INTERVIEW: Russia’s geological exploration may fall 5% in 2017

MOSCOW, Nov 20 (PRIME) -- The amount of geological exploration works in Russia may stay flat on the year in 2017, but may also contract by no more than 5%, Roman Panov, CEO of state geological exploration company Rosgeo, told PRIME in an interview published on Monday.

“We estimate the volume of the geological exploration market in Russia in 2017 at the level of 2016. Even if there is contraction, it will not be critical, it will be within 5%, as the companies have not implemented all the plans that they planned to do. Some works are at their finishing stage,” he said.

“Our companies have learned to live in the current conditions of the market, so I expect no significant further contraction from either the state order, or from subsoil using companies.”

He added that geological exploration and drilling will start growing from 2018 as companies have delayed obligations and will need to prepare and launch new facilities.

The resource base is starting to contract. “Our companies have a rather high safety margin, but they will have to return geological exploration to the pre-crisis level anyway to have a planning horizon of at least 10 years in advance. Geological exploration and servicing will be in higher demand than today,” he said.

Panov also said that calculations of Rosgeo show investment of Russian companies in geological exploration rising 2–2.2% per year starting from 2017–2018. “We see the possibility of a consistent restoration of internal demand for geological exploration in a range of five to six years,” he said.

In 2016, financing of geological exploration in Russia exceeded 320 billion rubles.

Rosgeo and Far Eastern shipyard Zvezda are discussing possible orders for construction of ships for 2D and 3D seismic exploration.

“We’ve submitted our suggestions and our needs to them,” Panov said. “They are now forming a future production plan assuming priorities from the point of view of thr size of ships and of generic solutions for production of these ships. We are working on that.”

The company also expects to sign contracts for works in Morocco by mid-2018. “We are working with Morocco on developing of the country’s metallogenic map in the first place, on restoration of geological information about solid minerals. There are very interesting resources there, including gold and non-ferrous metals,” he said.

“The colleagues and we have already switched to substantive discussions from the point of switching to contract relations. We expect to finish these works and to switch to practical implementation by the middle of next year.”

But the company does not plan to expand its geography to other countries in 2018 after it expanded cooperation to several countries including Iran, Morocco, and Saudi Arabia in 2017.

“We are collecting an order portfolio for the next five to seven years. Russian geologists traditionally do a lot of work abroad, at markets of the Middle East, Africa, and partially in Southeast Asia. Today the regions are in our focus,” he said.

He added the company sees no reason to expand its presence abroad as it will need more investment and technologies.

The Western sanctions provide no mid-term risk for Rosgeo.

“These (sanctions) had an obvious impact on our clients and on the amount of geological exploration. We felt them from the point of view of the price of instruments, which rose for our financial partners. But I can’t say that we felt a dire technological dependence of serious restrictions connected to the inability to do this or that work. I see no such risks in the mid-term,” Panov said.

The key factor for imports substitution in geological exploration is development of national software. “The structure of company management is changing rapidly, and it is connected to digitalization, so issues of large data pools management and of operations automatization become key. All efforts connected with imports substitution should be focused here,” he said.

He added that Rosgeo uses 95% of foreign software.

“There are certain risks connected to the level of dependence on these products. So we have to find acceptable solutions here. It is obvious that we are unable to change instantly, but we have to move in this direction,” he said.

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