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Vadim Kalnitskii, general director of ModulNefteGazEngineering (MNGE), talks to The Energy Year about the market of mobile facilities for early production and how the company solves common challenges for clients. MNGE provides services to the oil and gas industry such as transport, well measurement and equipment supply and leasing.

How is market demand currently developing, especially from the oil and gas industry perspective?
The market of mobile facilities for early production of oil and gas condensate wells is developing. In our opinion, the future lies with them. Basically, this market is formed around poorly explored reserves, small oil rims and new remote fields where infrastructure is still lacking. Since the share of developed fields in production is constantly replenished with new small, remote areas, the mobile early production facilities market will definitely grow in the short and medium terms. We see interest in our products from other countries as well.

What challenges do your customers face and what solutions do you bring?
Our clients extract their production from wells and need to transport it from places that lack infrastructure. Often, direct transport of this production is impossible or economically unprofitable. MNGE addresses the complete cycle of tasks, from production to transportation. Often, clients are not at all interested in how we will achieve the result. They just need oil with the desired degree of purification for transportation, always in full compliance with HSE requirements.
If the production has high gas content, we can organise the degassing process, after which we move the oil to a transport pipe or a road train.
If well products not only contain gas but are heavily diluted with water, we add additional blocks to the process and remove water to the most economically feasible level for subsequent transportation. When the customer requests that we prepare their oil to comply with commercial standards, we provide systems for cleansing it of salt and various impurities. With this task, the amount of equipment increases.

How would you assess the competition in the market?
Recently, in connection with the long economic crisis, the customer has become ever more demanding, looking for ways to reduce certain expenses. This, of course, affects our development.
There are several main players in the mobile oil treatment systems market. Some of them are larger in size due to the presence of other business profiles, while others are smaller in terms of revenue, but more narrowly specialised.

What are your competitive advantages?
MNGE works according to the models of EPC contracts, on a turnkey basis. We design and manufacture systems at our workshop in Ufa. We transport them with our equipment to the most remote and difficult-to-access places of the far northern region using, in particular, Vityaz-type snow and swamp vehicles (designed for the military-industrial complex). We then assemble and launch them using our team of specialists, and conduct subsequent operations.
Our work also involves organising catering, housing hundreds of people at remote sites and very strict compliance with stringent HSE requirements. There are few in the market who can do this. Today, we comply fully with the requirements of such companies as Gazprom Neft, Rosneft and Lukoil.

How important is innovation for your development?
Many MNGE employees were present at the very beginning of the development of mobile oil treatment plants in Russia. We are focused on this market segment to the maximum extent possible. We optimise production and look for opportunities to reduce the cost and time of equipment commissioning.
For example, in November [2019], we finished developing a new scheme for collecting data from metering devices. This will allow us to gain up to five days in the installation and commissioning of systems. Over the past two years, MNGE has seriously reduced the installation time for its mobile early production units for oil and gas condensate wells. Prior to this, the commissioning of the complex took up to 30 days, and now it is only 10-15 days. The main contributing factor was a solution for faster transfer of equipment from its transported state to an operational position.

What technical innovations have you developed over the past two years?
In recent months, we have begun to optimise costs in instrumentation – our goal is to move away from wires in the field – and now they are decreasing in size. Over these past two years, we replaced the equipment (optimised technical parameters) at our mobile oil treatment plants and adapted them for the preparation of heavy oils and oils with a high gas factor (up to 1,000 cubic metres or more per tonne). This is especially important now, since more unconventional reserves are being developed.
Over the last two years, we have also upgraded the horizontal flare unit for smokeless disposal of liquid hydrocarbons – its operation has become more stable and the range of utilised fluids has expanded.
The specialists of MNGE have developed a vertical gas separator. This allows a high degree of purification, up to 50 milligrams per cubic metre of liquid hydrocarbons in the flow range at the standard 3 million cubic metres per day.
We have developed a unified algorithm for the operation of paired technological equipment, an oil and gas separator-water separator, and a formation water sump. This allows for stable operation of the equipment in a wide range of productivity, 0-6,000 cubic metres per day in liquid with a stable output quality. The liquid has the following parameters: water content in oil of no more than 1%, oil content in water of no more than 40 milligrams per cubic metre, and content of mechanical impurities in water of no more than 40 milligrams per cubic metre.
We are currently creating a system to accelerate our implementation of rationalisation proposals and electronic document management, and to increase our number of servers.

What were the key figures of MNGE for 2018 and 2019?
Customers notice our work. The number of orders for 2018 and 2019 doubled, as did the company’s revenue, and new products accounted for about 20% of the company’s revenue, which in our opinion is a very decent indicator.
For 2018 and 2019, we have increased our staff by 120 people. We now have 209 specialists employed. We are investing seriously in training our staff – with more than RUB 2 million [USD 32,450] per year. Great attention is also paid to HSE.
In general, recent years can be described as a period during which we took a strong position as a contractor with a special approach to security and HSE as a whole. We have repeatedly received positive feedback from customers.

What are your development plans in Russia to increase the company’s share in the oil and gas market?
We have plans to expand production by developing new types of products. For example, in the near future, we will develop production of more environmentally friendly enclosed flare units.
As for longer-term plans, we will develop innovative technologies in the field of hydrocarbons treatment and transport, allowing us to combine several technological processes within the same apparatus and reduce the metal consumption of structures as well as the number of staff.
We also want to invest in new equipment and increase the overall number of mobile systems for oil and gas treatment from two to 10 units. More often our equipment is subsequently sold, but now we feel the demand for a full-service model in which the systems will remain on our balance sheet.

How do you finance your projects?
Not every bank understands how our equipment is priced. Today we have a good partner in Promsvyazbank. We have been co-operating with this bank for many years. They fully finance our projects at Gazprom Neft.
As for the support from the government, we are actively co-operating with the Chamber of Commerce and Industry of the Republic of Bashkortostan. They provide serious support, but not financially. They help and promote us a lot.

What are the main successes of the company abroad, and what are your plans for international expansion?
In general, domestic solutions used in mobile oil treatment plants are not inferior to foreign counterparts, and they are less expensive. But it is not easy to establish deliveries abroad. Additional certification and logistics costs are required. Nevertheless, the products of MNGE are ready to withstand international competition and in the conditions of a growing market we will certainly be actively promoting our products outside Russia.
We just formed a team this year to launch international activities. In the medium term we plan to have at least 30% of sales be abroad. In November, we visited ADIPEC, the world’s largest oil and gas exhibition. We saw interest in our equipment from the Middle East, Africa and Latin America. Now we have an idea of ​​what we want to come with next year and how we will position ourselves.
Our team is working on determining which countries to enter first. To do so, we conduct market analysis and establish contacts at the level of export support centres.

What is your medium- and long-term vision for the development of the company?
One of our priorities is to increase the volume and types of services that allow subsoil users to receive a full range of work on the basis of the outsourcing model, from hydrocarbons production to processing and obtaining finished products, with maximum added value. I would also like to create my own logistics centre.

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