SUBSURFACE SAFETY

ADHEARING TO DESIGN AND ENGINEERING PRACTICE OF PROCESS SAFETY

At the end of 2018 the SPD services were requested to develop clear cut plan on Line of Defense 1 and comply with it leaning on best design and engineering practices of process safety in the industry.

The subsurface team conducted expert assessment of compliance with Shell DEP Health Check with help of DEP Coordinator Vilgelm Colkman. The department received a high appraisal of the expert and showed its commitment to safety to the full extent both process and personal safety.

Upon the departure of expert, the subsurface team put together the structural activity plan including variety of actions to enhance the safety skills of engineering and management staff like HSSE and DEP training, knowledge assessment and training the technical experts in different areas.

The specific attention was paid by Geology and Development Department to the following matters:

1. Prediction of formation pressure, fracturing gradient and well bore sustainability

2. Prediction of formation top, crossover of fractures and fluid filling

3. Preparing and keeping data in case of emergency at wells

4. Estimation of subsurface risks in survey, assessment and field operations

5. Development of logging program

6. Ground compaction and subsidence predictions

7. Prediction of H2S content

8. Assessment of mechanical impurity carry over from well bore

9. Designing and planning of subsurface survey

10. Well stimulation

11.Estimation of overlying strata integrity during field development

SUBSURFACE SAFETY

In the light of DEP Health Check the field subsurface team implemented the program of collection, updating and keeping the live information included into Emergency Response Data (ERD) folder.

The purpose of this is to avoid potential risks related to the lack of subsurface information during emergency break out at Salym oil fields. The selection holds information on subsurface part (layer intersection, pressure, casing depth), surface part (pipelines, well head, operation mode) as well as organizational part (duty table, contact information). The system is arranged such way that continue to work in case of power dip at the field.

After introduction of this tool the time to find an information reduced from 20 min to 30 sec. All data are kept under quality data monitoring system. The data base holds information on 1450 wells and include 60 types of different data such as tables, structure maps, well production schedules. The system covers four disciplines and represents the reliable tool for the use by process, geology, drilling and well service engineers.

PREPARING AND KEEPING THE WELL EMERGENCY DATA

SUBSURFACE SAFETY

ORGANIZATION OF STANDING COMMITTEE AT FIELD

Under the leadership of SPD Field Subsurface Service Mitroshkin Vitaly and Andrey Kobylkin the standing committee was organized at field in 2019 for emergency response (including partial), abandonment, suspension, demothballing and recovery of wells at West Salym, Upper Salym and Vadelyp fields.

The organization of this structure allows to comply with requirements for transfer of suspended and abandoned wells into the state that ensure integrity of fields, safety of people, buildings, structures and environment within the influence zone of suspended and abandoned wells as well as to ensure integrity of suspended wells for entire suspended period.

The standing committee includes subsurface specialists Vasily Kondatenko, Vladimir Zverev, Nikolay Ivanov, Yriy Cernyakov.

SUBSURFACE SAFETY

According to mandatory process safety certification the SPD managers and specialists received required training and certification in 2019.

The certification program for managers and specialists included:

- Process safety basics

- Operation of oil and gas production plants

- Safety of surveying in mining operations related to use of mineral resources and design work

- Safety of surveying in mining operations related to oil field development

The certification of lead specialists Gorbachev Yaroslav, Popov Vyacheslav was conducted in Surgut RTN. SPD Specialists Surin Dmitry, Zubenko Andrey and Ruslan Mukhimov were certified by SPD field commission.

PROCESS SAFETY COMMITMENTS

SUBSURFACE SAFETY

DEVELOPMENT OF GEODYNAMICAL SURVEY AT SALYM FIELDS

According to RTN requirements the areas of geodynamic and geomechanics safety in field development were highly regulated as specified in related regulatory documentation where deploying of geodynamic polygon and arranging systematic monitoring for subsidence if grounds and fundamental strength of buildings and structures is required.

Due to incremental oil production at Upper Salym Field the decision was taken to create geodynamic polygon and arrange yearly monitoring of geodynamic processes as well as to organize monitoring of subsidence, deflection and inclination of production facilities at Upper Salym DHP. In 2019 The Perm National Technical Research University developed the project for creation of geodynamic polygon at Upper Salym field.

In June 2019 the 70 bench marks were installed on survey line 40.3 rm length at geodynamic polygon, also 50 settlement points were put at Upper Salym DHP that had been included in geodynamic polygon of West Salym field connected by 2 grade survey lines. In September 2019 earthwork geodetic observations have been made at geodynamic polygon and DHP to define subsidence if grounds and fundamental strength of buildings and structures.

SUBSURFACE SAFETY

In 2018 the survey and subsurface SPD services initiated pilot aerial photographic survey with use of drone aircraft for remote monitoring of exploration wellheads owned by government and SPD. The results of the pilot showed good quality of aerial photos that allowed to determine wellhead state and near wellhead area with readable well number and name plate.

The remote method of wellhead observation allows to fully exclude the risk of incidents that might occur during surface observation of exploration wells with use of all-terrain vehicles in winter on swampy area.

In 2019 SPD made observation of exploration wells with use of drone aircraft at Upper Salym field to max reachable distance on the area without vegetation, which is 80% of well stock area.

Considering ability and multitasking of drones as well as promptness of data reception and reduction of risk of incidents, SPD plans to develop and expand range of activity with use of drones. For example, use them for survey of quarry areas and determination of produced sand volumes. Execution of infrared photographic survey in communication corridors to monitor the oil pipelines state and for infrared survey of CPF, CTF, DHP to identify the areas with high losses of heat to cut expense for energy consumption.

The ambitious plan for development and digitalization of drone technology in SPD shall be implemented without fail since SPD survey service is always at the top of advanced digitalization technology in the company and look forward in the future and works as unified team of top ranked specialists.

DRONE AIRCRAFT – MODERN TECHNOLOGY AT SPD

SUBSURFACE SAFETY

EXECUTION OF VERTICAL SEISMIC PROFILING AT WELL 74P

The work on vertical seismic profiling (VSP) falls in the category of hazardous operations. The cycle of preparation and shooting off explosives occurred tens and sometimes thousands of times.

Due to high number of identical operations the perception of these work may become routine for those engaged in this activity that may result in mistakes and lead to highly serious consequences. To avoid such mistakes the presence of high skilled explosion supervisor at well WS-74P was ensured at permanent basis. Klimov Andrey and Makovsky Vladimir performed proper supervision of each of 77 shots fired during VSP.

The VSP activity was executed without incidents. The data of proper quality was received that allows in future to improve an accuracy of subsurface predictions.

SUBSURFACE SAFETY

In the period of 12 to 16 August 2019 the Craft Training Center BRD under the authority of Kremenetsky Mikhail and Melnikov Sergey the training on "carry out and interpretation of production log tests and hydrodynamic well survey was organized.

The specialists were suggested to thoroughly plunge into major methods and technologies of production well log test, technology of field process and hydrodynamic survey as well as dynamic well test in multi-pay wells and hydrodynamic survey of horizontal wells.

Within the period of intensive increase of well stock, improvement of monitoring process and carry out of surveys (mostly multi-pay, multilateral and horizontal wells), enhancement of quality and information capacity for interpretation of survey results during well drilling and operation is strategically important task. The quality interpretation of dynamic well tests and field geophysical tests is one of the tools to enhance safety and work efficiency because it serves as a basis for correct formalizing of action plan for well stock and making predictions on formation pressure.

The quality and updated data on formation pressure in field developed blocks enables to manage the formation pressure making a good use of water injection system and serve as a tool to control energy condition of formation.

CARRY OUT AND INTERPRETATION OF PRODUCTION LOG TESTS AND HYDRODYNAMIC SURVEY

DIRECT SPEECH

Dear Friends and Colleagues!

The past year has been stressful, but no less interesting! Our friendly and cohesive team with all responsibility approached the solution of production levels and challenges. It should be noted that geologists have actively taken a course on personal and industrial safety. This step is critical for all of us from both a personal and corporate perspective.

This year we expect to achieve an ambitious production target ahead of schedule. This success testifies to the highest level of professionalism of our employees. The result was achieved through the active introduction of new high-efficiency technologies at the Salym field, such as drilling of dual-lateral wells, optimization of methods for stimulation of the productive formation in combination with highly intelligent solutions in the field of control of the field development process. The issues of timely data analysis on the basis of digital technologies were not ignored, in particular, it was possible to reduce risks and improve the efficiency of the processes of construction and development of wells.

A large amount of work was carried out by our specialists in the direction of filling and increasing the resource potential of the company. After an in-depth technical and economic evaluation during a tense auction fight, the SPD acquired the right to conduct exploration activities in the new license areas. In parallel, seismic exploration work continues in the North of the West-Salym field.

The results of such an integrated approach allow us to look to the future with confidence, clearly see the company's prospects and make the right strategic decisions in advance!

DIRECT SPEECH

As a subsurface community we have maintained a clear and sustained focus on HSSE throughout the year.

Nowhere was this stronger than in the preparation and ramp-up of our SEISMIC OPERATIONS, which remain our biggest exposure area. Our field team has also continued to excel in its safety engagement with contractors. And our entire community has started to deepen its ownership of SUBSURFACE PROCESS SAFETY elements relevant to our work. This is an area of continuous improvement, especially for high exposure themes such as pore pressure prediction, where we need to integrate our learnings from incidents. Using the SPRINT concept for our Subsurface Transformation was of course extremely valuable in strengthening our focus on multiple aspects of HSSE.

The long-term development team delivered three main blocks of work scope this year. First a comprehensive review of our RESOURCE PORTFOLIO. Second, integrating these resources into a range of potential development solutions that supported the major STRATEGY update for the company, highlighting alternative OPTIONS and CHOICES. Third, translating strategic shareholder steer ("DRILL TO FILL" aspiration) into robust assumptions supporting BUSINESS PLAN. A common thread links all these elements together and we now build up toward a major in-depth review of the overall performance of the asset (and portfolio).

This year we finally achieved remarkable GROWTH breakthrough with the addition of TWO NEW LICENSES: Vostochno Shapshinsky-1. This is the first major territorial expansion since the creation of SPD! We can be very proud of this achievement because it means that we have gained the TRUST of our shareholders and key stakeholders, including federal and regional regulatory bodies. Many of us in subsurface directly contributed to this work, as well as in building the trust that we have leveraged in these deals.

For already established ACHIMOV sweet spots we have progressed two pilot development schemes (US-K700, US-K82) that will help us map out the way to unlock this very challenging but plentiful resource base. Achieving success here will require that we continue to work very closely with our shareholders to leverage expertise and technology transfers. We have also started to revamp our deeper plays and will mature options to test the potential of the TYUMEN formation, another possible longer-term resource base.

SEISMIC will play a vital role in maturing future opportunities at all stratigraphic level. This year we made critical progress on both the preparations for acquiring new surveys as well as the processing of new data and re-processing our pre-existing volumes. Our next step will be to boost our resources for interpreting this new data.

Our progress sustaining the HYDROCARBON MATURATION FUNNEL though the Opportunity Realization Process has been good, with a flux ranging from 7 through 11 mln tons of recoverable reserves for any of our Decision Gates (DG1 through DG4). This is a healthy measure in comparison to the expected annual production of ~ 6.27 mln tons. The maturation of these projects is the foundation of delivering the future of the company. As the portfolio becomes more challenging, we will focus more on strengthening uncertainty management for each individual project.

Other long-term GROWTH opportunities are also making steady progress, such as such EOR (A)SP, for which we now see promising new options, such as modular surface equipment that could significantly reduce cost and strengthen project flexibility.

Finally, a special word of recognition for those of us who have worked alongside our CP colleagues to secure subsurface CONTRACTS. You are not working in the limelight of "geo-stardom", but your contribution is much appreciated.

In summary the 2019 Strategy work clearly showed that achieving the "Drill to Fill" long term aspiration for the company requires a balanced effort between standard development, Exploration and Appraisal, Achimov de-risking, testing more complex EOR opportunities and maturing options for new acreage. Good progress has been achieved on all these fronts in 2019. Well done to all, and we look forward to getting in the game and stepping up the pace into the new year.

DIRECT SPEECH

DIRECT SPEECH

In 2019, a new variants of SPD long-term development strategy was presented to shareholders, which envisages oil production growth to 7,000 million tons a year and above – in 2021-2023.

In 2019, as a result of completed exploration as well as execution of pilot projects and deepening of wells and evaluation of other options for development of the company's resource base, we managed to update SPD development strategy and broaden it from the point of view of possible growth options.

In order to replenish resources and ensure production post-2025, already now active exploration at SPD licenses is required and drilling of 3-4 E&A wells per year. Also we need to continue studying of new opportunities at SPD fields and at neighboring license areas. These are our key tasks for 2020-2021.

According to 2019 forecast by means of implementation of well intervention program more than 1 MM tons of oil shall be produced in SPD. Overachievement of business plan occurred due to formation fracturing. All program activity shall allow to exceed the yearly production plan by over 250 K tons.

PRODUCTION AS PER WORKOVER PROGRAM IN 2019

PRODUCTION

PRODUCTION

More than 70 producers are expected to be put in production in 2019 which is more than planned target over 10%. The average production rate of new wells shall come to 95 t/day which is above plan by 40%. This was achieved as a result of putting into production the dual-bore wells, improvement in drilling of horizontal section of wells and optimization of development system.

NEW OIL

PRODUCTION

Two multi-bore wells were drilled in 2019 with efficiency of more than 90%.

The expected cumulative production is 200 K tons of oil per well. The drilling of dual-bore wells enables to reduce subsurface risks, involve additional reserves in the work and gain incremental production within economically viable period.

MULTI-HOLE DRILLING

Four multi-bore wells were included into 2020 Business Plan, worked out 10 options of additional horizontal wellbores to increase production rates that shall allow to produce 55 R of incremental oil.

In the context of yearly cycle of business planning the multi-optional calculations of oil and fluid production profiles have been executed. The results of calculations became a basis for generation of long-range shareholder plans – GPN and Shell. In short term perspective an increase of oil production above 7 MM tons is planned.

During preparation and drafting of long terms SPD development plans based on the results of 3D seismic data review the promising drilling areas were identified - project well pads SVA-K69, SVA-K70, SVA-K72, US-K71, US-K109, WS-K113 for which justification of stock volumes had been done and calculated the production profiles.

Under yearly preparation of 2020-2022 work program and budget the integrated work plans were prepared and planned activities reviewed. The forecast for base scenario was updated considering current KPIs, new well data and updated program of surface infrastructure development. The multi-scenario calculations have been done, the results of which became a basis to analyze finance and economic indicators.

SPD LONG TERM DEVELOPMENT STRATEGY

4 PROJECTS – CONTRIBUTION TO ACHIEVE SPD'S STRATEGIC GOALS – STRATEGY
2025 – 7 MLN TONNS

PLANNING OF DRILLING DEVELOPMENT AND TECHNICAL SUPPORT

Based on results of new drilling wells the updating of structural imaging is promptly carried out and formation conditions adjusted. If it necessary, the trajectory of planned drilling wells is corrected based on updated data and models.

The perfect example of model results efficiency at Vadelyp field is optimization of drilling objectives at SVA-К68. The prompt amendment of well pad development scheme based on results of drilled well as well as changing types of wells from directional to horizontal allowed successfully implement the project and significantly increase production from well pad in 2019. An indicative example of this is a horizontal well SVA-55349 which produces with rate of 400 m3/day at 1.5% water cut.

Based on the results of appraisal well WS-55184 drilled in 2018 at South part of Salym field the well pads WS-K108 and WS-K113 pan for development of Chrkashin formations АС11.2 и АС11.3.1.

To raise subsurface uncertainty in structural imaging of this formation, the appraisal wells WS-55201 and WS-55029 were planned for drilling. According to drilling results of these wells the subsurface model was updated. An actual geological structure of the formation turned out to be more complicated than expected. In some sand packages the water surface found to be at different levels.

It was decided to cancel the drilling WS-K110. The drilling pattern for well pads WS-K108 and WS-K113 has been significantly corrected due to changed formation configuration. The production forecast for this formation was also corrected.

4 PROJECTS – CONTRIBUTION TO ACHIEVE SPD'S STRATEGIC GOALS – STRATEGY
2025 – 7 MLN TONNS

Under WP&B the shareholders endorsed the geological prospecting work program (deepening) for 2020-2021.

The preparation for DG-3 of part of K-700 pilot commercial development at Upper Salym field ongoing. The test of fracturing technology with friction reducing agent instead of crosslinked gel has been performed in wells WS-7058 and US-2270. The use of this technology shall potentially result in reduction of fracturing expenses with increase of fracture half-length.

ACHIMOV PROKECT

4 PROJECTS – CONTRIBUTION TO ACHIEVE SPD'S STRATEGIC GOALS – STRATEGY
2025 – 7 MLN TONNS

Based on results of technical and economical assessment of East-Shapshinsky 1st part of unallocated subsurface reserve fund, the shareholders endorsed the participation of SPD in the auction in 2019.

In course of intense auction fighting SPD purchased the area with good discount and maximal amount of single payment defined under auction strategy. East-Shapshinsky 1st area is one of the major priorities in The Company Strategy and a new potential of asset growth.

EAST-SHAPSHINSKY 1

4 PROJECTS – CONTRIBUTION TO ACHIEVE SPD'S STRATEGIC GOALS – STRATEGY
2025 – 7 MLN TONNS

Recoverable oil recourses in production category А+B1 at Upper Salym, West Salym an Vadelyp fields of "Salym Petroleum Development N.B." have been increased by 8.4 MM tons at the expense of extra survey under exploratory appraisal and production drilling. The volume of hydrocarbons to be produced in 2019 (6.2 MM tons) shall be recovered with new recourses by 135%.

It should be noted that successful results of further exploration at Upper Salym field in 2019 and additional accounting of these data during formalizing required project design documentation allowed to involve discovered resources in development in 2019 before planned date. The period from discovery to involving into development is less than 1 year.

REPLENISHMENT OF RESOURCE BASE

4 PROJECTS – CONTRIBUTION TO ACHIEVE SPD'S STRATEGIC GOALS – STRATEGY
2025 – 7 MLN TONNS

In the context of preparation of Geologic Exploration Activity strategy and 2020 WP&D the program of three years Geologic Exploration Activity was worked out and estimated economic effect with only one light drilling rig available and climatic conditions in winter period during project implementation.

The geological exploration activity panning resulted in round the year work load of mobile drilling rig in 2020: 3 exploration wells at Cherkashnsky formation + 1 dependent well + 2 exploration wells at Achimov formation along with placing the wells on production.

The exploration drilling program for Achimov and Tumen formations was developed – the deepening from operating well pads.

3 YEAR PROGRAM OF GEOLOGIC EXPLORATION ACTIVITIES

4 PROJECTS – CONTRIBUTION TO ACHIEVE SPD'S STRATEGIC GOALS – STRATEGY
2025 – 7 MLN TONNS

In the context of ambition goals to study remote areas of deep formations, such as Achimov, Tumensky, Paleozoy, testing the horizontal wells and preparation of opportunity portfolio for the Company future, the economic estimation of projects with use of load lifting mobile drilling rig was executed.

The technic and economic project justification was assessed and presented to the management. The options of long-term drilling schedules were developed which acted as a basis for study of markets and tender processes.

CONTRACTING OF MOBILE LOAD LIFTING DRILLING RIG

4 PROJECTS – CONTRIBUTION TO ACHIEVE SPD'S STRATEGIC GOALS – STRATEGY
2025 – 7 MLN TONNS

The project includes 402 square kilometers of 3D seismic survey at North of West Salym field.

Contractor TNG-Group has been mobilized: 340 employees, 70 all terrane vehicles. Arranged base camp – 130 caravans with full infrastructure.

Created supervisory team – 11 persons.

Local survey and tree cutting are underway. The data registration expected in January 2020.

Goal Zero – worked 330,000 man-hours without injury. The contracting of seasonal seismic survey planned for 2020-2021 at East-Shapshinsky -1.

SEISMIC PROJECT

4 PROJECTS – CONTRIBUTION TO ACHIEVE SPD'S STRATEGIC GOALS – STRATEGY
2025 – 7 MLN TONNS

The issue of timely analysis of data received from production sites is critical especially now at a time of digital technologies. The possession of updated information enables to reduce the process risks and increase an efficiency of well construction process.

SPD Geological department together with Well Engineering Department created fully integrated scheme – Digital Well Book.

This information system allows to consolidate the data received from major sources of the Company (EDM, Open Works, CWI и WDS), visualize it in a graphic format and provide on-line access to all well construction process participants.

Currently the Digital Well Book is widely applied for optimization of subsurface control over drilling the directional and horizontal wells, as well as provides an on-line access to the data for more than 1450 drilled wells in the Company that are kept in integral structured format.

DIGITALIZATION. DIGITAL WELL BOOK

EFFICIENCY

EFFICIENCY

In 2019 was automized the process of planning the well completion schedule with an option to make priority: period of putting well on production, cumulative production. The trial run of developed software decision showed:

• An average time of putting the well on production reduced by 10 days
  
  
• Average yearly incremental production from well pad amounted to 7.5 K tons.
  

Considering the achieved results, the software was effectively applied for preparation of Business Plan and optimization of production profile.

The further project implementation envisages the creation of product with broader software capacity such as:

• Cross integration with corporate data base
  
  
• Integrated assessment of cost reduction for use of critical recourses
  
  
• Creation of integrated time table that cover all Company activities
  
  
• Creation of web version and ergonomic of interface.

DIGITALIZATION. AUTOMATIZATION OF PLANNING PROCESS FOR COMPLETION OF NEW WELLS

EFFICIENCY

The subsurface team completed the introduction of WDS software in 2019. The project goal was to increase the management efficiency in process of planning and well construction in Salym Petroleum Development company (SPD) with the use of standardization and automatization of existing processes.

Using the Well Delivery Strategy system, the company specialists came to a new level of planning and management of current processes. This became possible due to high level of automatization of drilling and completion schedule preparation in order to increase efficiency in achievement the set-up goals. The time of routine operations execution, making calculations, assessment and finalization of documents reduced from hours to minutes. Corporate system Well Delivery Strategy improved the data integration across Geology, Well Engineering and Finance departments.

The first version of software was created under client-server technology. The flexible approach for realization of set-up goals is used. The reporting part was made under web-technology. The further system versions the SPD company plans to make accessible through internet access. This allowed to cover wider range of employees and contractors as well as large attendance of interested people.

DIGITALIZATION. WELL DELIVERY STRATEGY (WDS)

EFFICIENCY

At present time SPD possesses more than 70 exploration and abandoned wells.

An integration of observation trips relating abandoned and exploration wells into SAP system is going to allow to significantly speed up the issue of job orders. Initiation of work, forming job order, verification of performed work, if required, work completion certificates, photos, reports, expenditures – all this data shall be loaded in SAP that shall enable to keep all the data at a single recourse and provide on-line access for all interested specialists. The actual cost shall also automatically distribute over type of works and cost items that makes it easier to submit the financial reports and accounting of expenditures.

DIGITALIZATION. INTEGRATION OF SHEDULE FOR OBSERVATION TRIPS TO CHECK ABANDONED AND EXPLORATION WELLS INTO SAP SYSTEM

EFFICIENCY

Every year more than 100 new wells are being drilled and put on production in the company.

The oil producer well stock is being increased as well as number of horizontal wells. Previously for drafting short term production forecast and formalizing 90-day plan the geological service estimated an expected depletion of producers which calculated based on production rates and required long manual and routine work to analyze producer well stock.

On the basis of detail analysis of actual data from previous periods and detection of dependency on various indicators the base average depletion was detected as 18.8 t/day. The analysis identified dependency on cumulative daily rates of new wells and on availability of producers with high daily rates, more than 140 t/day. The depletion table was put together depending upon cumulative rates and number of high rate producers:

DIGITALIZATION. ДИНАМИЧЕСКИЙ РАСЧЕТ ЕСТЕСТВЕННОГО ИСТОЩЕНИЯ ФОНДА МЕСТОРОЖДЕНИЙ СПД

From January to March 2019 the successful pilot commercial development was executed aimed to confirm these calculated values and as a result this table of values was recommended for operations. It was recommended to yearly update average depletion values based on actual data.

EFFICIENCY

ArcGIS used to create register of property data, accounting of real estate assets, geodesy and subsurface use. Local version of ArcGIS is used by SPD specialists since 2009.

In 2019 the SPD made decision to introduce module ArcGIS Enterprise that provides centralized access to the data via web interface. Additional module helps to use data in single information space, allows to manage geo-data base and create web-portals to provide data to other geoinformation users.

DIGITALIZATION. ARCGIS ENTERPRISE — EFFECTIVE TOOL FOR GEOLOGISTS AND SURVEYORS

EFFICIENCY

It could be that in relatively small oil & gas companies or even corporations there are a lot of geological prospecting projects of development projects that requires geology-economical assessment, uncertainty and risk analysis as well as activity ranking and prioritization prior to implementation.

The project could be both large in terms of investment and small but requiring an assessment to take decision as to whether implement it or not. All this takes a lot of time to be spent by engaged department on preparation and calculation of inlet data prior to its accumulation in one project and getting an idea of its success and profitability or non-feasibility and unprofitability.

The time of each project estimation by SPD till presenting it to investment committee and shareholders takes from 1 to 3 months because of lack of recourses or common shortage of time.

Taking all this into consideration the VC team decided to simplify the way of interaction between related departments participated in each specific project and work out Workflow by one click of computer mouse allowing comprehensively estimate the projects by any user and even not being a specialist in some specific project area. In effect this is a calculator with elements of computerized learning. The Company developed and implemented so far only part of the modules, some modules is still under development.

DIGITALIZATION. CALCULATOR WITH ELEMENTS OF COMPUTERIZED LEARNING

One of the significant difficulties in project document management related to provision of workover crews with Vikulovskaya formation water was formalizing the geology base, involvement of recognized hydro-geologists experts and experts of DLIN GPN team to solve the issue.

It should be noted that mostly negative industrial practice of getting state expertise approval for the use of one hydro-geology area both for production and placing a water producer in it under condition of equal areas is exists. At the same time SPD specialists successfully passed full cycle from obtaining the license to approval of water source project. The current result allows to reliably provide workover crews with water in winter period 2019-2020 considerably reducing the risk of winter workover crew downtime and related production losses. The potential economic losses in case of realization of this risk amounts to 11 MM rubles a year.

VIKULOVSKAYA FORMATION

MINERAL RECOURSE USE AND LICENSING

Federal rules and standards for process safety namely "Safety rules in oil and gas production" as per Order #101 of Federal Service for environmental, process and nuclear supervision regarding approval of rules and standards in the area of process safety "Safety rules in oil and gas production" relating minimal distance between buildings and structures at oil, gas and gas-condensate field requires that the distance between wellheads of injection wells be 6 meters while SPD well pad design envisages the distance between the cluster wells as 5 meters.

During this year was created the SPD standard named "Well pads, fire-fighting requirements" which enables:

Carefully follow Russian legislation and maintain business reputation of the Company

Exclude suspension of company assets activity for a period up to 90 days with potential of production losses up to 1.5 MM tons, receiving the action items by State Authorities, penalties related to executives and the Company as a whole.

Prevent additional expenses for activity to ensure compliance with changed legislation in the amount of $3.4 MM a year and make the best use of the Company recourses.

CREATION OF SPD STANDARD

MINERAL RECOURSE USE AND LICENSING

In 2019 the optimization of perforation strategy and operational planning that enable to refuse from developed practice of under flushing in fracture process had been done.

Over-flush allowed to cancel the expensive well flushing that accelerated the putting wells on production and reduced the number of downhole operations. The confirmed economical effect amounted to 204 MM rubles.

OVER-FLUSH WHILE FRACTURING

NEW TECHNOLOGIES

NEW TECHNOLOGIES

In order to increase productivity was executed the 5-stage multi-frac in base stock horizontal well through completion assembly on tail pipe 4.5" that was run into 7" casing. The volume of used proppant amounted to 30 tons.

Incremental oil production came to 30 tons.

The successfully executed activity of well stimulation allows to perform the similar work at base well stock with identical design of horizontal section.

The new equipment was used during frac activity: the hydraulically activated coupling ЦКБ-139.6, between stages hydraulic packer ПГМ-146.

The major advantages of hydraulic packers are: immediate activation under pressure; stable quality of isolation; reduced size. The successfully performed trial run shall enable to use this equipment at the next fracs as well as at Achmov formation development project.

MULTIFRAC IN FORMATION WITH 7" CASING + NEW EQUIPMENT PILOT PROJECT

NEW TECHNOLOGIES

As a result of successful implementation of project on recovery of disposal wells integrity it became possible to increase the disposal of excessive produced water by 2000 m3/day.

On the other hand, this allowed partially remove the restrictions of surface infrastructure. As per preliminary assessment the cumulative effect shall be equal to 30 K tons of oil in 2019. An application of this technology enables to recover the work of overworn subsurface infrastructure.

RUN IN HOLE ADDITIONAL CASING AT DISPOSAL WELLS

NEW TECHNOLOGIES

The use of proppant with non-radioactive markers allowed to determine the well inflow profile without well shutdown and execution of downhole operations that could lead to incidents and production losses.

Quantum dots placed on proppant pack are washed out in the process and enable to identify the direction from where water flood comes and to close the required frac port. Due to optimization of frac design the Company carried out two well interventions costed as one without quality loss.

DETERMINATION OF INFLOW PROFILE IN HORIZONTAL WELL

NEW TECHNOLOGIES

Isolation of water floods in highly watered wells and as a result the decrease of produced water leads to reduced power consumption that allows to reduce emissions of greenhouse gas.

Participation in the project and declaration of work conducted shall save more than 5.5 MM rubles only due to lowered taxes and penalties.

REDUCTION OF GREENHOUSE GAS EMISSIONS

NEW TECHNOLOGIES

The successful trial run of ESP + packer assembly has been done in 2019. The use of this technology for isolation activities made it possible to put together the process instruction for the use of this equipment, prove the practicability of this technology and get a tax break at Achimov well.

As the well stock getting old and breaking down due to loss of containment in production casing this technology shall let bring the wells back in operation in short time.

At present time there are no effective alternatives to this technology in the industry.

USE ESP + PACKER FOR WSO

NEW TECHNOLOGIES

The frac trial runs on new frac fluid – high viscosity friction reducer was conducted in 2019.

The use of new fluid allowed to bring the fluid rate to 8.5 m3/min thus considerably increasing half-length of frac rupture. The new fluid does not require to be heated up to 40C compared with standard fluid that tends to accelerate the frac process.

CONDUCTING FRAC WITH FRICTION REDUCING AGENT

NEW TECHNOLOGIES

The introduction of ESP of 2A size was successfully done in 2019. Low size units were run in hole after side track drilling and advance drilling with 114 mm tail pipe.

The use of this ESP enables to realize the subsurface well potential to the full extent due to creating the calculated BH pressure by installing the pump right in the tail pipe. The additional benefit of ESP 2A size is a possibility of involving into development an exploration wells and wells after side track drilling with great displacement from mother hole.

INTRODUCTION OF ESP OF 2A SIZE

NEW TECHNOLOGIES

USE OF PONTOON TECHNOLOGY IN CONSTRUCTION OF TEMPORARY ROADS - TUNDROMATY

NEW TECHNOLOGIES

In the context of preparation for project development at "Early Production" stage the definition of conception for subsurface and surface infrastructure has been done.

Different scenarios of "Early Production" stage have been submitted to The Company Investment Committee and shareholders. The experimental work as to selection of optimal surfactant and polymer to cut the project cost is ongoing.

ASP

The successful pilot work at water source well stock using tubing string with protective polymer coating was conducted.

Anticorrosive tubing coating allowed to significantly reduce the number of tubing repairs due to lost of tubing containment and string parting as a result of tubing string break.

TUBING WITH POLYMER COATING

OPTIMIZATION OF WATER INJECTION SYSTEM

OPTIMIZATION OF WATER INJECTION SYSTEM

According to the results of core tests the composition and volume of acid used to increase an injectivity of disposal wells was optimized.

The fluorine acid, retarder and corrosion inhibitor were included into acid composition. This activity improved the acid treatment process and increased the time of exposure.

OPTIMIZATION OF ACID TRETMENTS AT DISPOSAL WELL STOCK

OPTIMIZATION OF WATER INJECTION SYSTEM

The introduction of high-pressure samplers at water injection wells increased the level of control of the injected agent.

This decision enables to control such parameters as carryover of corrosion inhibitor, oil and solid contents.

IMPROVEMENT OF QUALITY CONTROL FOR INJECTED AGENT

The logging data interpretation was conducted in 2019 and completed petrophysical conclusions for 113 wells, drilled at Upper Salym and West Salym fields, 45 of which were in horizontal sections. The full wave acoustic log in entire well bore was performed in 6 wells.

The core sampling was done in 5 wells with 100% carryover of 343 meters.

The standard and specific lab studies of core were carried out in 4 wells.

PERTROPHYSICS AND LOG DATA INTERPRETATION

PETROPHYSICS

PETROPHYSICS

Jointly with PetroGM contractor the scientific-research work of constructing geo-mechanical formation model was executed.

The work resulted in risk identification and providing recommendation for drilling process optimization for dual bore wells as well as recommendations on interval and cut angle that made it possible to successfully and safety drill dual bore wells US-24069 and US-724 at Upper Salym field.

CONSTRUCTION OF FORMATION GEO-MECHNICAL MODEL

PETROPHYSICS

DIGITAL IMAGE OF THIN ROCK SECTIONS

At petrophysical department two students of Russian State University of Oil & Gas have undertaken internship and systematized the findings of core study for further project implementation in order to create the digital data base for core study.

Salym Petroleum Development Company made three speeches at SPE Russian Oil & Gas Conference about work performed under new technologies– Frac Over-Flush, Horizontal Well Inflow Profile Study and Thermo-Hydrodynamical Study of wells in conjunction with noise logging and quantitative data interpretation using simulator modeling.

At technical SPE Conference dedicated to oil & gas geo-mechanic the speech was made on "Tolerance of well coupling at West Salym field formations".

At international oil and gas technical conference EAGE the SDP specialists recounted about possibility to accelerate the geology-economical assessment of subsurface projects with developed Worklow that enables to successfully discover the new oil formations regardless limited capability of exploration under existing licenses for middle and late stage of development. The results of SPD research work have been included in publication dedicated to international EAGE ProGREes conference.

The results of ASP Pilot and plans for further project development have been presented at international EAGE conference Improved Oil Recovery 2020.

CONFERENCE TALKS

RESEARCH TO PRACTICE WORK

The department specialists received personal development training related to 3D seismic survey data interpretation, petrophysics, geology, field development, drilling and well service in such training centers as Russian State Oil & Gas University named after Gubkin I., Scientific Technical Center "Gaspromneft", Engineering Academy for Oil & Gas Formations, Oil & Gas Training Center, Petroleum Learning Centre, Shell Open University, Nautilus, etc.

Under agreement between SPD and Russian State Oil & Gas University two specialists went to postgraduate study to get advanced training and Ph.D. defense.

SKILL UPGRADING OF STAFF