March 2007

What's new in production

Latest word on controlling/utilizing greenhouse gases; New output abounds

Vol. 228 No. 3  

Greenhouse gases. Natural gas production is high on most everyone’s list, depending on the type. World Oil’s re-cent forecast (February 2007) recorded a return to US gas production growth. Across the globe, there are major investments in gas field development, as well as new pipeline infrastructure. Some areas, like Canada, will see a drop in gas production, even as the need grows for new resources. Oil output is up this year as well, which increases associated methane (CH4).

Natural gas is a wonderful fuel, but it carries its own environmental issues—greenhouse gases from raw release (CH4) and flaring (CO2). If anything, CH4 releases do more harm than CO2 on a same-volume basis. But, more CO2 is released than CH4, so CO2 gets the blame for creating a gaseous, warming presence in the atmosphere. However, there is good news on both fronts. There are effective CO2 uses and there is progress on associated gas flaring.

Carbon dioxide has been used for years to help produce more crude by improving oil’s miscibility in improved oil recovery (IOR) projects. Yet, not enough of it is concentrated to meet the IOR need. In fact, Kinder Morgan Energy Partners transmits over 1 Bcfd of CO2 through more than 1,200 mi of pipelines to support oilfield IOR. The company recently said it would spend almost $120 million to expand its CO2 business. It will develop a new CO2 source field and add infrastructure at the McElmo Dome Unit and the Cortez pipeline in southwest Colorado.

The Doe Canyon Deep Unit, in Dolores County, Colorado, will gain six CO2 production wells, one salt water disposal well and a 1-MMcfd CO2 compressor. The McElmo Dome Unit in Montezuma County, Colorado, will fea-ture eight CO2 production wells and two compressors to increase CO2 production to 1.28 Bcfd. A new 10-mi, 12-in. pipeline, set to run in 2008, will connect the Doe Canyon Deep Unit to the Cortez pipeline, and additional pumping stations will help move the gas.

The other bogeyman, flaring, is the burning of associated gas—produced along with oil—when it cannot be readily used. Unlike oil, associated gas is difficult to store and transport. Options for its use include local consumption, export, reinjection or flaring.

A United Nations group has worked since 2001 to reduce and eliminate gas flaring. Nigeria passed legislation some years back requiring operators to halt flaring. The program has been successful, and Nigerian President Oluse-gun Obasanjo recently said his administration has reduced gas flaring by 28% over the past seven years, the same level of reduction that was seen between 1958 and 1999. Total has said it will reduce global gas flaring 50% by 2012, having already reduced flaring 40% during the late 1990s through 2005.

Production investment. Saudi Aramco will spend up to $45.3 billion over the next four years to increase productive capacity about 30% and refining capacity almost 35%. The firm will spend $26.6 billion to grow capacity to more than 12 million bopd by the end of 2011, an increase of 2.95 million bopd. New capacity will come from further development of five fields—Khursaniyah, Shaybah, Nuayyim, Khurais and Manifa. Khursaniya will begin producing by the end of 2007. The Khurais development will go onstream by 2009, adding 1.2 million bopd.

CNOOC Ltd. has set an output target increase of just under 2% for 2007. The company plans to produce 162-170 million boe in 2007, compared with 165-168 million boe in 2006. Five new gas projects should start production this year, with more than 20 future projects planned. The firm will focus on offshore exploration, which requires $382 million, much of it going to deepwater exploration. Development project spending will grow 19% to $3.65 billion.

Alberta royalties. Provincial officials in Alberta, Canada, are reviewing their royalty structure, which could affect the production taxes paid by operators. The government has arranged for an independent panel to examine the pro-vincial tax structure for fairness, as a response to criticism, and to fulfill campaign promises from recently-elected officials. Officials hope to maintain a competitive system to attract and keep foreign investment. Operators pay 1% of gross revenues while recovering capital costs in the oil sands. Once costs are recovered, operators pay a 25% royalty on output. Royalty payments were about $2.1 billion in 2006. The panel will report its findings at the end of August.

New output. In eastern Java, Indonesia, EMP Kangean, a subsidiary of PT Energi Mega Persada Tbk began oil pro-duction from Sepanjan Island field. The field produces 3,500 bopd of 32.2° API oil from the SED-1A well, which was drilled underbalanced to maximize production. The company says that the well can produce up to 9,000 bopd.

In the North Sea, Statoil began production from its Skinfaks/Rimfaks project. The Rimfaks improved oil recovery project produced first oil as part of a multi-well subsea system that includes two wells from Skinfaks field. All wells are connected to Gullfaks South’s infrastructure, which is tied-back to the Gullfaks C platform. If developed individually, the new wells would have been marginal, but all should be online by this fall. Estimated recoverable reserves are 62 million boe.

Also in the North Sea, Maersk Oil produced first oil from the Dumbarton development in UK Blocks 15/20a and 15/20b. Dumbarton is a redevelopment of Donan field in 459 ft of water, 140 mi northeast of Aberdeen, Scotland. Maersk completed five horizontal producers and one deviated water injection well in Dumbarton last July.

In the Gulf of Thailand, Pearl Energy Ltd began producing 2,300 bopd from the Jasmine B platform in Block B 5/27. Flow began from the B2 well, with five development wells not yet onstream. This ends the first phase of a 22-well drilling program, including 16 production wells and six disposal wells.

In the Gulf of Mexico, Petrobras will start up the high-pressure Cottonwood field, in Garden Banks Block 244, in 2,198 ft of water. It produces 38.8 MMcfd and 4,000 bcpd from one well. A second well will go onstream soon, to raise output to 70.6 MMcfd. Cottonwood’s two wells are connected to a third-party platform nearly 17 mi away. WO 


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