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Getting 'small pools' into production

Friday, September 8, 2017

What is the best way to get 'small pools' - discovered offshore reservoirs, so far deemed uneconomic - into production? A conference session at this year's Subsea Expo event in Aberdeen explored in depth.

The Aberdeen Subsea Expo event in February held a full day discussion about how to get 'small pools' into production. Small pools were described as 'discovered hydrocarbons with the wrong development cost', or 'unsanctioned discoveries', or just 'these damnable things.'

Despite being a subsea conference, most of the discussion was not actually about subsea. The topic of 'small pools' brings together every discipline the oil and gas industry has - subsurface, drilling, field development and operations - since all are needed in order to drill and produce a small reservoir viably. Although perhaps the subsea industry sees that it has to most to gain from putting them in development.

Most of the UK Continental Shelf 'small pools' discovered so far are in the Central North Sea, with a seabed which is well understood, and depths which can be dived to, we heard at the conference. So they should be relatively straightforward to put into production.

To understand small pools, consider that it is the way of the world that more resources can be found in small accumulations than big ones. Consider gold - gold nuggets have been found very rarely, sometimes people find small flecks, most of the gold mining is for very small gold particles, and there is a bigger volume of gold than all the gold ever discovered in the oceans, but in molecular size volumes.

So we can say that any given reservoir is far more likely to be small than big.

Many oil and gas projects start looking like reasonable reservoirs, but end up as 'small pools' once more studies have been done on them, said Mike Tholen, upstream policy manager with Oil and Gas UK.

'Wherever you look you find more of [these] things, there's lots of them out there,' Mr Tholen said.

One oil company person once said, if it was viable to drill 5m barrel reservoirs, they could have a job forever.

So the business case comes down to whether companies can cut the costs of getting small pools into production - which may come largely to the speed they can be brought into production.

Analysis shows that any reservoir with under 10m barrels will be 'hard work'. Although if costs can be reduced by 25 per cent, then 9m barrels become viable, he said.

These reservoirs typically have a very short half-life (time for production rate to be halved) of 3-4 years, he said.

All of the known reservoirs must have something difficult about them, otherwise they would have been developed by now.

Over the past 40 years, about 5.5bn boe of small pools have been developed, but there are 3.2bn boe not yet developed.

The economics need to look at the development costs and the operations costs.

One rule of thumb is that the 'unit technical cost' (the sum of the capital costs and operating costs divided by the number of barrels produced from a project) should be under a third of the prevailing oil price.

So with an oil price of $60, the unit technical cost has to be around $20. 'Unless we get that right we'll miss the opportunities,' he said.

The capital cost needs to be about $10 a barrel. So rather than expensive fixed platforms, it might include subsea and floating solutions. The decommissioning costs could be lower because some of the equipment can be moved around from one reservoir to another.

If the technical cost for the total of drilling, completions, and plugging / abandonment is under $25 a barrel, 'that's a business,' he said.

The economics for small pools often don't show up the risk - if something goes wrong with the drilling, or the reservoir is not as expected, the whole project can fail. 'Normal economics don't apply to small pools,' he said. 'They have to be lower risk or higher value.'

And if wells can be built for under $10m that would be a great help, he said.

Carlo Procaccini, OGA

Carlo Procaccini, head of technology with the UK's Oil and Gas Authority (OGA), presented OGA's analysis, showing that there are about 350 discoveries adding up to 3.4bn boe which are 'technically recoverable' and currently not being pursued.

Of these, 70 per cent are small (under 10m barrels), 150 of them are unlicensed. The other 200 are shared between 50 different operators.

Most of these discoveries are in 'tie-back' distance, which means they are close enough to existing offshore platforms and pipelines to connect them together.

To put the 3.4bn boe figure in perspective, consider that total production in 2016 was 582 million boe. Total production to date in the North Sea is 43 bn boe, and there is a further 6.3bn boe of fields currently in production or under development.

So if it was possible to get all of the 3.4bn boe of small pools into production at the same time, North Sea production would rise by 54 per cent.

Meanwhile, there is a time urgency to get small pools into production because there is an increase in cessation of production of platforms (leading to decommissioning) and a decline in project activity, he said.

Of course, there is a reason why each of them has not been seen to be economic to produce to date, but it isn't always the same reason. Some of them have heavy oil, and others are in tight reservoirs. There are 'various degrees of technical challenges,' he said.

OGA is trying to work out how clustering might work, for example one operator might be interested in specialising in high pressure, high temperature wells, and drilling a cluster of HPHT small pools, if they were close together, he said.

Some are so close to existing platforms (with drilling rigs) that they could be accessed by drilling from the existing structure.

It is important for the industry to look at ways to reduce development and operating costs, including new drilling designs, or apply standards. Mr Procaccini thinks there could be savings of 15 to 28 per cent on some developments.

The 30th license round, coming up this year, will include 150 relinquished blocks (blocks which someone previously acquired, but are now made available because the operator did not build on them), he said.

Eric Marsden, OGA

Eric Marsden, area manager for the Southern North Sea and East Irish Sea (EIS) at the Oil and Gas Authority, shared some ideas to make small pools more viable.

Many of them have technical challenges - tight gas, poor rock quality, or off spec gas, which needs to be blended in order to access gas markets.

But perhaps an oil company could specialise in small pools of a certain type, and in doing so learn how to better develop them. It could get economies of scale by developing several at the same time, processing the fluids through the same equipment.

OGA is using some of the data at its disposal to try to work out ways that the small pools could be viably developed. It can see the production profiles, and the capital, operational and decommissioning costs. 'We can aggregate information and create insights,' he said.

'We're trying to kick-start collaborative, co-ordinated developments,' he said. 'We are commissioning our own studies - to understand potential of those areas. We have come up with a number of development concepts.'

Sometimes, 'there are a number of discoveries in the same geographical area which are not moving,' he said. The operator says, 'we're struggling with gas price, can you extend the license 18 months,' and it slips.'

Meanwhile the infrastructure is under-utilised and aging.

'This stuff doesn't happen on its own,' he said. It's a role we take very seriously - and working hand in hand with industry.'

If necessary, OGA can put pressure on companies to develop a small pool in one of their blocks, or give it to another operator.

Or if a small pool cannot be put in development because the owner of neighbouring infrastructure will not allow it to be connected, 'we call the infrastructure owner,' he said.

'We don't have that much time to get stuff moving. There's every drive to move the ball forward.'

Graham Whitehead

Graham Whitehead, Satellite Developments Manager at EnQuest and participant in the 'small pools' panel of the UK's Technology Leadership Board, said 'there is a sense of 'something good here but nobody knows what is about. It's complex but not as complex as it appears.'

Last year, industry people said that there should be a better way to categorise small pools and put them in a list. It was hard to get information due to commercial confidentiality. But OGA took the task on and sorted out the data, of who owns what. (A report is online at http://bit.ly/OGAsmallpool)

OGA used the first half of 2016 to sort out the data and the second half analysing it, he said.

With this data, OGA can push companies to come up with plans for their licenses, and develop data about reasons that licenses aren't being developed.

Another aspect is 'engaging and innovating the supply chain,' he said. 'You've got to know there's a prize there.'

The Technology Leadership Board has identified 5 key 'pillars' for getting small pools in production, as cluster identification, efficiency measures, adopting existing technologies, adapting and developing existing technologies and improving technology impact. 'No one is more important than another,' he said.

Key technologies can be a more portable FPSO, subsea standardisation, hot tapping technologies, and getting better access to infrastructure.

Gordon Drummond

One problem is that the challenge is not particularly big to any operator - so none of them have an incentive to really tackle it. 'You don't have anyone with enough 'skin' to make this stuff happen,' said Gordon Drummond, ?Project Director at National Subsea Research Initiative.

However it is in the national interest (and the government interest). 'We need OGA to pull all this stuff together,' he said.

The challenges are not usually about closeness to infrastructure or the size of the field, it is other technical challenges.

One problem is fluid co-mingling, if the fluids from the small pool can't be mixed with other fluids for some reason. Some fields have tight gas, heavy oil, high pressure / temperature.

Many of the small pools were last surveyed with seismic in the 1970s, and a new survey would show the subsurface in better definition.

Chris Pearson, OGTC

The Oil and Gas Technology Centre (OGTC) in Aberdeen has appointed Chris Pearson in the role of 'solution centre manager, small pools'.

OGTC has held a 'hackathon' which about 60 companies attended, looking at what technology might help make small pools more viable. The results included better hot taps, better gas handing and replacing umbilicals, Mr Pearson said.

Hot tap technologies which make it easier to connect a subsea pipeline with another live subsea pipeline. Making hot taps can take a long time, and a lot of vessel days.

There is an interest in better ways to handle surplus gas - with lots of concerns about flaring it offshore. Another interest area is reducing the need for more umbilicals (communications cables).

The well construction (drilling and completions) can take a large amount of costs, and can mess up the whole project economics if the reservoir proves to be difficult or drilling goes over budget, Mr Pearson said.

The big question is how all the technology can be fit together so it makes sense to produce a small pool.

OGA and OGTC are doing work to map out where the pools are, see if they can be put into clusters, and work out what technology is applicable where.

Mr Pearson is interested in the idea of generating hydrogen offshore - perhaps by 'reforming' gas into hydrogen and CO2, sequestering the CO2 in the subsurface, and sending hydrogen to shore to be used as a zero carbon fuel.

Neil McCullough, Enquest

Neil McCullough, president North Sea with Enquest, said that one way that the cost of small pools could be reduced is if oil companies show more willingness to adapt the production strategies to what would be easiest for suppliers.

This essentially means an attitude of 'I put my oilfield under your equipment", rather than 'You tailor your equipment to my oilfield,' he said.

Oil companies companies should also be tougher on engineers who always want to have more, he said. Mr McCullough relates to this personally - as a cyclist, he is always trying to persuade his wife that he needs one more bike, he said. But oil companies need to push back against these instincts, asking people to use what is available rather than go for bespoke solutions.

This means that a project can come onstream after a year, instead of 3 years, meaning a lot of benefit to company cash flow, he said.

Perhaps a better name for small pool could be 'discovered hydrocarbons with the wrong development cost,' Mr McCullough said.

One of the biggest barriers to reducing costs is drilling, and many drilling costs remain something of a mystery, he said. 'We've been using the same rigs for 25 years. The sensors have been upgraded. But the drilling itself is taking about twice as long and four times as much [money] to deliver a well. Total costs have risen from $13m to $30m for an offshore well.'

The drilling speed through rock is 'pretty quick', the mystery is more what takes up the time and cost after that, he said.

It ought to be possible to reduce this waste (with unproductive drilling time) by taking together all of the data and analysing it properly, he said.

Colette Cohen

Colette Cohen, CEO of the Oil and Gas Technology Centre (and formerly SVP UK & NL with Centrica), said that behaviour change could be a bigger challenge than technology development. 'We have brilliant technology, we have to change behaviour,' she said. 'We're so scared of [getting away from] what we already know and get comfortable with.

The efforts to develop 'small pools' look in some ways similar to the efforts to get unconventional oil and gas working in the US - however there is a big difference, in that the learning curve for unconventional could be much faster.

Colette Cohen said she was working in the US on unconventional oil and gas in 2008. 'There was a much more rapid learning curve,' she said. It was an environment of being able to test something new every day.

However what unconventional in the US in 2008 have in common with small pools in Aberdeen now, is perhaps a level of desperation, she said.

At the time, the lower 48 US states were about to start importing gas, which they hadn't done before.



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