Oilfield Services (part one)

INTRODUCTION

The main idea behind writing this book is the desire to share my many years of experience working in oilfield service organizations, acquired over a forty-year period of work in various countries and the political systems existing in them, and to analyze, together with the reader, various approaches to the implementation of technological processes in oilfield services.

During my career, I had the unique opportunity to work both in a "developed socialist" country and in several Western countries with a well-developed and well-structured oilfield services infrastructure. I observed and actively participated in the transitional process of economic restructuring in the former Eastern European countries and the Soviet Union; witnessed the success and failure of the largest acquisitions in the history of the oilfield services industry; and met and befriended remarkable people—true professionals in their field. It was precisely these interactions with them that allowed me to subsequently select the most effective approaches to organizing production processes and apply them in my own work.

People often ask rhetorically: "If I had the chance to start over again at the beginning of my professional life, would I take the same path?" Without a doubt, I would say YES! This doesn't mean I've always succeeded or haven't experienced disappointments and, at times, deep downfalls. I've had to endure much—the joy of dizzying success, the realization of the worthlessness and, at times, the stupidity of some of the people who made decisions about my career advancement, the betrayal of my team members and friends. But this is the essence of me, the essence of who I have become and am today. I am grateful to them all: to those who raised me up and to those who pushed me down—they all helped shape me into who I am today!

I had the opportunity to actively witness and even participate in two of the largest acquisitions/mergers in the history of the oilfield services industry, both of which ended in utter failure and financial disaster. A parallel can be drawn from the lives of politicians: most of those who, through their non-professional activities, caused significant damage to the state, typically moved on to other jobs and were subsequently promoted. These examples are readily available, so I won't cite them.

I am deeply grateful to those who, despite the enormous risks to their own careers, believed in me and gave me the opportunity to demonstrate my potential and abilities. One of them once told me frankly, "Don't delude yourself about your significance and uniqueness—I'm doing this not for you, but for myself—because your success will ensure my success on a much greater scale!" This man became my mentor for many years and will occupy a special place in the description of several events recounted in this book.

The book is structured into four Time Stages, each of which relates to a specific era of development of both political change in society and technological processes in the oilfield services industry:

THE FIRST STAGE refers to the Soviet era and covers the time interval from 1982 to 1989.

THE SECOND STAGE is the years I spent at SCHLUMBERGER; the time interval from 1991 to 2004.

STAGE THREE – the time and highlights of my production activities at HALLIBURTON; the period from 2004 to 2017.

STAGE FOUR – refers to the time of my development and implementation of the Strategy for the Development of the National Oilfield Services Business in Russia and Kuwait in the period from 2017 to 2019.

SO HERE WE BEGIN.

1.MAIN STAGES

1.1.THE SOVIET ERA (from 1982 to 1989)

Seven years of experience working at the Central Geophysical Expedition (CGE) of the USSR Ministry of Oil Industry. I certainly appreciate the enormous help and support provided to me by my first teachers and mentors: Serker Akberovich Serkerov (Department of Field Geophysics, Gubkin Moscow Institute of Oil and Gas), Viktor Iospa, Alexey Stepanchikov, Alexander Averbukh, and Georgy Gogonenkov (CGE).

Some of the most memorable events in my career during this period include:

1. Development of a methodology for the joint use of gravity/magnetic exploration data and seismic exploration data in the integrated interpretation of geological and geophysical information; I developed and implemented a software package for the stable solution of inverse problems of geophysics based on the regularization method approach (SIDSiG – a software package for solving problems of Joint Interpretation of Seismic and Gravity Exploration Data). Registration number in the State Fund of Algorithms and Programs of the USSR – 50880000156. This software package was implemented for commercial use in several geophysical organizations of the USSR Ministry of Oil Industry for solving problems of prospecting and exploration of minerals in the Volga-Ural oil and gas province and the Caspian Basin.

2. In collaboration with Dmitry Krylov (CGE), a technology for obtaining a stable solution to the inverse problem of seismic exploration was developed and implemented into production. This technology is based on the selection of a wide range of regularization functionals (cases of one- and two-dimensional models of the medium). Based on the results of joint research and experiments, the book "OPTIMIZATION METHODS OF INTERPRETATION OF COMPLEX GEOPHYSICAL INFORMATION" (ISBN 9785853580992 / 5-85358-099-X) was published by SCIENCE Publishing House in 1991.

1.2. INTERNATIONAL COMPANIES

1.2.1. SCHLUMBERGER (1991 – 2004)

During my time at SCHLUMBERGER, I held various positions in Germany, Canada, Russia, Ukraine, Belarus, the Baltic states, Azerbaijan, Uzbekistan, and Kazakhstan. I had the wonderful opportunity to meet, work with, and learn from such outstanding people as Albrecht Glocke, Mayer Bengio, Jorgen Rasmussen, Dan Daily, and many others

The most significant events during this period include the following:

1) Participation in the largest 3D seismic survey project for EXXON in the Canadian Arctic (where I worked as Deputy Head of the Seismic Crew).

2) Signing of the first commercial contracts and commencement of operational activities of the SCHLUMBERGER Company in Ukraine, Belarus and the Baltic States; Opening of the first SCHLUMBERGER OFS production offices in Kyiv (Ukraine) and Gomel (Belarus).

3) Participation in the Production Process Management and Optimization Project at YUKOS Oil Company (Russia's largest oil company from 1993 to 2003). Together with Olivier Favre and Vladimir Pivovarov, a collaboration between SCHLUMBERGER OFS and YUKOS Oil Company was initiated. This unique project enabled SCHLUMBERGER to significantly expand its production and research activities in Russia and establish itself as the number one oilfield services provider with its own research and development center in Moscow.

4) Together with Günther Schmidt and Dominique Fache (Schlumberger Industrias), a cooperation process was initiated between SCHLUMBERGER and the National Joint Stock Company Naftogaz of Ukraine (the structure of the oil and gas industry of Ukraine, created by the order of President L.D. Kuchma in 1997). With the start of this project, SCHLUMBERGER received the opportunity to enter the oilfield services market for both national and international oil and gas operators in Ukraine.

5) The first Projects of the SCHLUMBERGER Company with the Joint Venture TNK-BP (BP and Tyumen Oil Company) were signed by the Schlumberger Information Solution division, where I headed the Sales Department at that time.

6) Business growth with the largest Oil Operators of Western Siberia – OJSC SurgutNEFTEGAS and Oil Company LUKOIL.

7) Participation in the creation of the Territorial Bank of Natural Resources of the Yamalo-Nenets Autonomous District.

8) Participation in the formation and liquidation of the First Team of SCHLUMBERGER – SEMA.

1.2.2. HALLIBURTON (2004 -2017)

Having joined Landmark Graphics Corporation (a Halliburton Software Company) in 2004, I held several positions across the Eurasian region: Russia, Ukraine, Belarus, Kazakhstan, Uzbekistan, Turkmenistan, and Azerbaijan. I concluded my career at HALLIBURTON as Vice President for Russia and Sakhalin in 2017. The success of my fruitful career is undoubtedly linked to the names of my mentors, managers, and friends, such as Joe Rainy, Mike Hugentobler, Scott Cooper, Dean Radojevic, Dmitry Chasovskikh, Orest Kasparov, Amir Azizov, and many others.

Some of the key memorable moments during this period include:

1) In the position of Chairman of the Board of Directors of the joint venture PETRODATA Kazakhstan (Landmark and the Kazakh Institute of Oil and Gas), for the first time in the history of the joint venture, I brought its activities to a profitable level.

2) The Development Strategy of HALLIBURTON in Russia for the period from 2012 to 2017 was developed and implemented, including: both organic and inorganic growth – localization of production and strategic alliances with Russian oilfield service companies and drilling contractors.

3) Fivefold increase in the company’s turnover on Sakhalin (projects with Exxon NefteGas Limited and SEIC (Sakhalin Energy).

4) Increase in Halliburton’s turnover in continental Russia by 30%.

5) Reduction of the cost component of operating activities by 25%.

6) Implementation of an integrated approach for the most effective operation of HALLIBURTON service divisions in Russia (Integrated Project Management). Projects with Lukoil-Western Siberia, Lukoil-Komi, TNK-BP, Rosneft, ExxonMobil.

7) Implementation of the first project in Russia built on the principle of risk sharing with the Customer (TNK-BP, Nyagan – Em-Yoga Field).

8) Successful implementation of the project for joint production of Halliburton equipment with a Russian manufacturer (Nizhne-Kama Mechanical Plant).

9) Creation of a cohesive team of heads of Service departments and Directors of the business support functionality of the HALLIBURTON RUSSIA division.

10) Until 2014, I managed the HALLIBURTON division for the Region – Russian Federation, Ukraine and Belarus.

11) Participation in the process of the attempted takeover of BAKER-HUGHES by HALLIBURTON in the period from 2014 to 2016.

1.3. PRIVATE OILFIELD SERVICE COMPANIES IN RUSSIA – RIMERA GROUP (2017–2018)

In March 2017, I retired from HALLIBURTON and immediately received an offer from the Russian oilfield services company RIMERA Group (www.rimera.com). At that time, the shareholders of RIMERA Group had decided to transform the Company into the largest oilfield services company in Russia, compliant with advanced technologies and business standards in accordance with the Code of Quality, Occupational Health, Safety, and Environmental Protection.

As Vice President of HALLIBURTON, I was desperately short on time to analyze the detailed production processes required for my daily work. So, I eagerly immersed myself in the new role. I still have fond memories of my former colleagues – Svetlana Tudiyarova, Yegor Kropotin, and Igor Melnikov.

Over the 16 months of project implementation, the following results were presented to RIMERA shareholders:

1)A strategy was developed for RIMERA's transition to a fully integrated oilfield services company in Russia (organic growth with the possibility of mergers and acquisitions). The strategy was defended and approved by the Board of Directors on October 25, 2017.

2)RIMERA's strategy for the production and maintenance of oil and gas equipment was developed and launched; production of GRYPHON's downhole equipment was localized in Russia (IzhNefteMash OJSC, Izhevsk). Today, GRYPHON's well completion products/equipment are successfully sold to major oil and gas companies and oilfield service providers in Russia, as well as in other countries of the Eurasian region (Kazakhstan, Uzbekistan, Azerbaijan).

3)The RIMERA Group of Companies' export strategy has been developed and launched. In recent years, RIMERA has significantly increased its market share in Africa and Latin America; in 2019, a new legal entity (RIMERUS) was established in the United States.

1.4. GULF SERVICE COMPANIES – GOFSCO (2018 to 2019)

Even though my performance fully met the expectations of RIMERA Group's management, I failed to see any real commitment from the shareholder to implementing the proposed Strategy. RIMERA Group's main shareholder was unsure of ROSNEFT's management's positive response to such significant changes in the production structure and RIMERA Group's ambitions in the Russian oilfield services market. He decided to suspend the Project, and I was instructed to focus my efforts on 1) mergers and acquisitions and 2) the export growth strategy.

One of RIMERA Group's strategic partners in the Middle East was the Kuwaiti service company GOFSCO (gofsco.com.kw), with whose management I had developed a trusting relationship, specifically with its CEO and co-owner, Hussam Al-Marafie. At the time, GOFSCO was exploring opportunities to expand its business with KOC (Kuwait Oil Company) around production enhancement services, particularly around electrical submersible pumps (ESPs).

Since RIMERA Group was one of the largest players in this market, Hussam was interested in promoting RIMERA Group technologies in the Kuwaiti market and in June 2018, he invited me to join his team.

Hussam had a good relationship with the Russian Ministry of Energy (his primary contact was Vasily Eremenko, who at the time was responsible for relations between Kuwait and the Russian Federation within the Ministry). In addition to the project to supply RIMERA Group equipment, GOFSCO had several other interesting projects in the development, production, and restoration of oil and gas reserves.

I accepted Hussam's offer to take the position of Director of Business Development and Strategy at GOFSCO and began my work in Kuwait in August 2018. My main responsibilities were:

1)Increasing the volume of oilfield services provided by GOFSCO to the Kuwait Oil Company (KOC).

2)Expansion of the range of oilfield services of GOFSCO by creating a Partnership with leading players in the global oilfield services market (localization (“Kuwaitization”) of the best global achievements in the field of well construction, heavy oil production and integrated projects).

3)Development and implementation of the GOFSCO Development Strategy in the field of export.

The reality I encountered in Kuwait didn't live up to the expectations Hussam Marafie had promised me. This was a valuable "lesson," which I'll share with you in more detail below in the relevant section.

However, during my stay in Kuwait, I met such wonderful specialists and professionals in their field as Ali Alavi, Head of the Submersible Pumps Department for Oil and Gas Production; Sultan Suleyman, John Tapp and many others.

So, we move on to the presentation of events related to the First Stage.

2.SOVIET ERA (1982–1989).

2.1.HOW IT ALL STARTED

My desire to learn didn't really emerge until I was in fifth grade. I remember what motivated me—in elementary school, arithmetic was my biggest challenge—I struggled with proportions and percentages for a long time. And I must give credit to my mother, who, after spending a huge amount of time with me, finally got me to grips with it! Math became my favorite subject, and when we started studying physics, I dove into it, as they say, "Head over heels."

I was always impatient for when we would finally start working on issues related to the electrical department – I saw how my older friends assembled such beautiful “still lifes” from transistors, switches, light bulbs and other elements.

I never got my turn as a student in the established school curriculum and began studying the subject independently, simultaneously improving my knowledge of mathematics by searching for alternative solutions to theorem proofs offered by the school curriculum. Therefore, as a seventh-grade student, I had an excellent grasp of the ninth-grade curriculum in mathematics, physics, and chemistry.

It was 1974. My math and physics teachers secured permission for me to participate in the Regional Physics and Mathematics Olympiad for eighth-grade students (such competitions began in the eighth grade). They invited me to give it a try – but to everyone's surprise, I took first place in Physics and second place in Mathematics. Based on these results, I was sent to Gorky (now Nizhny Novgorod) to compete in the All-Union Physics Olympiad, where, to my great regret, I only won the prize for the youngest participant. But from that moment on, I developed a strong desire to further develop my skills in the natural sciences, and as a result, I graduated with a Gold Medal in 1977.

I reveled in the aura created around my name, but fortunately, a "sobering up" came quickly—when I failed to enroll in the Physics Department of Lomonosov Moscow State University. Due to the high competition for applicants, MSU's entrance exams were held a month earlier than those at other Soviet universities, so a month later, I was successfully accepted into the Geology Department of the Gubkin Moscow Institute of Petrochemical and Gas Industry, specializing in Geophysical Methods of Mineral Exploration. I graduated with honors in 1982. Since I was one of two top students in the course, my initial assignment was to a Special Group of Students for Advanced Foreign Language Study (there were only two spots available—the first was for English, where my best friend and classmate, Dmitry Khitrov (with whom we were often confused due to our similar appearance), was assigned. I was assigned to a spot in French. I successfully passed all the required checks (including an interview with KGB officers), but literally a month before my thesis defense, I was informed that, due to "a number of important circumstances," my spot had been awarded to another candidate, whose father, oddly enough, was an associate professor in the Department of Geology…

Since I still had the right to the First Place of Choice of Work, I was assigned to an “elite” place at that time – the Central Geophysical Expedition of the Ministry of Oil Industry of the USSR, where my work activity began on August 15, 1982.

2.2. Central Geophysical Expedition (CGE)

In the late 1980s, the Central Geophysical Expedition was the leading enterprise in the Soviet Union in the development of technologies in the field of processing and interpretation of geophysical information, both in the field of linear and areal seismic observations and in the analysis of geophysical well survey(logging) information (GIS)

The Enterprise's structure was simple and divided into methodological areas/departments—"Parties." Each Party conducted scientific development and pilot implementation of various technologies in seismic exploration or GIS. In addition to scientific activities, the Center for Geological Exploration also handled the commercial processing and interpretation of geological and geophysical data in the most challenging geological conditions, both within the USSR and abroad.

The General Director of the Center for Geophysical Exploration, Alexey Kashik, oversaw the GIS department. The Chief Engineer, George Gogonenkov, oversaw seismic exploration. Both were highly skilled leaders and deservedly earned the respect of both the Center for Geophysical Exploration staff and leading geologists and geophysicists of the USSR and the countries of the Socialist Commonwealth. Until the early 1990s, such luminaries of Soviet geophysics as V.I. Meshbey, V. Glagovskiy, D. Finikov, V. Druskin, V. Levyant, and many other outstanding figures in geophysical science worked at the Center for Geophysical Exploration. Many of them emigrated to the United States, Israel, Australia, and European countries and continue to work in the industry.

Many years later, while working in the Persian Gulf countries, I would have to deal with the “new” Management of the ROSGEOLOGIA Company – which would leave a rather sad impression on me – but that is a completely different story, which I will briefly tell you about in the following Chapters.

My first job was in the department that conducted production testing of the SDS-3 software package (link), developed under the supervision of the CGE team, which at the time was the largest Geophysical Center in the USSR. The SDS-3 package was somewhat analogous to the modernized Western Geophysical Company Seismic Data Processing Package

After working at the Company for about a year, I developed a clear understanding of what I'd like to do next. Given that my specialization in the Department of Field Geophysics was Gravity and Magnetic Prospecting, my primary research focus will be the integrated interpretation of gravity, magnetic, and seismic data.

Certainly, the accuracy of the solutions obtained from seismic exploration inverse problems is much higher than that obtained by analyzing gravity and magnetic survey data. However, in certain geological conditions, such as the presence of zones of poorly correlated seismic reflections, seismic exploration methods are ineffective. On the other hand, gravity/magnetometry methods can provide effective solutions. The reflection, refraction, and scattering of seismic waves are recorded in zones of varying acoustic impedance of the underlying rocks. Acoustic impedance is defined as the product of elastic velocity and rock density. As a rule, the deeper the rock, the higher its density and elastic velocity, and therefore, the higher its acoustic impedance. However, there are several exceptions to this rule, such as:

1)Areas of development of salt-dome tectonics; The steep slopes of salt domes are poorly defined in seismic records, and in some cases are not recorded at all. Salt deposits have a fairly low density, but rather high values of the oscillation velocity of elastic waves in them – thus, in fairly wide areas of the dome outcrop zones, the acoustic impedance values of the salt area are equivalent to the acoustic impedance values of the oversalt deposits – in such zones, the reflection effect does not form, and there is no correlation of the seismic record.

2)Horizontal replacement of rocks of different densities can also influence the lack of stable correlation of the seismic signal.

It is precisely in such complex conditions that the use of the Gravimetric Method can bring quite significant success in solving the problem of determining the location of rock contact boundaries (A more detailed description of the approaches I use can be found at the following links).

The Methodology of Joint Interpretation of Seismic and Gravity Data that I proposed was implemented in the Complex of Algorithms and Programs of the Seismic and Gravity Survey – SIDS_G, registered under number 50880000156 in the Main Fund of Algorithms and Programs of the USSR.

While working on solutions to inverse problems of geophysics, which require deep knowledge of differential equations, mathematical physics, and field theory, I realized the need to seriously study these and other areas of mathematics. In 1983, I enrolled in the evening program at the Faculty of Mechanics and Mathematics at Moscow State University, which I successfully completed in June 1986.

Of greatest interest to me was the direction associated with the search for the most stable solutions to inverse problems of seismic exploration and gravity exploration.

In addition to the difference in the physics of the process (the Wave Equation of Seismic Prospecting was described by a Second-Order Partial Differential Equation of the Hyperbolic Type, and the Solution of Inverse Gravity Prospecting Problems by the Solution of the Poisson Equation (an elliptic differential equation in partial derivatives of the second order), it was necessary to take into account the fact that both methods also differed in the criteria for assessing the correctness of the problem (according to Hadamard).

The criteria for the correctness of the solution of inverse problems are three conditions: 1) the existence of a solution, 2) the uniqueness of the solution and 3) the stability of the solution.