Page 16 - RusRPTDec23

2.6 Will Vostok Oil be able to survive under sanctions?
Vostok Oil, one of the largest greenfield oil projects in Russia, continues to push ahead, according to its state-owned operator Rosneft, in spite of sanctions imposed by the West.
Rosneft plans to drill 12,000 production wells between now and 2038 into the cluster of fields in the north of the Krasnoyarsk region that make up the Vostok Oil Project, the company’s vice president and chief geologist, Andrey Polyakov, said in a presentation earlier this month. Oil reserves are estimated at 6.5bn tonnes, or 47.6bn barrels, according to Rosneft. What is more, the oil is low-sulphur and could therefore carry a premium on international markets. At the Payakhskoye and Irkinskoye fields 14 modern Russian-made drilling rigs are set for work in the near future, manufactured specifically for the harsh conditions of the Arctic Taimyr Peninsula.
The project has more advantages: low production costs and a low carbon footprint, in part achieved by the expected complete utilisation of associated petroleum gas, according to Rosneft’s plan. The company also intends to build wind turbines to provide the project’s facilities with power, supporting the goal of having a carbon footprint three-quarters smaller than the global average for new oil projects.
Vostok Oil comprises the Vankor oilfields, some of which are already in production, along with the yet-to-be-developed Payakh, West-Irkinsky and East-Taimyr fields. Rosneft intends to deploy 400-tonne rigs capable of drilling wells of up to 6,000 metres in length to fully exploit these deposits. The Vankor fields, where production started a decade and a half ago, have already yielded 259mn tonnes (1.9bn barrels) of oil to date, along with 47bn cubic metres of natural gas.
Today Vankor oil flows through Russia’s national pipeline system. But the intention is to redirect this oil and ship supply from other Vostok Oil fields on tankers via Russia’s Northern Sea Route (NSR). This offers greater flexibility – supply can be delivered by carriers to both the Asian and European markets, depending on demand. The former has a lot of appetite for Russian oil currently, whereas the latter, at least for the time being, is looking to eliminate Russian oil imports entirely.
Vostok Oil’s realisation would also help support a national goal, set by Russian President Vladimir Putin, of increasing cargo traffic along the NSR to 80mn tonnes by 2024 – an aim that the government estimates would boost annual GDP by 2%.
The project is not cheap. Rosneft CEO Igor Sechin claimed last September that investments in Vostok Oil would total around RUB12 trillion (over $130bn). But the company estimates it will produce 2mn barrels per day (bpd) of oil at peak, along with as much as 50mn tonnes per year (tpy) of LNG. So while there is big potential, how to finance such an ambitious enterprise is an important question, particularly considering Russia’s current isolation from Western capital markets as a result of the conflict in Ukraine.
16 RUSSIA Country Report December 2023 www.intellinews.com