Rustam Rakhmatulin: “Lost Exploration Volumes Will Have to Be Recovered”
OGE talks to Rustam Rakhmatulin, vice president for Commerce at GEOTECH Holding – the leader in Russia’s seismic survey market.
OGE: In your opinion, what are the key 2010 market trends?
Rakhmatulin: The key trend is the decrease of both business- and staterun exploration projects. The cuts affected all aspects of seismic exploration, but exploration drilling projects suffered the most. In turn, seismic data processing and interpreting volumes deteriorated also. This decrease is the result of oil and gas companies trying to run cost-cutting policies during the crisis – at the time, this primarily meant slashing investments, including exploration-related money (in exploration, return on investment starts after the field goes online, which means approximately 5-10 years).
We understand the difficulties customers face, but it pays to note that the decline in exploration projects over 2009 and 2010 will impact reserves which otherwise would have been put onto companies’ records and ultimately this will lead to a need to recover two years’ worth of exploration work. We believe that the state today is able to control this process and we are prepared to do more work – we do have some spare capacity left.
OGE: What are the dynamics of your company’s seismic exploration over 2008–2009?
Rakhmatulin: Since 2008, it has been stable and positive. We expect to retain the current rate of seismic exploration in 2011, maybe even boosting it a little, considering the information we have on exploration projects at large companies. On the other hand, even if the market grows faster than expected, GEOTECH has sufficient resources to cope with much higher volume of work. The exploration drilling rate in 2010 did not hit the numbers we had hoped for, but nevertheless, they are higher than they were in 2009 – the hardest year for exploration drilling, both for our company and the market as a whole. We believe the exploration drilling market will return to 2007–2008 levels around 2012.
OGE:What is the balance between 2D and 3D seismic surveys over the past few years?
Rakhmatulin: In 2009 we had more 2D seismic surveys. The rate was about 70/30 percent. In 2010 the balance shifted towards 3D projects and the rate there is about 50/50 percent. It is difficult to predict what we will see in 2011, but it is most likely the balance will remain intact, perhaps with a slight shift towards 2D projects due to uncompleted seismic surveys which are written into licensing agreements (usually such agreements require 2D work).
OGE: Did the crisis bring any positive trends?
Rakhmatulin: Very much so – the crisis set companies apart, separating those engaged in serious E&P work from those chasing quick money and which are interested in the acquisition and quick sale of licensed lots. Somewhere in 2012–2014 we hope the market will consolidate more, leaving only large companies with big potential. We consider ourselves such a company since, despite the crisis, we continued our investment programs (running into billions of rubles), while at the same time being engaged in human resources and science. Today, when the peak of the crisis has passed, we expect sustainable growth for 5-6 years and hope to implement all major subsidiary optimization programs.
OGE: Do you expect an increase in offshore exploration?
Rakhmatulin: We expect an increase in exploration projects offshore in the Arctic, on the Black Sea shelf and in the Far East. GEOTECH is keeping a finger on the pulse of this market segment and plans to join offshore research projects in the near future. We welcome the evident interest from the state-owned companies Rosneft and Gazprom as well as from the government which allocated a significant amount in 2010 and 2011 federal budgets for developing offshore seismic exploration.
OGE: Is there interest in complex technologies, such as 4D seismic exploration, in Russia?
Rakhmatulin: There is no interest to 4D projects on the domestic market, though companies in our holding can provide such services. There is certain progress in electrical and geochemistry prospecting, we also plan to develop our own departments for electrical and geochemical surveys. We welcome growing interest to river-based seismic surveys. Over the past few years, GEOTECH ran several successful projects on East Siberian rivers using the new unique proprietary technology of non-explosive pulsed electromagnetic sources. The client was satisfied with the result – the resulting data was of very high quality, superior to data obtained from other seismic technologies. We expect state-owned companies will retain their interest to river-based projects. This technology can also be used in shallow transition zones (from 20-30 cm to 15-30 meters deep). These technologies have a great outlook; in the meantime, we will do our best to actively develop and promote them.
OGE: What share of the market does your company hold?
Rakhmatulin: GEOTECH Holding dominates the market of seismic exploration, running 40 percent of all terrestrial seismic exploration projects. In exploration drilling we hold a smaller share – about 10 percent of the market. We control about 15-20 percent of the field of data processing and interpreting.