By Melissa Akin and Katya Golubkova
MOSCOW, July 10 (Reuters) - Two veterans of Yukos oil company, who helped launch post-Soviet Russia to top world producer status by spreading fracking, have left the country’s only oil firm focused exclusively on hard-to-extract “tight oil”.
London-listed RusPetro on Wednesday announced the departure of Chief Executive Don Wolcott, former vice president for production and well performance at Yukos.
RusPetro said it would part ways with a non-executive on its board, Yukos veteran Joe Mach, whose watchword at Yukos was “frack every well,” according to Thane Gustafson’s “Wheel of Fortune: The Battle for Oil and Power in Russia”.
The two men led a drive to squeeze more oil more cheaply out of Siberian fields with horizontal drilling, simple hydraulic fracturing and enhanced recovery technologies ubiquitous in Texas but little used in post-Soviet Russia.
The technological changes, hardly remarkable by the current standards of the shale revolution, helped Yukos double production in just half a decade and ultimately launched Russia past Saudi Arabia to become the world’s largest oil producer.
Once Russia’s top crude producer Yukos was bankrupted and its owner, Mikhail Khodorkovsky, jailed on tax charges after he fell out with President Vladimir Putin.
Yukos assets are now operated by state oil company Rosneft . Russia’s big integrated oil companies have started a drilling campaign in the vast Bazhenov shale and other tight plays but still concentrate mostly on their conventional reserves.
Tight oil refers to hard-to-extract oil trapped in non-porous rock.
RusPetro, with proved and probable reserves of over 1.8 billion barrels of oil equivalent in the heart of West Siberia, was set up to try to recreate the phenomenon of 15 years ago on a small scale, using more advanced production technologies.
RusPetro’s tight oil-focused operations are based in the Khanty-Mansiysk region of West Siberia, near to fields operated by Gazprom Neft and TNK-BP - the latter recently taken over by Rosneft.
It is currently drilling low permeability formations and ultimately targeting the Bazhenov. The economics of developing such reserves are difficult because of a heavy tax burden.
Just days before the departures, however, the lower house of parliament passed a long-promised tax relief package to spur drilling in West Siberia’s tight rock and boost output.
“For all companies in Russia producing tight oil, wellhead revenue is about $22,” RusPetro’s head of investor relations, Dominic Manley, said, estimating the tax breaks would raise it to $38.
“That is going to incentivise all kinds of investment in these kinds of reserves. It is the difference between not making any money and starting to make some money out of this type of reservoir.”
RusPetro said the departures were by agreement with the company’s shareholders and did not specify a reason. Tatyana Kalachova, an analyst who covers RusPetro at Otkrytiye brokerage, said the change was likely instigated by the shareholders after production downgrades.
RusPetro floated in London in 2012, when it raised $240 million. Its share price, which doubled after the listing, has since fallen by more than 80 percent, hit by downgrades to output which hit cash flow projections and hurt the company’s ability to fund drilling.
“They wanted 10,000 bpd but they had less than 6,000, then they decreased the target for the current year, so they were underperforming,” said Tatyana Kalachova, who covers RusPetro at Otkrytiye brokerage in Moscow.
RusPetro also said that its current chairman Chris Clark would step down at the end of July and would be replaced by Alexander Chistyakov, a shareholder with RusPetro and a former director with the Russian Federal Grid company.