Wintershall boosts output 8% thanks to Russia, Norway in 2016
KASSEL. March 22 (Interfax) - Germany's Wintershall boosted hydrocarbons production 7.8% in 2016 to 165 million barrels oil equivalent, thanks largely to its operations in Norway and Russia, the company said in a press release.
"The much higher production volumes in 2016 came primarily from Norway and the Achimgaz joint venture in Russia. In Libya, Wintershall was only able to produce again in onshore concession 96 from September 16, 2016 owing to the difficult political conditions, and it resumed production at a low level of 35,000 BOE per day," it said.
The company aims to be producing 190 million BOE by 2018, said CEO Mario Mehren, confirming medium-term guidance.
In current times where prices are low, the company said it was profiting from its diversified portfolio with low production and reserve replacement costs, especially in Russia and Argentina. The company has raised its production to a record high and at the same time reduced costs and investment expenditures, it said. "We adapted successfully to the new business climate," Mehren said, and continued: "The results, especially our continued positive free cash flow, show that the measures we have taken are working."
The company's operating costs were further streamlined. For example, the expenditures for exploration, the development of proven oil and gas reservoirs and technology, particularly in countries with high costs, were cut. "Thanks to cost optimization and the asset swap with Gazprom, we were able to reduce investments on the previous year by around 700 million euros," Mehren said. Spending discipline would be a key success factor in 2017 too, he said.
"Wintershall's oil and gas production in Russia also continues to grow: the cooperation with its partner Gazprom , which has been going on for more than 25 years, is proof that industry partnerships can be possible and successful over decades. The western Siberian natural gas field Yuzhno Russkoye, in which Wintershall has 35% of the profits, has been producing at plateau since 2009.
Wintershall also has a 50% share in the development of Block 1 A of the Achimov formation in the Urengoy field in western Siberia. The gradual development of this field continued, and at the end of January 2017 it was producing from 80 wells. The next step for the BASF subsidiary will be to develop Blocks 4 A and 5 A of the Achimov formation together with Gazprom.
"Our Russian projects are successful. Russia is our most important core region. Nothing will change that," Mehren said. "We are continuing to invest as planned in expanding our projects, because natural gas from Russia can stand up to competition from anywhere," he said.
In the first year, 2008, Achimgaz drilled six pilot wells at Block 1 A. Commercial development began in 2011 and by January this year the company had 80 operating wells plus a gas and condensate treatment plant with five trains. Production currently exceeds 18 million cubic meters a day. It rose 30% last year to 6 billion cubic meters. In the period to 2018, the number of wells should grow to 110 and production to 8 billion cubic meters. Achimgaz has been drilling inclined wells since 2016 to optimize the development plans.
Wintershall aims to start producing at Blocks 4 and 5 in 2020, although Gazprom said in a March Eurobond prospectus that this was scheduled for 2019-2020.
Thilo Wieland, a member of the Wintershall management board, told reporters agreement had been reached with Gazprom to delay Blocks 4 and 5 until 2020 due to a challenging market environment, although this once again underlined the company's long-term commitment to working in Russia.
The terms for developing the blocks are unchanged - there will still be 45 wells at the initial stage, which will start to be drilled at the end of this year.
Wieland said the fact that OMV was joining the project would not affect its format. Wintershall is currently carrying the project out with Gazprom, and the decisions that have been reached will be part of the package to be offered to the new potential partner. That partner has not yet joined, so this in no way affects work. When it does join, Wintershall will be pleased to receive any useful new information to enable the project to be carried out successfully, he said.
Wieland also said Wintershall had decided to use horizontal drilling technology at a later stage at Block 1 A and would look at how this integrates with further development and at the project economics. Eriell drilled the first horizontal well, Wieland said.
