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Monthly analytical report "Oil and Gas of Ukraine", August 2015.
PETRO KATERYNCHUK, General Director of «Region» LLC

  1. Region is one of leading service companies in Ukraine. Tell us how it all started?
    In 2000 a mining company was founded that had to be involved in production of hydrocarbons in Carpathian region. In 2003 it was decided to establish a joint Ukrainian-Polish company which would deal with complex services. But from the beginning production and drilling services were outlined into separate businesses and soon production assets were sold out for Region to become solely drilling and service company.
  2. Where the company stands today, what are the main directions of work and the volume of orders?
    The company offers a wide range of services from intensification and acidizing to hydraulic fracturing and coiled tubing. But speaking about amount of proceeds, the main income during recent years accounts to drilling.
    Such a wide range of services implicates that Ukrainian market of services is very narrow. For example we cannot focus on projects on hydraulic fracturing only or coiled tubing solely because of little orders. Keeping the fleet together with equipment standing idle for years in Ukraine is unprofitable.
    We have two production bases, one in Mirgorod (Poltava region) and the other in Pervomaysk (Kharkiv region). These are regions where we work today.
  3. Are there any prospects for Ukrainian drilling companies abroad? What is your opinion as to the most promising countries or markets and services demanded?
    The company has ISO 9001 and ISO 18 001 international certificates with yearly support. It is important when operating on international projects. We worked in Adygea, Russia for JKX company performing acidizing and coiled tubing washing there. Also we had been working in Kazakhstan for several years being involved in a project with KazMunayGas on about 30 hydraulic fracturing operations in a field of Prorva in Atyrau region. We opened an office in Kazakhstan trying to gain a foothold. But since Chinese comrades entered the market there I believe our prospects as well as of European companies are limited. After financial crisis of 2008 China captured everything: having bought mining assets they began to widely promote their service companies.
  4. What equipment does the company possesses?
    The company has light rigs for shallow drilling and workover of 100 to 180 tons. In total we have 4 light mobile rigs and two heavy drilling rigs (400 tons).
    Also we can offer two coiled tubing units and one nitrogen unit. With regard to hydraulic fracturing we have a part of indispensable equipment such as containers for preparation of drilling fluids, a blender but some equipment including pumps we hold on lease. Our company plans to purchase a complete set of equipment but the market is too small for that.
  5. Who are your main customers? What is different about working with private, foreign and state-owned companies?
    We do business with companies such as KUB-GAS, Poltava Petroleum Company, Naftogazvydobuvannya, Regal Petroleum, Burisma, including joint activities with Karpatygaz. Our customers comprise a pool of the main players in the market of private production.
    As for state-owned companies, we have an experience of long-term collaboration with Ukrnafta and Ukrgasvydobuvannya. It’s no secret that there are certain difficulties in working with state-owned companies especially in terms of settlement of services rendered. Especially today in the period of devaluation, while equipment and materials are mainly imported, delays in payments are killing business. So we took a decision to stop collaborating with state companies. Though, they may offer a large amount of work but for us it’s not a business, it’s a headache.
  6. After a sharp rise of rents on gas production for private companies last August everyone is talking about stopping drilling projects. How is this affecting service companies?
    Of course, the volume of orders decreased but rent issue is aggravated by unstable political situation. Foreigners are in no hurry to invest because they cannot take dividends. Politicians say one thing about the necessity of development of the industry and acting different. On the other hand those companies that started drilling programs last year continued to drill. As for repairs and stimulation, many companies really cancelled projects until better times.
  7. What are major trends in the market of oil and gas? Are there any prospects for production growth?
    In my opinion private companies are the future of Ukrainian oil and gas production. There are good prospects for its increasing. This is due to drilling of wells with horizontal completion and conducting hydraulic fracturing as do all modern companies. I am sure that soon the situation in oil and gas industry in Ukraine will stabilize and mining companies will invest in production projects. It is important for experience and expertise accumulated over years to have demand. From this everybody will benefit: from people and investors to the state.
  8. Some of production companies are developing their own drilling units. Can it result in decline of volume of activity for service companies in the future?
    Hydrocarbon production and servicing are completely different types of business. These are different areas of activity. Rendering services is a level of completely other tasks.
    From my experience I can say that if a production company already has a large quantity of producing wells then at some point the company may decide to purchase its own rig for workovers. This step is a passport to cost-effective business.
    On the other hand competition compels service companies to improve and bring new technologies. As to practice established all over the world, there are service companies following path of specialization. The company which is engaged in business of bits may not be engaged in completing of wells or hydraulic fracturing. Specialization allows growing faster. The approach of drilling and repairing within the framework of one enterprise is a Soviet practice.
    Looking at our company I understand that a range of services offered is too wide and I’m not very happy with this situation. When I’m asked by foreigners whether we offer services like Schlumberger (one of the world’s leading service companies), I reply that we offer more because we also drill.
    As I said, this situation is determined by Ukrainian market with little orders resulting in a small market of service companies. In the future subject to the development of industry and job growth service companies will develop in the direction of narrower specialization.

Oil & Gas. Energy bulletin №9. September 2010

Due to decline in hydrocarbon production at Ukrainian oil and gas fields the problem of exploration of new fields and operation of existing ones has become especially acute lately.  Efficient production is possible only in case of application of modern drilling practices and world-class drilling equipment.

Some oil producing companies solve this problem by concluding contracts with foreign oilfield servicing companies following the principle "A prophet is not recognized in his own land ", other companies do it in the old-fashioned way. However, in modern world such approach is unacceptable. Over the last few years several Ukrainian companies have emerged with a potential to carry out full package of services on exploration and production drilling, maintenance, reconstruction and stimulation of wells, meeting the highest global standards. Region LLC is recognized as a leader among these companies, and since 2003 it has been a pioneer in coiled tubing practices in the Ukrainian market.

The cooperation with Region is obviously advantageous. First, it is economically because servicing company’s equipment is located on-site, there is no need to mobilize it from across the ocean, certify it and train staff; therefore, it enables to avoid financial costs and time consumption. Second, REGION specialists already have a grip on using modern drilling equipment and know the peculiarities of its adaptation to working conditions in Ukraine.

No wonder that our client list includes such leading companies of the oil and gas industry as Ukrnafta, Ukrgasproduction, Chornomornaftogas, Poltava Petroleum Company, “Rudis” drilling company, Regal Petroleum Corporation Ukraine, Astroinvest – Energy, Natural Recourses.  REGION stock of orders also includes contracts with non-residents like Kazmunaygas, East-European Servicing Company (Kazakhstan), Southgasenergy and Oil Field Technology Services Ltd in Russia, JKX Oil & Gas plc and Cadogan Petroleum (Great Britain).

Even this list of partners testifies to the high professionalism of Ukrainian servicing company. Moreover, each of them is willing to give the most positive recommendations of REGION LLC.

The quality of equipment used by the company and the qualifications of its staff are confirmed by a number of international certificates. Just only last year the company was certified according to international systems ISO 9001, 14001, OHSAS 18001 as an international drilling contractor. A key to company’s success is the efficient combination of highly skilled professionals’ experience, their research findings and modern high-tech equipment. This combination provides a full range of services associated with new well drilling, workover operations and stimulation of marginal wells by means of advanced world practices.

Today REGION LLC eagerly takes up such complex projects as hydraulic fracture, including acid fracturing, acid treatment with coiled tubing unit, water suppression, well completion with  nitrogen unit and many other things. For a long time none of these jobs could not be done in Ukraine. For example, REGION  LLC was a first company in Ukraine to carry out high-volume acid fracturing with injection of 600m3 acid-gel mixtures.

REGION LLC is favourably endowed with a fleet of modern equipment that is very helpful to perform its commitments timely and effectively.  This fleet comprises workover  rigs manufactured by U.S., Canadian and Chinese companies with their loading capacities of 180 tons, coiled tubing and nitrogen units, Stewart & Stevenson equipment package for hydraulic and acid fracturing. And it is far from the complete list. In addition, REGION company has its own flow-testing laboratory where flow-tests tests and simulations are conducted as well as preparation of design projects. The efficiency and productivity of operations is calculated in advance. In other words, our company takes professional approach to future work areas by using technological, engineering and scientific potential. Thus our company staff contributes to the strengthening of energy independence and prosperity of Ukraine.

 “Drilling” magazine. Acid fracturing procedure in the  Dnieper-Donets Trough.

 The success of oil and gas well drilling in carbonate sediments of Dnieper-Donets Trough depends on many factors. The porosity and permeability of fluid-saturated  rocks are also not in the bottom of this list, the result of such drilling, even in wells of the same field,  is unpredictable and risky process.

The purpose of large-scale hydrochloric acid treatments in the limestone is to obtain a system of connected fracture in the oil-and-gas-saturated layers with initially low reservoir properties by means of destruction and dissolution of formation matrix, removing of residual mud, increasing layers permeability with simultaneous increase in the drainage radius in order to obtain a stable fluid influx to the well bottom.

Work on the production stimulation in carbonate reservoirs is carried out in Ukraine and abroad. But only this summer "Region" LLC was the first company to carry out a series of works on large-scale hydrochloric acid treatments at the oilfields of Dnieper-Donets trough in Ukraine. The total amount of fracturing fluid delivered and reacted in the reservoir was more than 550 m3 per well.

The work was carried out in several stages:

-          acquisition and analysis of geological and engineering well data;

-          designing of hydrochloric acid treatment process, simulation of injection parameters, selection of chemicals and fluid systems, fracture modeling in the reservoir;

-          preparatory work in the well;

-          mobilization of personnel, equipment and chemicals;

-          on-site rigging up operations;

-          fracturing fluid preparation (up to 600 m3);

-          hydrochloric acid fracturing;

-          well completion by means of coiled tubing unit and liquid nitrogen.

Methodology of hydrochloric acid fracturing:

Stage 1.  This stage consists of hydrochloric acid injection to treat the whole productive well section opened by a filter, its cleaning from the products that can cause clogging and creation of a system of interconnected fractures in the most permeable productive intervals.

Stage 2. At the second stage hydrochloric acid solution thickened with polymer is injected that increases the flow area of fractures created at the 1st stage. High viscosity of the treating fluid increases the bottom-hole pressure while the main fracture is under development, and due to the effect of acid to rock retardation (the rate of dissolution of carbonates reduces by 30-40 times with polymer) an extensive system of fractures in a layer is formulated with subsequent dissolution of their walls.

With project volume and injection mode of thickened hydro-acid solution the model fracture length shall reach 100-120 meters.

Stage 3. This stage consists of hydrochloric acid treatment and fracturing of rocks with less permeability along the whole length of productive section opened by a filter. Formation of new fractures in layers which are less permeable and are not filled with a viscous acid solution.

Stage 4. Formation water injection with surfactant is aimed at driving the acid solution out of the well into the formation with dissolution of reactor effluent. This treating fluid wash away the reactor effluent formed in fractures significantly reduces their concentration and the surfactant contained in the fluid reduces friction against the fracture walls and capillaries. Thereby it prevents clogging of new fractures by insoluble particles of solid matrix, especially in the immediate proximity to the wellbore drainage zone.

Stage 5. Following the hydrochloric acid fracturing, the well completion was carried out by means of coil tubing through a slow relief of bottom-hole pressure and fluid intake at the minimum possible underbalanced conditions. In this case it is extremely critical to avoid sharp draw-down pressures, especially in the well-drainage areas. This enables to clean thoroughly the treated area from reactor effluent remained after the acid fracturing, enables to extract the most of it out of the reservoir and prevents " jamming "of these effluents during the completion of new fractures, that in its turn  saves newly formed permeability of the treated reservoir.

The customer of this operation was a joint British-Ukrainian oil and gas company which constantly applies the best international practices and modern technologies for hydrocarbon crude production.  Working project design and general management was implemented by representatives of the British company Senergy Co, preparation of process liquid formulations and reagents supply were provided by Weatherford International, Inc. "Region" LLC was the main contractor on hydrochloric acid fracturing and subsequent well completion by means of coiled tubing and nitrogen units. All these operations were carried out by using modern equipment made by leading world manufacturers Steward & Stevenson, Hydra Rig (USA). Cooperation of all the companies stated above resulted in implementation of large-scale hydrochloric acid fracturing at high technological and organizational level in accordance with international standards of industrial and environmental safety.

Implementation of this acid fracturing technique proved to be very useful in Carboniferous reservoirs of oilfields in Ukraine.

Industry is the soul of business and the keystone of prosperity
by Charles Dickens