Oil and Gas Industries
Bill Pyke
Hilbre Consulting Limited,
October 2012
Delivered to:
Oil and Gas Development and Production
1
Outline
• Offshore Developments
• Producing oil and gas wells and surface facilities
• Transportation; pipelines and tankers
• The cost of production
2
Exploration & Production Sequence
$m.
Application & Award of Permit - Licencing
Exploration – Prospect Identification
1-3
1
Exploration – Exploration Drilling
1-20
1+
2-15+
1-3
1001000’s
1-4
Appraisal of Discovery - reduce the uncertainties
Development – FEED studies design & build
surface facilities, devt drilling
Production
3
0-10+
Yrs
0+
10+
Funds flow in Upstream Operations
Exploration
Development
Gross
Revenues
Tax
& Royalty
Allowances
Operating
4
Net
Revenue
The Progress from Discovery to Development
• The exploration phase involves drilling of discovery wells.
• The additional wells are referred to as appraisal or delineation wells.
They are required to provide more information on the size, shape and
petroleum volumes in the field.
• On declaration of a commercial discovery, a plan of development is put
in place. The type of development depends costs, environmental
conditions and prevailing legislation.
5
Drilling in Offshore Oil and Gas Fields
• The early discoveries of oilfields were made in The United States and
Baku in the Caspian region in the later parts of the 19th century. These
operations entailed the drilling of a large number of closely-spaced
wells.
• In the earlier part of the twentieth century the oilfields in Oklahoma and
West Texas were developed by so-called pattern drilling in which the
producing wells were sited on an acre spacing grid.
• The evolution of improved reservoir management techniques and
improving technology led to fewer wells being required. These wells
were drilled from centralised surface gathering facilities. The technique
of deviating wells enabled drillers to ‘steer’ their wells to designated
subsurface target locations.
6
Drilling Technology 1925
7
Drilling in Oklahoma in the 1920s
7
Offshore Development Options
8
Source: Natural History Museum /UKOOA
Deep Water Fixed Steel Jackets
Deepwater Jackets similar to the one
above
have been used to develop reserves in
water depths in the range of 250350metres in the Gulf of Mexico
9
North Sea Oil Production Platform
Drilling Rig
Helideck
Accommodation
Modules
Flare Boom
Oil risers
10
Production Wells:
Development With Deviated Drilling Programme
11
Source: Britain’s Offshore Oil and Gas, UKOOA/ Natural History Museum(1997)
A generic North Sea field area overlain on a central
London map
12
Source: Britain’s Offshore Oil and Gas, UKOOA/ Natural History Museum(1997)
Floating Systems
13
Source: Total
Onshore Production
14
Oil & Gas Recovery
Concepts
•
Oil/Gas occupies pore spaces in sedimentary rock
• Extraction leads to voidage replacement by water
(below the oil horizon) in the oilfield or gas (above the
oil horizon) in the oilfield
• Natural oilfield recoveries are referred to as primary
recovery and are dependent on the energy and
physical conditions in the oilfield. Recoveries range
from 10-35%.
• Water and/or gas injection can increase recoveries
and known as secondary recovery
• Natural gas recoveries are commonly much higher
than oil; 70-85%
15
Recovery
Recovery influenced by:•
Natural reservoir conditions: porosity and permeability
•
Nature of the petroleum fluids: oil, gas, NGLs and condensate
•
Prevalent economic conditions: costs and prices
•
Location of oil/gas field
16
Recovery (2)- Global Figures
•
Oil resource/endowment 11 trillion barrels (11x1012 barrels)
•
Proven Reserves 1.4 trillion barrels (1.4x 1012 barrels)
•
Historic Global Recovery factor 11%, 89% still in the ground!
•
Current global-averaged field recovery factor 22%
•
Improved/enhanced recovery could get to 70% recovery
•
Each 1% improvement yields 100billion barrels which is
5 years global supply
17
Behaviour of Reservoir Fluids
in Production
•
Oil and Gas fields in production lead to changes in pressures, volumes
and fluid content of the period of production
•
Many fields have good natural recoveries based on high original
pressures in the reservoir. A good aquifer provides support
•
Recovery of petroleum volumes (reserves) can often be enhanced
18
October 2012
Primary Recovery
19
The Natural Drive Mechanisms for
Recovery (1)
Bottom and Edge Water Drive
The aquifer system underlying the hydrocarbon accumulation
provides the energy for driving hydrocarbons to the well bore.
Combination Drive
Both the aquifer and free gas both provide the energy to drive
hydrocarbons to the well bore.
Edge drive
20
Bottom drive
The Natural Drive Mechanisms for
Recovery (II)
Gas Cap Drive
This type of Reservoir has no aquifer system. It consists of a
saturated oil with a gas cap. A free gas phase is in equilibrium
with the oil Acting like a piston the expanding gas cap drives
down into the Reservoir sustaining the production rates of the
oil wells.
Gas Cap Drive
21
Porosity and Permeability
22
Reservoir Pressure Trends for
Reservoirs Under Various Drives
Reservoir Pressure - % of Original
100
80
Water Drive
60
40
Gas Cap Drive
20
Dissolved
Gas Drive
0
20
23
40
Oil Production - % of Original Oil-in-Place
60
October 2012
Secondary Recovery
24
Secondary Recovery
25
Source: Technip
Example: Ghawar Oilfield, Saudi Arabia
26
Source: Saudi Aramco
Improvements with Secondary Recovery
Handil Oilfield, Indonesia
27
BPMigas, 2006
Recovery Targets for the
Major North Sea Operators
60
Percentage Recovery
50
40
57%
64%
45%
38%
30
20
10
0
28
1978
1995
2005
2010
Historically 38% of in place volumes was considered a typical North Sea recovery factor.
With modern technology and cost efficient methods the recovery factors can approach, and even exceed, 60%.
October 2012
Enhanced Recovery
29
Enhanced Recovery (EOR)
Additional energy is often needed to enhance the production rate and
ultimate recovery of reserves.
Some Examples;
Miscible Flood
CO2 Miscible Flood
WAG
Foam+CO2
Thermal
Steam Flood
Fire Flood
Injection
Chemical Injection
Fracturing
30
Thermal Recovery -Steam Injection
• Steam reduces viscosity of heavy
oil and improves recovery
• Used in many fields in onshore
California, Indonesia
31
Steam Injection, Indonesia
32
BPMigas, 2006
Enhancing Recovery- “Fracking”
33
Production Profiles
34
Reserves
and Production Profiles
• Reserves are a stock (inventory) asset
• Production is flow and therefore a revenue stream
• Translating reserves to production involves costscapital, operating and transport
• Reserves = Production rate x time
• Ultimate reserves are a function of:• Prices
• Costs
• Field characteristics and performance
• Type of petroleum
• Location
35
The Recovery Factor and the
Production Profile
1) Physical Conditions
- Drive System
- Reservoir Quality
- Enhanced Recovery
- Reservoir Compartmentation
- New Reserves
2) Commercial/Financial Aspects
- Market
- Transport
- Price
- Operating Cost
3) Environmental Aspects
- Restrictions on production rate
- Flaring?
36
The Production Decline Curve Method
From existing history the estimator will use a methodology which
incorporates producing wells, gas lift installation, workovers,
effect of the reservoir drive mechanism.
Four types of decline curve generally exist:
- Linear
- Exponential
- Hyperbolic
- Harmonic
Most production rate/time graphs have been found to exhibit exponential or
hyperbolic decline.
37
Production Profile Options
Rapid
Production
Plateau Rate
Oilfield Profile
Small Gasfield Profile
38
Time
Baseline Production Profile
Baseline Production Profile- Marginal Field
Field Statistics
8000
Estimated Field Reserves
17.2 million barrels
Reservoir
Agbada Sands
Depth to Prodn.
1500m.
Recovery Rate
41%
Peak Oil Rate
7,410bopd
Prodn Decline
15% / year
Wells
3 producers; 2 injectors
Surface Plant Mods
Compressor, separation train
Cost Reference Year
2003
Project start year
2003
Planned Field Life
13
Decomissioning Year
2018
7000
Production Rate Barrels/day
6000
5000
4000
3000
2000
1000
0
2005
39
2006
2007
2008
2009
2010
2011
Year
2012
2013
2014
2015
2016
2017
Cash Flow Profile
40
30
Revenue $,mm
20
10
0
2003
2004
2005
2006
2007
2008
2009
2010
2011
-10
-20
Years
40
2012
2013
2014
2015
2016
2017
2018
Economic Cut-off Production Rates For
Cessation of Production
Production Rate/Day Log Scale
100000
10000
UKCS FPSO 6000 bopd
1000
Onshore Field
Eastern England
100 bopd
Stripper
Well,
Oklahoma
100
10
2.74 yrs
13.65 yrs
21.91 yrs
0
1000
41
2000
3000
4000
5000
Days in Production
6000
7000
8000
Categories of Supply Cost
(Global Average in Brackets)
• Finding- Exploration: lease costs, exploration &
appraisal wells seismic, overheads ($3-5/bbl)
• Developing- production wells, surface plant, export pipelines ($17/bbl)
• Production-lifting and related operating costs ($8/bbl)
• Transportation and Tariff- export pipeline,
shipping costs ($2/bbl)
• Abandonment: decommissioning costs at the end of production ($2/bbl)
42
Global Benchmarks
for Supply Costs
12
10
8
Finding
Develop
6
Opex
4
T&T
2
0
43
$/boe
Abando
n
Pipelines
44
Forties Pipeline System U.K. North Sea
Source: BP
45
European Oil and Products Pipeline Network
46
46
BTC Pipeline
47
48
Oil Tankers
49
Marine Tankers and Worldscale Rates
• The world tanker fleet had 4,186 vessels with a carrying capacity of
358,800 dwt.
• 84% of the tanker fleet were owned by independent tanker companies.
• The average age of the fleet was 11.9 years.
• World Scale Freight Index used as a starting point for negotiating costs
• World scale 100's, reflect application of tanker operating cost
assumption to the ports and distance/steaming time on route. These
“flat rates” appear in US dollars per ton of cargo.
• The freight for a given ship and voyage is normally expressed in a
percentage of the published rate and is supposed to reflect the freight
market demand at the time of contract
50
51
Source, McQuillan Services, New York, March 2008
Comparative Marine Tanker Transportation Costs
Source
Destination
Volume
Barrels
Worldscale
Rate
Freight
Cost
$/barrel
52
West Africa
U.S. Gulf of
Mexico
400,000
74
$2.27
West Africa
Northern
Europe
910,000
74
$1.61
Arabian
Gulf
Northern
Europe
1,900,000
36
$1.51
Arabian
Gulf
Japan
1,750,000
48
$1.60
Source: Drewry Shipping Consultants, February 2009