A joint venture between Shell and Russia’s Gazprom Neft has begun drilling in a Siberian shale formation that is believed to hold one of the world’s largest shale oil deposits.
The joint venture, Salym Petroleum Development (SPD), is eying the Bazhenov shale as a play potentially similar to the highly prolific Bakken shale in the US.
The Bazhenov is located in Western Siberia, and covers 2.3 million square kilometers or 570 million acres, which is the size of Texas and the Gulf of Mexico combined, an area 80 times bigger than the Bakken.
The drilling announcement follows a memorandum signed in April last year to explore and develop shale oil and Arctic offshore projects in Russia.
Oleg Karpushin, SPD’s chief executive officer, said the appraisal program will give his company an edge in developing hard-to-recover resources.
"We hope that the pilot project will allow us and our shareholders to make a decision about moving to a large-scale development," he said.
SPD said it plans multi-stage fractures of all five wells in Upper Salym, West Siberia in a bid to tap shale oil potential in the prospective Bazhenov formation.
The first horizontal well follows three years of study on the prospect, which included three vertical wells, 3D seismic, coring and well logging in the Upper Salym area.
The Bazhenov layer has attracted Shell and Exxon because it is said to be similar to the Bakken shale, a key venue behind the North American shale boom.
Exxon will also start a $300 million pilot project drilling in a different part of the Bazhenov with Russia’s Rosneft this year.
The Bazehnov region has many cracks and fractures which could make its oil flow more readily, and therefore production could come in at a lower cost. So far, test wells in the region have operated at 400 barrels per day, on line with Bakken test well averages.
Moscow has introduced tax breaks to incentivize exploration of the Bazhenov and other shale plays.