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Company in Mass Media

How Rus’-Oil manages to compete with major players in the oil market


“Our competitive advantage is the absence of Soviet legacy”, Rus’-Oil speakers say, suggesting awkwardness of the big oil corporations. The oil company appeared just five years ago, yet it is already challenging the industry giants. Its managers justify these ambitions by abandoning “traditional” business cases and tout the advantages of this approach. But what exactly is Rus’-Oil, after all?

Rus’-Oil started development of Mayorskoye oil field back when this part of Orenburg subsoil was no longer in service, discarded as depleted land. Nevertheless, Rus’-Oil specialists did some additional exploration, identified the reserves and figured out Mayorskoye can still produce oil for the country’s needs.

Sergey Podlisetsky, current Rus’-Oil General Director, purchased the oil field in 2011 with the money borrowed from a famous businessman Alexey Hotin. The asset was purchased at the market value. It was only after this step that Rus’-Oil itself appeared, uniting several companies engaged in exploration and drilling.

The new company made its first step by purchasing expensive drilling equipment. Usually small oil companies prefer finding contractors for this job, but Podlisetsky decided to go his own way. Rus’-Oil started drilling and production, in addition to designing its own oil refinery unit. The company managed to raise monthly output to 16,000 tons.

However, it was impossible to effectively develop Mayorskoye forever. So the young whippersnapper started searching for new deposits. Soon Rus’-Oil got control over Dulisminskoye deposit, by acquiring its operator from Sberbank for more than half a million dollars. The same algorithm was used: additional exploration, drilling optimization, production intensification.

The company started with a detailed analysis of subsoil structure. A drilling schedule was developed, taking into account penetration speed for different strata. Drilling support group was also established, tasked with preparing a high-quality well development project.

The operation group took over flowline monitoring: how the product is transported, where excess gas is formed, and where water freezes. The company also reviewed old wells and adjusted the progress of works respectively.

Podlisetsky went his own way. Rus’-Oil started exploration, drilling and production on its own. When examining reserves and performing additional exploration, Rus’-Oil is assisted by two companies using different methods. Basically speaking, Rus’-Oil receives information in 3D format. The two sets of data complement each other and help find reserves that had not been discovered before. “While doing the drilling and exploration, we found a new oil-bearing formation – Ust-Kut horizon, which we are developing now”, Rus’-Oil reported.

In Autumn 2016, the company doubled its C1 reserves to 42 million tons, as confirmed by DeGolyer and MacNaughton. In the last three years, production at Dulisminskoye deposit nearly doubled: from 832,000 tons in 2013 to 1.5 million tons in the current year. By 2018 the company plans to increase production to 2.5 million tons.

However, despite the success with Dulisminskoye back in 2013, investors were in no hurry to line up in front of Podlisetsky’s office. The company had to start on its own, finding small spots. First they took control over “Razvitie Sankt-Peterburga”. Thanks to growing reputation and Alexey Hotin’s support, the company was able to participate in auctions for oil properties. This is how Rus’-Oil got hold of Gustorechenskoye and Travyanoye deposits.

These spots had their own specifics, too – so called green-field location, a hard-to-reach place where not just the well – the entire infrastructure had to be built from the ground up. Specialists know you have to be very patient with green-field sites – going from development to large-scale production usually takes up to five years. Rus’-Oil did it in three, thanks to a know-how: instead of building traditional roads, which require a lot of time and money, the company used pontoons – floating slabs that were used to deliver equipment to the site. The same slabs were used to line up the surface for the drilling rig, warehouses and temporary housing.

Oil industry spends 7-8 million rubles per kilometer, when building roads. Rus’-Oil invested in pontoons once and is now using them at all its sites, with serious savings. While traditional approach allows activity only in winter, the slabs allow working at summer off-road season.

By the way, the 150-km pipeline connecting Gustorechenskoye and Multanovskoye deposits was also built in summer, while the rest of the oil industry was on vacation. This alone gave the company a six-month head start.

Now the deposits produce 400,000 tons a year. DeGolyer and MacNaughton estimated Gustorechenskoye reserves in 2016 at 55 million tons.

Company’s entry to Yakutia also paid off. ALROSA diamond developers were burdened by Irelyakhneft in Mirny. The main problem was that the company, just like the entire region, was cut off of mainland Russia, with all its markets. To further complicate the situation, production was only possible in summer. This seasonal factor alone was enough to repel any prospective buyer.

Rus’-Oil specialists studied the structure of Irelyakhskoye and found out that local oil had one useful property: it didn’t freeze even at –60 degrees Celsius. This meant the oil produced in the warm time of the year could wait for the buyers without losing its qualities in Yakutia’s frost, and even more importantly, it could be used by the local boiler houses all around the year.

Rus’-Oil signed contracts with local utility providers, becoming part of the winter supply scheme. Next year, Irelyakhneft will start exporting oil via Eastern Siberia – Pacific Ocean pipeline. The company claims it will be producing 500,000 tons by 2018.

Rus’-Oil geography is already impressive. Mayorskoye oil field in Orenburg Oblast, Dulisminskoye in Irkutsk Oblast, Gustorechenskoye, Travyanoye and Multanovskoye in Yugra, and Irelyakhskoye in Yakutia. 

Recently Rus’-Oil also acquired Polyarnoye Siyanie deposit in Nenets Autonomous Okrug from ConocoPhilips and Rosneft, tentatively for 150 million dollars. Experts say this is not the most convenient area for development of oil production. Nevertheless, Rus’-Oil has reviewed seismic survey data and declares it will increase production from the current 300,000 tons to 400-450 thousand tons as soon as 2017. Some analysts say this is not feasible.

Feasible or not, the company produced 3.4 million tons in 2015 and expects to extract over 4 million tons by the end of 2016. This kind of performance is highly unlikely of an amateur. And only time will tell whether Sergey Podlisetsky’s company will be able to compete with the leaders in oil production industry.