Production maintains high level
Start of production from the Yuzhno Russkoye gas field
First phase of the Achimgaz project almost complete
New exploration projects in the North Sea and Qatar
Kassel. As Germany’s largest producer of crude oil and natural gas, Wintershall focuses internationally on selected core regions where the company possesses a wealth of regional and technological expertise. These regions are Europe, North Africa, South America as well as Russia and the Caspian Sea region. The company’s future success is based on two pillars: investing in the exploration, development and production of hydrocarbons as well as increasing its technological know-how.
In 2007 Wintershall succeeded in raising the production of crude oil and natural gas slightly above last year’s level, to 112 million barrels oil equivalent. Although crude oil and condensate production declined year-on-year by one percent to 8.4 million tons, partly due to the farming out of a concession in Dubai, natural gas production rose by four percent in 2007 to 7.8 billion cubic meters. This rise was primarily due to the start of production at the Yuzhno Russkoye natural gas field in October of last year. This is the first time that a German company, BASF subsidiary Wintershall, has been directly involved in the production of natural gas in Western Siberia.
389 percent of the volumes produced in 2007 were replenished. The total reserve-to-production ratio was ten years (2006: seven years). This figure is based on Wintershall’s share of production in 2007 and refers to the reserves at year end. Because of contractual rules, these figures do not include any volumes from the Achimgaz project. Wintershall participates in the ZAO Achimgaz joint venture to develop the Achimov horizon in a section of the Urengoy field together with Gazprom dobycha Urengoy LLC.
One of the company’s key activities within its “Gas for Europe” strategy is the search for, development of and production from natural gas reservoirs in Europe and the surrounding countries. In order to implement this strategy the Company focuses on strong partnerships for developing new projects. A prime example of this type of strategic partnership is its cooperation with the world’s largest natural gas producer, OAO Gazprom.
Major investments in the search for and development of new fields
Wintershall’s Exploration and Production invested a total of 2,274 million euros on exploration, capital expenditure and acquisitions in the search for and development of new oil and gas deposits in 2007 (2006: 524 million euros)1. 250 million of this was spent on Europe (2006: 221), 142 million euros on North Africa including the Middle East (2006: 138), 48 million euros on South America (2006: 62) and 1,834 million euros on the core region of Russia and the Caspian Sea (2006: 102). The key areas of investment were the Mittelplate field development, the offshore field Al Jurf, the water injection project in Libya, and the continued development of the Achimov Formation in a section of the Urengoy field in Western Siberia.
Eleven wells identify new deposits
In 2007, Wintershall took part, either directly or via subsidiaries, in 22 completed (2006: 32) exploration and appraisal wells, of which eleven (2006: 14) discovered new crude oil or natural gas reserves2 . Another six exploration wells had not been completed at the year end. This good success rate is partly due to the fact that in the last few years Wintershall has mainly concentrated on exploration near known deposits, so-called nearfield exploration, a method which generally leads to a higher rate of success. However, in the future Wintershall plans to focus more on exploration in the so-called greenfield sector, in areas where the existence of oil and gas has already been established, though not in the vicinity of known deposits.
The Mittelplate offshore field, in which Wintershall and RWE Dea AG each hold a 50 percent interest, is the cornerstone of our oil production in Germany. The two companies have been developing the most important German oil deposit off the coast of Schleswig-Holstein together since October 1987. Fitting for the 20th anniversary of the start of production, in 2007 the 20 millionth ton of oil was produced from the deposit. With proved initial reserves of around 200 million barrels, the Mittelplate oil field is Germany's largest known oil deposit.
In what is known as the Entenschnabel in the German sector of the North Sea, Wintershall operates the only German offshore production platform with an annual production volume of around 700 million cubic meters of natural gas. The BASF subsidiary has a 49.95 percent interest in the A6-A platform. In the German sector of the North Sea, in June 2007 the BASF subsidiary received a three-year exploration license for three blocks, H10, H13 and H14, and for two part blocks, G12a and G15a. The blocks are situated 80 kilometers north-west of the East Frisian island of Borkum. Wintershall already has seismic data for the area, which covers about 1,500 square kilometers, and in recent months the company has collected new survey data in one of the biggest ever cross-border seismic initiatives, covering about 2,300 square kilometers, in the Dutch, Danish and German North Sea.
The development of the “tight gas” field in Leer, which began in 2007, will continue in 2008. Tight gas reservoirs typically contain gas that is embedded in highly compact, almost impermeable rock. Using so-called multiple-frac technology, the rock of the deposit is fractured to increase the flow of the gas thus making it easier for the gas to enter the well. Wintershall cooperates with Gaz de France Produktion Exploration Deutschland GmbH (operator) in Leer in Lower Saxony.
Around half of the natural gas currently consumed in Europe comes from the countries bordering the North Sea – Norway, the Netherlands, Denmark, the UK and Germany. The wholly owned BASF subsidiary is planning to invest more than 300 million euros in the search for and production of crude oil and natural gas in the North Sea by 2010 alone. Wintershall has been active in the North Sea since 1965.
Wintershall is one of the largest natural gas producers in the Netherlands. It operates a total of 26 offshore platforms in the southern sector of the North Sea, one of which is in German territorial waters. Since 2000, Wintershall has increased natural gas production in the Netherlands fivefold to two billion cubic meters a year. Overall, Wintershall has an annual production volume of six billion cubic meters in the Netherlands in about 50 joint ventures, which makes it one of the biggest operating companies in the country. Preparations are underway for the development of the E18-A and P9-A and B fields in the Dutch sector of the North Sea. In addition, another four exploration blocks were acquired in the Netherlands in 2007.
In order to further improve the efficiency of its operations in the southern section of the North Sea, since last August Wintershall has been controlling 18 offshore platforms from Den Helder with an ultra-modern radio monitoring system. The new system will secure the future commercial production of smaller and medium-sized reserves in the southern section of the North Sea. The total capital expenditure for the newly installed center for Remote Controlled Operations (RCO) in the North of the country was 11.5 million euros, 4.3 million euros of which Wintershall, as the operating company, is providing.
Rijswijk, near The Hague, is home to the company-wide competence center for offshore technology. Here Wintershall is working on developing its shallow-water expertise. The development of offshore expertise is gaining importance for the exploration and production of oil and gas, and the company applies this expertise to its activities in other regions of the world. For instance, Wintershall has extended its operations to the British, Danish and Norwegian sectors of the North Sea.
In Denmark the seismic surveys carried out in the exploration blocks 4/06 to 6/06 are currently being evaluated. These blocks cover a total area of around 1,600 square kilometers and are near German territorial waters. Wintershall is operator of all these blocks and has a 35 percent interest in each.
In Norway, in February 2008, the Norwegian Energy Ministry awarded Wintershall Norge A.S. shares in five new exploration licenses from the last bidding round, APA 2007. The Norwegian subsidiary of Germany’s largest exploration and production company was awarded two new licenses in the European Arctic Sea and three new licenses in the Norwegian North Sea. With a share of 40 percent, Wintershall will be the operator in license areas PL 472 and PL 474 in the Norwegian Sea off the coast of Central Norway. Wintershall was also awarded shares in three licenses (PL 465, PL 462 S and PL 461) in the Norwegian North Sea off the coast of Bergen. Last year the BASF subsidiary had already taken over shares in another three licenses (PL 286, 443 and 444). With a majority shareholding of 40 percent in license PL 443, Wintershall is operator for the first time since 2007. The first exploration well in license PL 273, in which Wintershall also holds a stake, was started in March. Wintershall participates in a total of 11 licenses in Norway and has thus positioned itself as an active company in the E&P industry.
In the UK, the BASF subsidiary acquired a new exploration license in the 24th licensing round of the United Kingdom as future operating company for the four part blocks 49/20c, 49/24b, 49/25b and 50/21. It also received a license for the southern part of block 44/13. Wintershall Noordzee B.V. has a majority shareholding of 49.5 percent in another part block (44/24b). The first exploration well for this license is planned for 2008. Overall, Wintershall has shareholdings in 20 blocks and part blocks in the British sector of the North Sea.
Russia and the Caspian Sea region
In December 2007 BASF and Russia’s OAO Gazprom officially launched operations at the Russian natural gas deposit Yuzhno Russkoye. BASF’s shareholding in the gas production in Siberia is part of an assets swap. The wholly owned BASF subsidiary Wintershall has a 35 percent share in the economic success of the company OAO Severneftegazprom (SNGP), which holds the license for the Yuzhno Russkoye natural gas field in Western Siberia. In return, OAO Gazprom has increased its shareholding in natural gas trading joint venture WINGAS GmbH from 35 to 50 percent minus one share. Gazprom will also receive a 49 percent share in a Wintershall subsidiary that produces oil onshore in two concession areas in Libya. The Yuzhno Russkoye field in Western Siberia has recoverable reserves of more than 600 billion cubic meters of natural gas and is thus some three times the size of Achimgaz, another joint venture project between Gazprom and Wintershall producing hydrocarbons in Siberia. Gazprom currently supplies Germany with about 40 billion cubic meters of natural gas a year. Based on this figure, the Yuzhno Russkoye field could cover all Russian gas exports to Germany by itself for another 15 years.
Wintershall participates in the development of the Achimov Formation in a section of the Urengoy field in Western Siberia via the ZAO Achimgaz joint venture. Wintershall and its partner, Gazprom subsidiary Gazprom dobycha Urengoy LLC, each have a 50 percent interest in Achimgaz. The six production wells planned for the first project phase have been drilled and the first production tests were successful. Production is scheduled to commence in the second quarter of 2008.
The German-Russian Volgodeminoil joint venture owned by Wintershall and Russia's largest producer of natural gas, OAO Lukoil, celebrated its 15th anniversary in 2007. Volgodeminoil was founded in November 1992 and it is now the longest-standing joint venture for hydrocarbon production between a Russian and a Western European partner. The joint venture operates in three license areas in the Volgograd region over a total surface area of about 13,600 square kilometers where it is very active with surveys looking for new deposits. Volgodeminoil already produces crude oil from three fields and is preparing another field for development.
In Turkmenistan an exploration well in block 11/12 off the coast of the Caspian Sea will begin in the middle of 2008. Thus, the BASF subsidiary is continuing the exploration activities in the offshore exploration blocks in 2008. Wintershall has a 34 percent shareholding in each of the blocks and is the operator. Further exploration projects in the Caspian Sea Region are being pursued in Dagestan and Azerbaijan.
Wintershall has been active in exploration and production in Libya since 1958. The company operates eight onshore oil fields there. Wintershall also produces from the Al Jurf offshore field in the Mediterranean Sea off the Libyan coast as part of a consortium with the Libyan National Oil Corporation (NOC) and French oil producer TOTAL. Out of six exploration and appraisal wells completed in 2007 in Libya, four discovered new deposits.
The company also operates a gas conditioning facility near Jakhira which conditions the associated gas and transports the resulting gas and condensate for sale on the coast. Wintershall has already invested more than 1.3 billion U.S. dollars in Libya and drilled a total of over 120 wells.
Wintershall is the leading foreign oil producer in Libya and is also regarded as the leading company in terms of technology there. It is one of only a few companies that no longer flares the gas associated with crude oil production. Instead, it fully treats the gas making a significant contribution to reducing CO2 emissions. The central processing facilities of the Nakhla and As Sarah fields are used to process the increasing volume of oil and associated gas from the N field, which is currently under development. Following the integration of the Hamid field in December 2006, flaring has now finally ceased for good. All the associated gas is now processed instead. Wintershall has set itself the goal of ceasing the flaring of associated gas in routine production by 2012 at all production sites where crude oil is produced.
The expansion of existing onshore fields continued in 2007, and Wintershall started the development of new oil discoveries. In order to enhance recovery in the oil fields, a 142 kilometer-long pipeline network is being built in concession 97 through the Libyan desert as part of a parallel joint development phase of four fields, and will connect concessions C96 and C97. The pipeline network will be used to transport water from the deposits. The planned water injection maintains the deposit pressure of the associated fields N, P, Q and A. For this purpose a total of 22 wells, eleven of them injection wells, will be sunk by 2011. The deposit and process water from the central processing facilities in Nakhla is transported back to the water treatment facility in C96 by pipeline. When this pipeline starts operations in 2008, Wintershall will increase the disposal of deposit water from 97.3 percent to 100 percent. This will make it the first operator in Libya to fully discontinue waste disposal via open evaporation basins.
In offshore activities, once the first development phase of the Al Jurf field in the partial concession C137N in the Mediterranean has been completed, the second development phase will begin with the sinking of further production wells and two gas injectors.
Following seismic reconnaissance by air, the first seismic measurements in the 11,500-square-kilometre onshore exploration area in the Kufra Basin in Southeast Libya are scheduled for 2008. Following a successful bidding round at the end of 2006, Wintershall took over as operator with a 65 percent interest.
In Mauritania the contracts for the Ta5 and Ta6 onshore blocks were officially ratified in 2006. The geophysical surveys in this area started last year.
The Middle East
In 2007 Wintershall was awarded another exploration license in Qatar’s territorial waters with two partners. Wintershall will be the operating company. Offshore block 3 covers an area of about 1,900 square kilometers. 3D seismic surveys as well as exploration and appraisal wells are planned for 2009. Wintershall is already the operator in the adjacent offshore block, block 11. Following successful seismic surveys, two exploration wells were conducted there in 2005 and 2006 and both found hydrocarbon deposits. A successor well in block 11 to further explore the deposit is being prepared and is scheduled to start in August. In Dubai a five percent interest in an offshore concession was returned on 31 March 2007.
In Argentina, Wintershall has interests in oil and gas fields off the coast of Tierra del Fuego and in the Neuquén Basin. Both areas rank among the most promising hydrocarbon reserves in Argentina. Off the coast of Tierra del Fuego, Wintershall produces from the Carina and Aries natural gas fields together with the French company Total and PanAmerican Energy (PAE). This is the largest Argentinean offshore gas production project to date. By 2027 these two fields are expected to produce a total of 56 billion cubic meters of natural gas, 3.4 million tones of condensate and 2.4 million tones of LPG (Liquefied Petroleum Gas). Wintershall’s subsidiary Wintershall Energía has a 37.5 percent interest in this venture.
One of Wintershall’s most important projects in Argentina in 2007 was the development of the Aguada Pichana concession in the Neuquén Basin. Since the field was discovered in 1972, more than 170 wells have been sunk, 124 of which are producing natural gas. Wintershall has a 27.3 percent share in the Neuquén Basin gas field. The other partners are Total, Repsol-YPF and PAE. An offshoot of the field in the north-east is currently being developed and integrated into the main field. A well here has been producing the first gas from the field since December of last year. With the extension of the field now underway in the north-west and other exploration activities in the south-west, the project partners are aiming to develop additional reserves to secure Argentina’s gas supply. In addition, a tight gas research project is being conducted in the main Aguana Pichana field to provide information on the spreading patterns of artificially created cracks, so-called fracs. The aim of this project is to make gas from parts of the deposit with low permeability commercially recoverable.
The company is also stepping up its activities in the San Roque concession, which also lies in the Neuquén Basin, with the development of the Rincon Chico field, amongst other things. Other exploration activities are also planned for this region, as well as in the Cañadón Asfalto Basin in central Argentina. In addition, Wintershall is also involved in the Cruz del Sur pipeline project, which delivers Argentinean gas from Buenos Aires to Montevideo in Uruguay.
Outlook: oil and gas production target of 140 million barrels
In 2000, Exploration and Production was set the target of increasing oil and gas production in the first decade of the new millennium by 50 percent - in terms of production volume, the target was 120 barrels oil equivalent. However, the 2010 target will now be met sometime in 2008. Hence a new and challenging target for oil and gas production has been set: the target for oil and gas production is now approx. 140 million barrels oil equivalent by 2010.
To achieve this target the company plans to maintain its high level of investment on searching for new fields and expanding existing ones.
1 Including property, plant, and equipment and intangible assets. The large increase in intangible assets is due to the assets swap with Gazprom and the associated addition to intangible assets for the marketing contract for natural gas from the Yuzhno Russkoye gas field.
2 Discovery in this context means commercially recoverable reservoirs were established.
Wintershall is a wholly-owned subsidiary of BASF in Ludwigshafen. The company has been active in the exploration and production of crude oil and natural gas for over 75 years. Today, the company is Germany’s largest crude oil and natural gas producer.
Wintershall. Shaping the future.
More information, background reports and photographic material on the annual press event are available on the Internet at www.wintershall.com.
This release contains forward-looking statements based on current experience, estimates and projections of BASF management and currently available information. They are not guarantees of future performance, involve certain risks and uncertainties that are difficult to predict and are based upon assumptions as to future events that may not prove to be accurate. Many factors could cause the actual results, performance or achievements of BASF to be materially different from those that may be expressed or implied by such statements. We do not assume any obligation to update the forward-looking statements contained in this release.