…And, while cutting the well count by half.
Thane Gustafson’s newest book on the politics of Russian business focuses on how Soviet oil and gas assets were distributed in the 1990s, who won them and how their ownership has evolved in the past two decades—a culmination of Gustafson’s research, relationships and interviews beginning in the 1980s.
Of course, the fate of Russian oil upstart Mikhail Khodorkovsky is well known, particularly within international human-rights courts and councils.
Lesser known is the role of Joe Mach, a veteran Schlumberger well specialist and University of Tulsa petroleum-engineering graduate, who was hired by Khodorkovsky’s Yukos in early 1999 to turn around its declining oil fields. Mach’s is one of the many tales Gustafson shares in his new Wheel of Fortune: The Battle for Oil and Power in Russia .
Gustafson writes, “Joe Mach enjoyed playing the part of the tough, rough-spoken Tulsa petroleum engineer, complete with cowboy boots and cigar. His language was so colorful, it was said he spelled ‘oil’ as a four-letter word.” By 1999, Mach’s career had already spanned several decades.
Khodorkovsky, who was still in his 30s at the time, meanwhile, “was a chemical engineer by first training and knew nothing of wells and reservoirs…and the logic of (Mach’s) nodal analysis appealed to him immediately….”
Mach went to work, training Yukos engineers. Mach tells Gustafson, “These people had one job: to look at each well, calculate its performance gap and sort them in descending order. The well with the biggest gap went on top and we worked on that well.”
Gustafson writes, “For Joe Mach, West Siberia was an oilman’s dream. ‘Siberia is the simplest environment in the world: It’s one big beachfront,’ he would tell visitors. ‘The Ob’ River is flowing today right over where it was 130 million years ago. It’s the same place. You can see it on seismic; you can see it on the logs. The West Siberian landscape has not changed in 130 million years.’
“The result was a uniquely uniform and prolific environment for oil. ‘You can go a thousand kilometers; it’s the same g[------]ed sand. All across, it’s 18% porosity. The water saturation is very consistent. The other no-brainer is [that] the reservoir pressure is 4,500 pounds and the bubble point’s 1,800. In other words, it’s pure oil. Man, it doesn’t get any simpler than that.’”
Relatively little of the oil the rocks contained had been produced yet. “Pumps, fracs and floods: These became Mach’s mantra over the next five years. But he might as well have said ‘shibboleths, bad practice and screw-ups’ because making changes in these three basic techniques ran straight up against established ways, beliefs and rules.
“From the moment Mach arrived at Yukos, the fight was on, both inside the company and out, in Moscow and in the field.”
Russian pumps at the time were old school in terms of power. Gustafson cites the Russian newspaper Moskovsky Komsomolets ’ interview with Khodorkovsky in 2002. “When Joe first arrived, our guys said, ‘We know everything better