(John Kemp is a Reuters market analyst. The views expressed are his own)
By John Kemp
LONDON, July 16 (Reuters) - As U.S. and EU policymakers have imposed targeted sanctions on Russian individuals and firms in response to the crisis in Ukraine, Western companies have sought to insulate their own projects from the political imbroglio and continue developing the country's vast oil and gas resources.
Exxon Mobil and Shell have joint ventures with Rosneft and Gazprom respectively to explore and produce shale oil and gas from beneath the swampy plains of Western Siberia and both want to be allowed to continue operating there.
It's easy to see why. The West Siberian basin is the largest petroleum basin in the world, covering 2.2 million square kilometres between the Ural Mountains and Yenisei River, extending from Kazakhstan in the south to under parts of the Kara Sea in the north.
The region contains dozens of super-giant and giant oilfields, including Samotlor with 28 billion barrels of oil originally in place, and Urengoy with more than 350 trillion cubic feet of original gas reserves.
The first oil discovery in the region was made in 1953. Most of the large oil and gas fields were discovered in the 1960s and 1970s. Since then, new field discoveries have been much smaller, which helped fuel the peak-oil panic in the early 21st century.
But more than 90 percent of that oil is thought to have come originally from a layer of black shale averaging just 20-40 metres thick and buried almost 3 km beneath the surface. Now oil and gas companies are trying to figure out how to go straight to the source, known as the Bazhenov shale.
Tapping shale directly has revolutionised oil and gas production in North America. Western oil companies and their Russian counterparts hope it can do the same in Siberia.
LAND OF OIL
Everything about Bazhenov is on almost unimaginable scale. It covers an area of almost 1 million square kilometres - the size of California and Texas combined.
The formation contains 18 trillion tonnes of organic matter, according to the U.S. Geological Survey ("Petroleum Geology and Resources of the West Siberian Basin", 2003).
Bazhenov is estimated to hold more than 1.2 trillion barrels of oil, of which about 75 billion might be recoverable with current technology, making it the biggest potential shale play in the world, according to the U.S. Energy Information Administration ("Technically Recoverable Shale Oil and Shale Gas Resources", 2013).
To put that in context, Bazhenov contains an estimated 10 times more recoverable oil than the famous Bakken formation in North Dakota and Montana.
Bazhenov could produce more oil than has so far been extracted from Ghawar - the super-giant field in Saudi Arabia that made the 20th century the age of petroleum.
In Soviet times, geologists were well aware of Bazhenov's oil riches but were unable to extract them owing to the tight packing of the rock, which meant oil and gas would not flow freely through the shale to the wells.
In 1980 and again in 1985, the Soviet government detonated small nuclear devices underground in the West Siberia oilfields in an attempt to stimulate production.
The experiments were code-named Project Angara and Project Benzene respectively, and were among 21 nuclear explosions conducted by the ministries of oil and geology to stimulate oil and gas production between 1965 and 1987.
"Special explosives were developed by the Soviet weapons laboratories to meet the unique requirements of stimulating oil and gas reservoirs," according to one U.S. arms control expert ("The Soviet Program for Peaceful Uses of Nuclear Explosions", 1998).
Now Russian oil companies and their joint venture partners from the West are hoping to produce oil and gas from shale using less extreme methods involving water, sand and chemicals to shatter formations and open pathways for the hydrocarbons to flow to the wells.
Bazhenov is attractive for oil and gas exploration because it has many of the same features that made shale plays successful in North America, particularly North Dakota's Bakken.
The parallels with Bakken have been made explicitly by Rosneft in presentations to investors ("New age of petroleum", March 2013).
In the central part of the basin, the Bazhenov is buried about 2.5 km below the surface, similar to the average burial depth in the core areas of the Bakken.
Like Bakken, the Bazhenov is a black, organic-rich shale deposited on the bottom of an ancient sea. It was deposited in an oxygen-starved environment so there was plenty of opportunity for organic material to be buried before it could decompose fully.
Bakken and Bazhenov have a total organic carbon content of around 10 percent in their most prospective areas. Bazhenov contains plenty of Type I and Type II kerogen, which tends to generate oil and gas.
Most of the oil produced from reservoirs sourced from the Bazhenov has been medium gravity (29-37 degrees API), which is a bit heavier than Bakken but still highly prized by refiners.
Like Bakken, Bazhenov is under unusually high pressure for its depth. The clay content of the shale is low, making it suitable for fracking.
Similar to Bakken, Bazhenov is a thin formation. Horizontal drilling will be essential to maximise contact between the wells and the oil-bearing shale, which means mastering difficult drilling techniques.
But unlike the giant oil and gas deposits off Russia's north coast, most of the Bazhenov is on land, in the same sort of semi-empty wilderness as North Dakota.
Bazhenov oil could, theoretically, be produced by the same sort of extensive manufacturing-like drilling and fracking processes that have been used successfully in North Dakota and Texas.
By 2003, some gas had already been produced from more than 200 wells bored down into the Bazhenov at the Salym and adjacent gas fields, according to the U.S. Geological Survey.
But no significant production from shale had been achieved in other parts of the West Siberia basin. The entire area remains comparatively under-explored for unconventional oil and gas.
The attractions of the Bazhenov for Western oil companies and their Russian counterparts are obvious: an enormous world-class onshore oil resource that would benefit from Western expertise in hydraulic fracturing, horizontal drilling and seismic surveying.
The obstacles are mostly above rather than below ground. Russia has proved a difficult financial and business operating environment for Western oil firms, with abrupt changes in royalties and taxation, regulations, and asset ownership rules.
Political relations between the Russian government and its Western counterparts have been deteriorating for some years, and threatened to rupture completely over the crisis in Ukraine.
In April, the United States imposed sanctions on Igor Sechin, a close confidante of Russian President Vladimir Putin and chief executive of Rosneft. Significantly, however, the United States has not imposed sanctions on Rosneft itself.
Some U.S. foreign policy experts have called for the United States and the European Union to restrict the transfer of new oil and gas technology and ban investment in new oil and gas fields.
The immediate aim would be to compel Russia to heed Western concerns over Ukraine. The longer-term objective would be to deny Russia access to the expertise - especially in complex horizontal drilling, seismic and oilfield visualisation - needed to develop shale deposits, entrenching U.S. superiority in shale energy.
So far, however, Western companies have lowered their profile and successfully lobbied against the imposition of broader sanctions on investing in Russia's oil and gas sector.
The stakes are just too big. Bazhenov is one of the most promising oil and gas plays anywhere in the world and a key component of future supplies.
With Western oil companies still largely shut out or heavily restricted from producing oil in Saudi Arabia, Iran and Venezuela, and struggling to find low-cost projects in other areas, Bazhenov is simply too important to lose. (Editing by Dale Hudson)