ASPO WORKSHOP UPPSALA : ASPO WORKSHOP UPPSALA Technology and Frontier Areas -
Can they save the USA?
Jeremy Gilbert
Natural Bias : Natural Bias All of us interpret data differently, according to our experience, background and perception
A geologist is trained to think differently from an engineer or an economist
Basis for my own bias : Basis for my own bias Degree in Mathematics
20 years of reservoir engineering worldwide with BP, then many years of general management
After working as the company’s Chief Petroleum Engineer I spent the final years of my career in Alaska
Evidence : Evidence As every policeman knows, witnesses are likely to describe the same incident in quite different ways
Geologists are generally optimists
Their challenge: find oil against the evidence and despite possible earlier failures
Engineers are naturally cautious
They must develop the geologists’ finds, match investment to expected performance
New technology as a panacea : New technology as a panacea Until a decade or two ago US was source of virtually all new production technology
To determine how technology can influence recovery efficiency where better to look than in the US itself and at a field whose size has meant that funding for new technology has generally been available
Alaska - “The Last Frontier” : Alaska - “The Last Frontier” Not just on auto license plates!
Few parts of US remain relatively explored. Alaska is generally accepted as the only area where truly significant volumes of yet-to-find oil may exist
….. but do they?
The path to Prudhoe … : The path to Prudhoe …
BP has always been recognized as a worldclass explorer, beginning with the first Middle East discovery at MiS in 1908
BP lost core supply source in Iran in 1951 and began major exploration in other areas, including North America
In 1950s industry had begun development of oil and gas fields in Cook Inlet in SW Alaska
The last throw of the dice : The last throw of the dice BP’s geologists had much experience of ‘foothill’ oil near Iran’s Zagros Mountains
In Alaska BP tested Iranian-type anticlines in foothills of the Brooks Range ; others followed - but the results were disappointing
Patience was running out, interest moved north to new State land on the coastal plain near Colville River
BP and ARCO-Esso acquired most of the available leases
Optimism wins the day – just! : Optimism wins the day – just! In late 1968 ARCO-Esso discovered oil in what had been planned to be their final Prudhoe Bay
Shortly afterwards, a BP well drilled on much less costly downflank leases confirms the ARCO-Esso discovery
A huge lease sale takes place in 1969, raising almost $1 billion
Prudhoe Bay : Prudhoe Bay In the 1969 lease sale, Arco-Esso made the high bids, winning what proved to be the crest of a giant structure
BP, with lower bids, acquired what turned out to be much of the flank area
The structure had a huge gas cap, about 25 tscf, and so BP had more than half of the oil
In 1969 BP became joint operator of the field with ARCO
Operational Extremes : Operational Extremes After its discovery and initial appraisal the explorers estimated Prudhoe Bay reserves at 15 billion stb - but we know that they are always optimists!
Development engineers had to deal with huge problems before we could recover even a single barrel
Remote and hostile : Remote and hostile Huge logistical problems of operating in remote Arctic location
How to travel and work on tundra, deal with permafrost, live in extreme cold?
Bringing in equipment by land impossible; airlift or summer sea-lift only options
Main problem: how to export crude oil?
Balancing Act : Balancing Act In normal onshore oilfield, new wells can be drilled as needed and put on production immediately, facilities can be upgraded at any time
In Alaska, industry had huge upfront expenses
We had to be cautious and balance the pipeline capacity against risk, likely field offtake, operating coats and oil price changes
Make or break? : Make or break? Pipeline to Gulf of Alaska planned in 1969 – 800 miles of 48” pipe, 600 river crossings, up to 4700’
World’s biggest civil engineering project; cost to be $900 million
Construction delayed by environmental and land ownership problems
Cost of TAPS escalated to over $9 billion
Project would have been economic disaster had oil price not quadrupled in 1973-4
Start-up : Start-up The pipeline was completed in 1977
Production began in April 1977 at 3 mbd
Based on the 125 wells drilled 9 billion stb was a prudent estimate to SEC
Within 32 months production had reached plateau level of 1500 mbd
Second Phase : Second Phase By 1982 field had settled down to routine production, with more than sufficient well capacity to fill the production system
Studies showed that changes to initial facilities would be required to maintain offtake capacity at 1.5 mbd
We began to plan remedial actions – mostly as envisaged in Initial Development Plan
ACTION!!! : ACTION!!! Well flowlines expanded; well pads manifolded
Produced-water handling and injection facilities expanded
Low pressure gas separation facilities
Infill drilling begun to reduce well spacing
‘Horizontal’ wells drilled to reach isolated and secondary reservoirs
Large scale EOR using Miscible Injectant
The onset of decline : The onset of decline In 1989 could no longer maintain plateau rate
Even closer infill drilling, additional EOR injection, and flank developments failed to reverse decline
Gas breakthrough to producing wells resulted in unexpectedly high gas production …
… but huge expansions in gas handling capacity in 1991 and 1994 did give short-term respite and allow production to increase
Steep offtake decline rate continued but some recent respite with cheaper drilling
A win or a loss? : A win or a loss?
Advances technology maintained plateau offtake continued longer than anticipated
Over 10.6 billion stb now produced, so engineers’ initial estimate (9.6 billion) far exceeded
Current estimate of 13.5 billion stb is short of explorerers’ promises - despite unforseeable technology advances
Some of estimated remaining reserves may prove uneconomic
Prudhoe Bay - Reported Reserves : Prudhoe Bay - Reported Reserves
And we drilled …. : And we drilled ….
Predicting the future : Predicting the future 1977 1988
Conclusions : Conclusions Reservoir geology found to be more complicated and depletion processes more complex than expected
Despite these, the target production plateau length was exceeded through application of technologies developed or refined at Prudhoe Bay
Although the engineers’ reserves estimates were found to be conservative the new technologies were not able to deliver the geologists’ predictions of recovery
New Alaskan reserves? : New Alaskan reserves? Alaska appears to be a concentrated habitat with most of its oil on the North Slope margins and in or around the super-giant Prudhoe Bay field
Other fields are much smaller than Prudhoe – less than 5 billion stb reserves total - although a few are large by Lower 48 standards
The North Slope has generally been well evaluated (59 exploration wells) but there is still a possibility of oil in ANWR
So, what about ANWR? : So, what about ANWR? Environmental concerns exaggerated
Dream of ANWR politically useful
blame environmentalists/ Democrats
perception of future reduction in import dependance
Collecting key seismic data and drilling key wildcats would have negligible impact
Chances are it will yield only modest reserves
ANWR Reserves Studies : ANWR Reserves Studies Several published State/Federal agency studies, from 1986 to 1998
Most recent, by USGS, based on all publicly available data and improved analysis
Study suggests “mean technically recoverable oil” of 7.7 b stb
Sounds impressive at first hearing
… BUT!!! …
USGS – Optimists All? : USGS – Optimists All?
ANWR – an engineer’s view : ANWR – an engineer’s view Must discount technically recoverable volume for:
risk of not encountering the oil 0.75
oil there but in small pools 0.8
areal restrictions on drilling, facilities 0.9
Take $24/bbl for ANS crude, to calculate economically recoverable from technical volume using USGS data
Risked reserves: 2.7 b stb; aggressive plateau rate: 750 mbd
Plateau could not before achieved before 2020; by then offtake from other Alaskan fields will decline almost 700mbd
The other frontier - Deepwater : The other frontier - Deepwater Amazing technological achievements make deepwater production feasible …
… but challenges development and operating skills to maximum
Costs likely to be many times greater than for onshore or shallow water
Small accidents, set-backs have huge consequences
Deepwater geological environment : Deepwater geological environment Geology very different to that of most onshore fields and usually very complex
Turbidites, “marine avalanches”, form reservoirs but these often lenticular/entwined
Rich source, below delta front, at upper boundary of maturity: oil often degraded
Larger fields are generally found first
Operational Constraints : Operational Constraints Floating production equipment brings huge mooring and riser problems
Platform capacity limits constrain peak offtake
Pressure maintenance is difficult - as is control of injected fluids
Economics may rule out development of all but largest accumulations
Deepwater reserves : Deepwater reserves Demanding economics force adoption of aggressive recovery factors for development plans to be approved
Advances in technology likely to be needed to achieve these aggressive initially estimated reserves
Hence little potential for “reserves growth”
Farewell to ‘reserves growth’ : Farewell to ‘reserves growth’ ‘Reserves Growth’ in giant fields by as much as 70% (Kuparuk), 40% (Forties) have been common following oil-in-place, recovery factor revisions
In new fields oil-in-place now much better defined by early 3-D seismic, improved down-hole logging in initial wells
With modern technology initially expected recovery factor already close to technical limit set by reservoir physics– little potential for increase
Impact of Deepwater : Impact of Deepwater Three production phases likely:
First: already underway
Second: ultradeep water US
Third: Mexico
Production expected to peak around 2010 at about 2.5 million b/d, with sharp decline thereafter
Deepwater Production Profile : Deepwater Production Profile
Overall US Production : Overall US Production
Growing Imports : Growing Imports * With conservative assumption of flat demand
Growing US Dependence on Imports : Growing US Dependence on Imports 1971 peak for US ‘Lower 48’ production
Alaska’s production peaked in 1989, current fields declines cannot be significantly reduced
Even optimistic ANWR development will have limited impact on US domestic supply
Deepwater production will peak about 2010 (even if rates doubled impact on supply deficit is small)
Hence, imports are bound to rise unless demand can be cut dramatically
Cost of imports : Cost of imports With conservative assumption of constant $30/stb
Conclusions : Conclusions The US has been thoroughly explored, new large fields are unlikely
It has state-of-the-art technology and is using it to maximize recovery efficiency, ‘reserves growth’ in existing fields will be insignificant
Domestic production is inexorably declining; imports are set to rise, even with flat demand
The cost will soon become insupportable for a country already heavily in debt
There has to be a solution other than WAR