontal wells that can affect future production negatively, according to experts.
So, Russian companies need to cut deep and cut it fast. According to Bloomberg, the country has to reduce its total output by some 2.5 million bpd over this month and next. Two months is not such a long time, but from July on, reduction quotas will remain, they will just be relaxed from a total OPEC+-wide 9.7 million bpd to 7.7 million bpd. A lot of wells will need to remain shut in. Russian producers may need to get used to the thought that some wells will be lost permanently.
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