* Russia's biggest driller sees horizontal drilling up 50
pct in 2013-CFO
* Tight oil push to bear fruit for Eurasia Drilling in 2015
* Tax break proposals support investment in tight oil
* Total drilling up 26.6 pct in 2013 despite decline in
By Melissa Akin
MOSCOW, Jan 23 Russia's Eurasia Drilling Co.
sees its volumes of horizontal drilling, key to
Russia's ability to tap increasingly tight oil reserves and
sustain output, rising by as much as 50 percent next year, its
chief financial officer said.
The real impact of Russia's push into tighter reserves - oil
trapped in non-porous rock released through horizontal drilling
and multistage hydraulic fracturing, or "fracking" - is still
around two years away, Richard Anderson said by telephone.
Russia's top oil companies, who make up Eurasia Drilling
Co.'s clientele, are delving into tighter reserves as Russia's
cheaply accessed conventional reserves decline in the core
fields of Western Siberia.
"All of our clients will be doing at least a few pilot wells
this year," Anderson said. "I don't expect we'll see a whole lot
of impact on our business before 2015 but by 2015 we'll start to
feel some effect.
"There is a meaningful move. If you look what's happening in
North America, it's really revolutionising what is being done
there. Something will happen (in Russia)."
As Russia's biggest driller, EDC reflects trends throughout
the Russian oil industry, which is struggling with declines in
West Siberia and is faced with the cost and risk of developing
new reserves in remote Eastern Siberia and the Arctic.
Its clients complain they cannot afford more expensive
drilling and enhanced recovery methods like those that have
driven the U.S. tight oil revolution because of a tax regime
which skims 90 percent of the revenue from each export barrel.
The government is due to approve a package of tax breaks for
tight oil projects, including the vast Bazhenov shale of West
Siberia, in the early months of 2013. The industry is still
debating whether it will spur output.
"It is our clients' view that once those are in place the
economics should work," Anderson said.
"What you may see is that this may actually push off the
development of Eastern Siberia a little bit if the tight oil
sands take off. We might see capital spent in Western Siberia
that a few years ago we would have seen spent in Eastern
In 2012, it reported on Wednesday, total metres drilled rose
26.6 percent to 6.05 million metres in 2012, a company record,
after Russian oil companies stepped up new drilling, additional
drilling around the edges of old fields, and renovation of old
The number of horizontal metres drilled, key to tapping
tighter oil reserves which cannot be accessed by conventional
vertical drilling, was below expectations with a decrease of 1.9
percent, which brought the figure to 862,000 metres, Russia's
biggest drilling company said.
The decline stood in contrast to the company's earlier
optimism on horizontal drilling. In August, company founder
Alexander Djaparidze said growth in horizontal drilling in
Russia would outstrip growth in the United States, where it is
driving a boom in shale oil.
"It stayed basically flat in 2012," Anderson said. "Clients
said they wanted to sit back and assess the results of the
horizontal drilling they had done in 2011. In 2013 they plan to
do considerably more horizontal drilling."
Russia's output hit a new post-Soviet record of 10.37
million barrels per day but gains of recent years have slowed
from the spectacular rise in the mid-2000s that catapulted
Russia to the rank of world's top producer.
The company's revenues were approximately $3.2 billion with
a core earnings margin of 24.3 percent.
"Although the released outlook is just marginally above
consensus expectations we would see it as positive," Merrill
Lynch analyst Anton Fedotov said. "EDC has historically been
conservative on guidance, but has usually upgraded it during the
For 2011, it reported revenues up 52 percent to $2.75
billion with an EBITDA margin of 21.7 percent.