O

ILFIELD TECHN

OLO

GY

AUGUST 2015 | EXPLORATION | DRILLING | PRODUCTION

ww

w.oilfieldtechnology.com

AUGUST 2015 EXPLORATION | DRILLING | PRODUCTION

© 2015 Baker Hughes Incorporated. All Rights Reserved. 43068 07/2015

Get the confidence you need to make critical well integrity decisions.

The Integrity eXplorer™ cement evaluation service is the first in the industry to measure lightweight and contaminated cement bonds, regardless of the wellbore fluid environment. The service provides rig site deliverables so you can make faster decisions with confidence.

Call us or visit BakerHughes.com/IntegrityeXplorer to learn how to gain confidence in your cement quality.

+1 713-268-6218 or +44 2070 483646

Is your cement quality weighing you down?

Copyright © Palladian Publications Ltd 2015. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the copyright owner. All views expressed in this journal are those of the respective contributors and are not necessarily the opinions of the publisher, neither do the publishers endorse any of the claims made in the articles or the advertisements. Printed in the UK. Images courtesy of www.shutterstock.com.

Oilfield Technology is audited by the Audit Bureau of Circulations (ABC). An audit certificate is

available on request from our sales department.

O

ILFIELD TECHN

OLO

GY

AUGUST 2015 | EXPLORATION | DRILLING | PRODUCTION

ww

w.oilfieldtechnology.com

AUGUST 2015 AUGUST 2015 EXPLORATION | DRILLING | PRODUCTION

OFC_OT_August_2015.indd 1 03/08/2015 15:50

ISSN 1757-2134

Contents August 2015 Volume 08 Issue 08

5362

More from Read on the goApp available on Apple/Android

Like us on FacebookEnergy Global

Join us on LinkedInOilfield Technology

Connect on Google+Oilfield Technology

Follow us on Twitter@Energy_Global

Front cover

Logan International’s proprietary Xciter Extended Reach Lateral Vibration Tool has delivered over 5000 successful runs, reducing friction and maximising efficiency in slide drilling. Positioned close to the BHA, the Xciter is effective in directional drilling applications, including S wells, curve sections and laterals. Its proximity to the BHA prevents damage to MWD, LWD and EM, and it does not cause signal interference.

03 Comment

05 World news

10 Every cloud...John Bridgeman, the EIC, UK, reviews the state of the upstream oil and gas industry in the North Sea.

15 Battery powered explorationCarlos Gonzalez, ICCN+Palladium, USA, reviews the early adoption of lithium-ion battery technology for seismic exploration applications.

19 Smaller footprint, greater impactDan Cook, Ward Leonard, on getting the most out of a rig by integrating high power density electric motors.

23 Double dutyJ.J. Miller & D. Nelson McMillan, Halliburton Baroid, discuss a new dual-purpose drilling and completion fluid.

27 Shedding new light on downhole vibration toolsPat Thorpen & Martin Sanders, Logan Rentals, USA, explain how new downhole vibration tools can help operators overcome the obstacles of horizontal wells.

30 From up in the air, to down in the groundAdam Keithly, LORD Corporation, USA, reveals how downhole tool problems can be solved with aerospace technology.

35 Rising to the challengeJohn MacDonald, Clarus Subsea Integrity, Ricky Thethi, 2H Offshore, & Jonathan Deegan, Riskbytes, provide an economic and risk assessment of single and dual casing top tensioned risers.

39 A breath of fresh airGerald Woodward, CLARCOR Industrial Air, UK, shows how oil and gas installations can be protected by hydrophobic filtration inlet systems.

43 Methods to stand the test of timeStuart Bond, Exova Group, UK, considers proactive fitness-for-purpose testing and new methods for SURF components.

49 Giving strength to offshore operationsPaul Frost, Atlas Copco, UK, presents the logistical challenges of creating and shipping custom-designed air compressor packages to offshore projects.

53 Crossing wiresThomas McCudden, Nautronix, UK, explores life of field challenges – both the expected and unexpected.

56 Sending a signalWojciech Emmerich, Oleg Akimov, Imed Ben Brahim & Alexander Greten, Baker Hughes, examine a new system designed to provide reliable, high-speed mud pulse telemetry.

62 Building blocks to see the bigger pictureSimon Copping, Expro EGIS, UK, explains the importance of collating, analysing and sharing valuable well integrity information.

69 Cost-efficiency buoyed upDeepwater demands drive improvements in inflatable packer technology argue Tim Davis, and Ray Frisby, P.E., TAM International, USA.

Take control.

We designed the AMPHION Drilling Control System to manage, control, and monitor rig floor activity, giving you a safer and more e�icient operation. Our user-friendly touch screens respond quickly and allow simultaneous monitoring of multiple equipment functions while maximizing drilling e�iciency and awareness.

Innovation at your fingertips.

Get to know us at nov.com/amphion

To learn more, download GO NOV from the App Store or Google Play.

©2014 National Oilwell Varco | All Rights Reserved

RIG Land AMPHION Take Control D392004505-MKT-003 OGAU 05-01-2015.indd 1 7/8/2015 4:44:41 PM

Comment August 2015

David Bizley, Editordavid.bizley@oilfieldtechnology.com

Contact us

SubscriptionOilfield Technology subscription rates: Annual subscription £80 UK including postage/£95/e135 overseas (postage airmail)/US$ 150 USA/Canada (postage airmail). Two year discounted rate £128 UK including postage/£152/e216 overseas (postage airmail)/US$ 240 USA/Canada (postage airmail). Subscription claims: Claims for non receipt of issues must be made within three months of publication of the issue or they will not be honoured without charge. Applicable only to USA & Canada: OILFIELD TECHNOLOGY (ISSN No: 1757-2134, USPS No: 025-171) is published monthly by Palladian Publications, GBR and is distributed in the USA by Asendia USA, 17B S Middlesex Ave, Monroe NJ 08831. Periodicals postage paid New Brunswick, NJ and additional mailing offices.Postmaster: Send address changes to Oilfield Technology, 701C Ashland Ave, Folcroft PA 19032.

August 2015 Oilfield Technology | 3

EditorialManaging Editor: James Little james.little@oilfieldtechnology.com

Editor: David Bizleydavid.bizley@oilfieldtechnology.com

Editorial Assistant: Louise Mulhalllouise.mulhall@oilfieldtechnology.com

DesignProduction: Sophie Awcock sophie.awcock@oilfieldtechnology.com

SalesAdvertisement Director: Rod Hardy rod.hardy@oilfieldtechnology.com

Advertisement Sales Executive: Ben Macleod ben.macleod@oilfieldtechnology.com

Business Development Manager: Chris Lethbridge chris.lethbridge@oilfieldtechnology.com

WebsiteWebsite Manager: Tom Fullerton tom.fullerton@oilfieldtechnology.com

Website Editor: Callum O’Reilly callum.oreilly@oilfieldtechnology.com

MarketingCirculation Manager: Victoria McConnell victoria.mcconnell@oilfieldtechnology.com

Subscriptions: Laura Cowelllaura.cowell@oilfieldtechnology.com

Office Administrator: Jo Repton jo.repton@oilfieldtechnology.com

Reprints: reprints@oilfieldtechnology.com

PublisherNigel Hardy

Palladian Publications Ltd, 15 South Street, Farnham, Surrey GU9 7QU, UK Tel: +44 (0) 1252 718 999 Fax: +44 (0) 1252 718 992 Website: www.oilfieldtechnology.com

Back in May of this year I pointed out that, despite the pain being felt on quarterly statements, there was some room for cautious optimism in the global oil and gas industry – global demand

continued to show an upward trajectory and new projects were still going ahead around the world. A few months on and we appear to be in much the same situation: development continues, but the low oil price (Brent is hovering around US$50/bbl as I write this) continues to cause concerns.

The North Sea is a prime example of these mixed fortunes. Breakeven prices for some older fields in the UK North Sea still lie at around US$80/bbl and cutting costs has become a priority for many companies, which has inevitably led to job losses and redundancies. Whilst this has been happening, however, industry watchdog Oil & Gas UK has announced that oil and gas production from the UK North Sea is on course to post an increase for the first time in 15 years. The 2.5% increase has been driven - according to Oil & Gas UK CEO, Diedre Michie – by industry investment “into improving the integrity and performance of UKCS assets.”1 The UK government has also gone some way to helping the situation by making large cuts to production taxes on both new and existing fields – in fact, UK treasury figures suggest that the reduced taxes along with other incentives could fuel £4 billion worth of investment in the region.

It is certainly positive to see both government and industry working towards ensuring that the UK North Sea continues to remain profitable. It is a pattern worth replicating; governments can make the operating conditions easier for the industry, allowing the industry to continue to invest in getting oil and gas out of the ground more efficiently. Developing and integrating technologies that allow for reduced operating costs will help the industry endure periods of low oil prices and allow for even greater profits when they rise again.

As for exactly when prices might rise again, I think it’s pretty safe to say that we’re not out of the woods yet. One hurdle, the possible exit of Greece from the EU (or Grexit) appears to have been avoided, but the recent agreement between Western powers and Iran over its nascent nuclear programme has left another just on the horizon; the deal looks set to bring yet more oil onto a saturated market. However, the silver lining of this particular cloud is that it seems unlikely that sanctions on Iranian exports will be lifted until next year at the earliest, and foreign investment into Iranian production will take several years before impacting global supply – a bit of a storm may indeed be coming, but it should at least be visible from a distance.

In the meantime, three separate US Energy Information Administration reports appear to show US production as having peaked in recent months.2 The US shale boom has been one of the key production-side drivers behind the declining oil price (the other being Saudi Arabia’s decision to give up its role as swing producer); to see data showing that shale production might have reached a peak offers some hope that at least this one downward driver might have a declining influence in the coming months. Still, I wouldn’t want to bet against the US shale companies just yet – their ingenuity is what has them operating in fields that were once, not too long ago, considered inaccessible.

This is a rough patch for the industry, no doubt, but it’s not the first period of adversity that oil and gas has been through – many industry veterans have lived through several downturns like this – the industry always bounces back in time. Indeed, global oil demand continues to rise and companies across the world are constantly looking at novel engineering solutions to cut production costs.

Speaking of which: the Oilfield Technology team will be doing the rounds at Offshore Europe (8 - 11 September) and we’d be happy to hear how your company is pushing the industry forward. See you there!

References1. http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/11780648/North-Sea-oil-

production-rises-despite-price-slump.html2. http://oilprice.com/Energy/Crude-Oil/US-Oil-Production-Finally-Starting-to-Decline.html

The FUTURE of surface preparation in corrosion prevention is here TODAY

l Eliminate soluble salts and prevent flash rust for 24+ hours

l Provide the best achievable surface for coating adhesion

Recommended by Leading Coating Suppliers

Use with: Dry Grit Blasting, Wet Abrasive Blasting,UHP Water Jetting, and More

On: Pipelines, Offshore Installations, O&G Terminals, Transport and Storage Facilities

www.holdtight.com

World news August 2015

In brief

August 2015 Oilfield Technology | 5

SBM Offshore releases H1 2015 earnings report - solid first half, but industry still searching for new equilibriumSBM Offshore has reported better than expected revenue in its H1 2015 earnings report. The company has reported a healthy appetite for its projects, as evidenced by the 45% taken up by joint venture partners in the Turritella project as well as the recently announced US$1.55 billion of project financing for Cidade de Saquarema. Progress in discussions with Brazilian authorities continues via the announced signing of a memorandum of understanding. The company also reported that it continued to achieve over 99% uptime across its fleet while directional backlog ended the period at US$20 billion. Full year directional revenue guidance has been increased to at least US$2.6 billion.

Bruno Chabas, CEO of SBM Offshore, commented on the findings, “The current downturn is having a profound impact on our industry, which is faced with the challenge to reinvent itself to survive profitably in the current oil price environment. SBM Offshore is determined and confident it can play its part based on its track record of technological innovation, its willingness to take decisive action through its restructuring and backed by its strong lease and operate cash flow.”

The company’s total assets remained stable at US$11.3 billion as of 30 June, 2015 compared to US$11.1 billion at year-end 2014. This reflects, amongst other factors, the lower investments in FPSOs Cidade de Maricá, Cidade de Saquarema and Turritella during the period.

Cape secures Clair Ridge contract with BP Cape plc has extended its relationship with BP after being awarded a new Clair Ridge contract worth £9.8 million, with further future phases added over the next 18 months.

Clair Ridge, 75 km west of Shetland, is the second phase of development within the Clair field. The contract is in support of the hook-up and commissioning of BP’s two new bridge-linked Clair Ridge platforms. Effective from July 2015, the contract will cover the provision of core services including access, insulation, coating, passive fire protection and platform services for the Clair Ridge hook-up work.

Joe Oatley, Chief Executive, Cape plc: “We are delighted to be awarded this further contract by BP. Cape has a long-standing relationship with BP and we look forward to continuing to work with this important client to deliver our critical industrial services to this prestigious project”.

Russia The Russian government has announced that it had delivered ‘ample scientific data’ to the United Nations to back its claim to more than 460 000 square miles of Arctic territory and the wealth of energy, gems and precious metals believed to lie within.

The Arctic is believed to hold as much as 20% of the world’s remaining undiscovered oil and gas resources.

Saudi Arabia According to recently published TechSci Research report, the oilfield chemicals market in Saudi Arabia is projected to surpass US$960 million by 2020. Growth in this market in Saudi Arabia is expected on account of rising oil and gas production, along with anticipated increase in the exploration of shale gas deposits in the country.

“Saudi Arabia is home to 100 major oil and gas fields, of which eight oilfields produce more than 50% of crude oil every year. [The] oilfield chemicals market is highly consolidated with major players collectively accounting for more than two-thirds of the market revenues in 2014”, said Mr. Karan Chechi, Research Director, with TechSci Research.

UK According to The Telegraph, oil and gas production from the UK North Sea is expected to increase for the first time in 15 years, despite the ongoing reduced oil price and recent job losses.

Industry body, UK Oil & Gas, is expecting a rise of approximately 2.5% on last year’s figures. The drive in production has been attributed to two main factors: the use of more efficient technologies by the oil industry, and an improved investment environment supported by reduced production taxes on both old and new fields.

Yolla-6 well begins production at BassGas AWE Limited, a 35% joint venture partner in the BassGas project, has announced the Yolla-6 development well has been tied-in to export facilities on the Yolla platform and production from that well has commenced.

Well performance is being monitored to achieve optimal co-mingling with production from the existing Yolla-4 well. The early unstabilised production rate from the BassGas facilities has now increased to approximately 57 TJ/d following the addition of the Yolla-6 well.

AWE Managing Director, Bruce Clement said that the development drilling phase of the BassGas Mid Life Enhancement project was nearing completion, “With Yolla-6 now on production, and well performance in-line with data acquired while drilling the well, we are looking forward to additional production from the Yolla-5 well, due to come online in early August,”

The Yolla offshore platform is connected by pipeline to the gas processing facility at Lang Lang, Victoria. The platform lies 140 km offshore from Kilcunda, Victoria.

6 | Oilfield Technology August 2015

World news August 2015

Diary dates

To read more about these articles and for more event listings go to:

Web news highlights

www.oilfieldtechnology.com

ÌÌ Bright side to falling oil prices?

ÌÌ Trelleborg introduces oil and gas sealing website

ÌÌ Energy East pipeline price tag goes up

ÌÌ Offshore Europe 2015 welcomes newcomer Sulzer

3M completes acquisition of Capital Safety3M has announced that it has completed its acquisition of Capital Safety from KKR for a total enterprise value of US$2.5 billion, including the assumption of approximately US$0.7 billion of debt, net of cash acquired.

3M’s Personal Safety business provides respiratory and hearing protection solutions that help improve the safety and security of workers. The business also supplies products and solutions in other safety categories such as reflective materials for high-visibility apparel, protective clothing and eyewear, among others.

On a GAAP reported basis, 3M estimates the Capital Safety acquisition to be US$0.04 per share dilutive to 2015 earnings, all of which will be incurred in the third quarter.

3M’s 2015 earnings guidance of US$7.80 to US$8.00, announced on 23 July, 2015, excluded the estimated impact from its pending acquisitions of Capital Safety and Polypore’s Separations Media business at that time. The acquisition of the Polypore Separations Media business is still pending completion.

13 - 16 September, 2015

AAPG ICEMelbourne, AustraliaE: mtaylor@aapg.orgwww.ice.aapg.org/2015

28 - 30 September, 2015

8th Petroleum Geology ConferenceLondon, UKE: Nicola.Peel@hg3.co.ukwww.petroleumgeologyconference.com

28 - 30 September, 2015

SPE ATCEHouston, USAE: registration@spe.orgwww.spe.org/atce

18 - 23 October, 2015

SEG Annual MeetingNew Orleans, USAE: tdallis@seg.orgwww.seg.org/web/seg-new-orleans-2015

27 - 29 October, 2015

LAGCOELafayette, USAE: danielle@lagcoe.comwww.lagcoe.com Statoil: Peregrino FPSO marks 100 million bbls produced

After just four years in production, the Peregrino field in the Campos basin offshore Brazil has passed a significant milestone, with 100 million bbls produced since April 2011.

The Peregrino field includes two fixed drilling platforms (WHP A and WHP B), and the floating production and storage unit FPSO Peregrino.

The field, jointly owned by Statoil and Chinese Sinochem, achieved the milestone on 2 August. Pål Eitrheim, Manager of Statoil Brazil, said “We are pleased to have reached a major milestone in our Peregrino operations,”

“Peregrino demonstrates the power of possible, and we are proud to operate a project that is both exciting and challenging. These results reflect the professionalism of our people, and the application of technology developed by Statoil, in Brazil and elsewhere. We are constantly learning and we look forward to reaching new milestones as we continue to develop this large field.”

According to a report published by the Brazilian National Agency of Petroleum, Natural Gas and Biofuels (ANP) in March 2015, Peregrino is Brazil’s eighth largest field, and has the second heaviest oil ever produced in Brazil.

The operation includes two fixed drilling platforms (WHP A and WHP B), and a floating production and storage unit (FPSO Peregrino), with a production capacity of 100 000 bpd. Statoil holds a 60% stake and is the operator of the field, while Sinochem holds the remaining 40%.

With an excellent track record, Peregrino has achieved all production, efficiency, cost and safety targets in 2014.

INPEX to undertake exploratory drilling INPEX Corporation has announced that it has been commissioned by the Agency of Natural Resources and Energy of the Ministry of Economy, Trade and Industry (METI) of Japan to drill one exploratory well for the agency’s ‘Heisei 26~28 Domestic Offshore Drilling Programme in Japan’. The objective of the drilling project is to determine the presence of hydrocarbon deposits and conduct geological studies.

The exploratory well will be drilled in a location offshore Yamaguchi and Shimane prefectures where in 2011, the Japanese government conducted a geophysical survey from the seismic survey vessel Shigen as part of its Domestic Oil and Natural Gas Exploration Project, and where INPEX conducted a 3D geophysical survey in 2013 based on the earlier survey.

INPEX plans to drill the exploratory well beginning in May 2016 until August of the same year at a location approximately 140 km north of Yamaguchi Prefecture and approximately 130 km northwest of Shimane Prefecture, in water depths of 210 m.

August 2015

KNOW HOW

Oil & Gasweirinaction.com

Introducing advanced technology

for continuous duty performance.

The know-how you needIntroducing the SPM® QEM 3000 frac pump offering 275,000 lbf rod load 100% of the time.

• Industry first high-horsepower continuous duty frac pump

• New to the industry – optimized dual-pressure lube system

• Power frame design optimized to increase pump life, lower maintenance

• Featuring the SPM® Duralast™ fluid end

• Reduced total cost of ownership of pumping assets

See the pump in action: weirinaction.com/knowhowpump

weir207_oilfieldtech_ad_0714.indd 1 7/14/15 12:59 PM

8 | Oilfield Technology August 2015

August 2015World newsTeam Oil Tools acquires Odessa Packer Services - purchase backed by private equity firmTeam Oil Tools, LP has announced that it has acquired all the outstanding shares of Odessa Packer Services, Inc. Founded in 1982, Odessa is an oilfield packer and downhole tool service company focused on the Permian Basin market.

Team is focused on the design, manufacture, sale and service of downhole completion products. In October 2014, Team acquired Schlehuber Oil Tools as part of its ongoing effort to grow its Permian operations. Team is backed by Intervale Capital , a private equity firm which invests exclusively in oilfield manufacturing and service companies.

Adam Anderson, Team’s CEO, will oversee the combined business. Anderson commented, “We are very pleased to welcome Odessa’s employees to the Team family. The Permian basin is the largest oilfield market in the world and we feel fortunate to be able to expand our presence there with the addition of Odessa.”

Steve Hughes and Leonard Neatherlin, Odessa’s President and Vice President of Operations, respectively, will manage operations for Odessa and work in close coordination with managers of Team’s other Permian locations in Midland, Denver City and Levelland. Hughes and Neatherlin commented, “We’re very excited to join Team as an important part of the company’s Permian Basin presence. It has been a pleasure getting to know Team management and Intervale.”

Tuan Tran, Principal at Intervale Capital added, “We are delighted to partner with the exceptional team at Odessa. The addition of OPS to the Team platform marks an important stage in our efforts to expand our business in the Permian. We are confident that the combination will create compelling cross-selling opportunities and allow Team to better serve its growing Permian customer base.”

First output from Don Pedro and San Miguel wells Nostra Terra has announced that the first wells of the Don Pedro Prospect, in which it has a 1% working interest (as announced on 27 April 2015) and the San Miguel Prospect, in which it also has a 1% working interest (as announced on 18 May 2015), are now in production.

The drilling operations were successfully concluded on the initial test wells of the Don Pedro and San Miguel prospects. Each test well was drilled to a vertical depth of approximately 5300 ft in order to take a full, conventional core and to obtain additional petro physical data on the target formation. Each well was then turned horizontally, reaching a total measured depth of 10 000 ft.

In addition to the encouraging hydrocarbon shows encountered during drilling operations, the well results will be used to confirm whether or not the predictive geological tools employed in planning this initial well have been successful.

Gazprom Neft ESPO crude exports reach 10 million tFollowing the supply of a further 100 000 t of East Siberian Pacific Ocean (ESPO) crude to the Chinese market in July, total volumes of ESPO crude exports by Gazprom Neft since the commencement of supplies have now reached 10 million t.

Payment for all ESPO crude supplies despatched by Gazprom Neft to China throughout 2015 have been made in Chinese currency: negotiations with purchasers on potential payment in rubles are ongoing.

Anatoly Cherner, Gazprom Neft CEO for Logistics, Processing and Sales, commented: “The main buyers of ESPO crude are China and Japan, although we also make deliveries to other countries in the Asia—Pacific region. In expanding exports eastwards Gazprom Neft is diversifying delivery destinations as well as developing a system for payment in national currencies, promoting the company’s sustainable growth and development.”

BG Group starts up sixth FPSO in the Santos BasinBG Group has announced first oil from the Cidade de Itaguaí floating, production, storage and offloading (FPSO) vessel, the sixth unit to start production across the Group’s significant discoveries in the Santos Basin, offshore Brazil. The FPSO will produce from the Iracema North area of the Lula field in the Petrobras-operated BM-S-11 block.

Anchored 240 km off the coast of Rio de Janeiro, the Cidade de Itaguaí is approximately 2220 m above the ocean floor. This is the second leased FPSO deployed on the Iracema development and will double the gross production capacity to 300 000 bpd and 16 million m3 of natural gas per day from the area. The FPSO will also be able to store 1.6 million bbls of oil.

BG Group has a 25% interest in Block BM-S-11 (Petróleo Brasileiro S.A., operator, 65% and Petrogal Brasil S.A., 10%). BG Group also has a 30% interest in Block BM-S-9 (Petróleo Brasileiro S.A., operator, 45% and Repsol Sinopec Brasil 25%).

Successful appraisal well on the Edvard Grieg fieldLundin Petroleum has announced that its wholly owned subsidiary Lundin Norway AS has completed the drilling and logging of appraisal well 16/1-23 S on the Edvard Grieg field in the Norwegian North Sea.

The well was located in PL338 and was drilled approximately 2.4 km southeast of the Edvard Grieg platform.

Ashley Heppenstall, President and CEO of Lundin Petroleum, commented on the operation, saying that “The Edvard Grieg southeast appraisal well has been successful. This well, together with last year’s appraisal well in the same area of the field, will in my opinion result in an increase to the Edvard Grieg reserves at the end of this year. The low incremental cost of developing such barrels will add value to the Edvard Grieg asset.”

August 2015

Creating Value Along the Hydrocarbon Journey

In an industry where extreme conditions and technical requirements grow more challenging every

day, Cameron takes the lead as we collaborate with our customers to develop solutions that add

value to each step in the hydrocarbon journey, from reservoir to point of sale. Visit us at Offshore

Europe to hear Cameron technical experts talk about the issues that are facing the industry. Spend

time with us to explore the many ways in which Cameron addresses these challenges through

innovation, enabling technologies and life-of-field solutions. Let us show you how Cameron creates

the flow control technology that energizes the world. www.c-a-m.com/offshore-europe2015

Scan to see what’s new at Offshore

Europe 2015

STANDS 5D70 & 5D80

AD01899CAM

INVENTING. COLLABORATING. LEADING.

JOHN BRIDGEMAN, THE EIC, UK,

REVIEWS THE STATE OF THE UPSTREAM OIL

AND GAS INDUSTRY IN THE NORTH SEA.

10 | | 10

M uch has been spoken of regarding the dearth of upstream activity in the North Sea following the decline in the oil price in late 2014. From the high of US$115/bbl

in June 2014 to a low of around US$45/bbl by the end of the year, the oil price decline has led to a number of well publicised ramifications – job cuts, cancelled projects and severe delays – as many major companies (both operators and contractors) strive to make their developments economic. The oil price has since recovered somewhat, but many projects in the North Sea are still

not profitable – around 10% of production on the UK Continental Shelf (UKCS) is struggling to make money – and the industry must adjust accordingly.

Productivity and efficiency challengesA lot of talk has been focussed on low productivity and inefficiency. Offshore installations, for example, are working only around 60% of the time on the UKCS, due largely to poorly planned maintenance, while, when compared to other industries,

| 11

12 | Oilfield Technology August 2015

the oil and gas industry is in the bottom 3% for efficiency and productivity.

It is also worth bearing in mind that many operators were struggling to make a profit in the high oil price environment and that the low oil price is not solely to blame for the recent industry difficulties. Even at US$100/bbl, around an eighth of production on the UKCS was loss-making. For years collaboration and standardisation have been key calls from the industry to streamline projects and cut costs, both of which have been fought against due to the highly competitive nature of the industry.

The ramifications of high-costs and low efficiency is emphasised by the fact that it cost £3.6 billion in capital expenditure to find 1.1 billion boe between 2004 and 2007, while between 2011 and 2013, it cost £17.7 billion to discover 1.2 billion boe equivalent – an unsustainable rate of return.

A growing government roleThe UK government has begun to play its part with the establishment of the Oil and Gas Authority (OGA) and the announcement of a 10% cut in the supplementary charge, which has been calculated to transfer roughly £13 billion from the government to operating companies.

The tax decrease will also make the UK fiscal regime more attractive in a global context as the UK’s percentage government take is now lower than both the Gulf of Mexico and Brazil. However, more is still required from the government to assist in making exploration and appraisal (E&A) work more economic as these recent tax cuts will have very little impact on operator’s decisions to drill smaller prospects (under 50 million bbls).

On average around one in three wells will be successful, but there is no financial support from the government for unsuccessful wells, a factor that discourages E&A activity. On the UKCS only 14 exploration wells were drilled in 2014, compared to 44 in 2008. The UK also does not compare favourably to Norway, where more than 40 exploration wells were drilled in 2014.

The possible advantages to increased exploration can be seen here, where the Johan Sverdrup field, discovered in 2010, is estimated to hold around 2 billion bbls of oil. This is a good example of the possible rewards of investing in exploration, even in a mature basin.

For an equivalent success to be realised on the UKCS however, there needs to be a change in exploration strategy; the 10 year average success rate for exploration wells is around 30%, but between 2012 and 2014 that dropped to around 18%. Also, between 2012 and 2014, 86 exploration wells were drilled, and only 166 million boe discovered – less than 2 million boe per well. Better pre-drill analysis and improved access to data are likely to be necessary to better these figures, while a different strategy in terms of drilling larger, riskier prospects may also be required.

UK supply chain opportunitiesWhile exploration in the UKCS is at a low, there remain plenty of opportunities for the UK supply chain with several developments moving forward. One of the more advanced of these is the US$7 billion Mariner heavy oil field, located in Block 9/11a, operated by Statoil.

Several major contracts have been awarded on the project to date, including the engineering, procurement and construction (EPC) contracts for the steel jacket and topsides to Dragados Offshore and a consortium of Daewoo Shipbuilding and CB&I respectively. Subsea 7 has also been awarded a contract on the Mariner project for the installation of 39 km of rigid flowline and the flexible riser system. Topside construction began on the project last autumn and is expected to be installed in 2016, while the jacket is complete and ready for load-out.

Subsea work is also currently underway, with the pipelay of the gas import line taking place. The subsea manifolds have yet to be placed. Much of the UK supply chain’s opportunity in the Mariner field may

present itself post-production. The field is expected to have a large Opex due to the heavy (11 – 15˚ API) oil and the related difficulty in exploiting the field’s reserves; a supporting jack-up will be on-site at Mariner for at least four years.

The development of Mariner also reflects the change in investment in the UKCS, with less going towards conventional developments and more towards enhanced oil recovery (EOR), heavy oil, high-pressure high temperature (HP/HT) and West of Shetland developments. Projects that fall into these categories include the Bressay heavy oil field; Captain EOR project, the Culzean HPHT field and the Laggan-Tormore project West of Shetland. All of these projects are in various stages of development.

Statoil is currently working on a development concept for its Bressay heavy oil field, with a decision expected to be made before the end of 2015 and a final investment decision expected in 2016. This follows the abandonment of a previous development plan for the field in late-2013. The original plan included accommodation and processing platforms connected to an FPSO.

The Mariner and Bressay fields have benefited from new UK tax allowances for ultra-heavy oil developments. These are categorised as fields with oil that has an API of 18˚ API or less. This tax relief has also been of benefit to EnQuest’s Kraken field; an FPSO development that is scheduled to start-up in 2017. It is hoped that the new tax relief introduced in the 2015 budget could have similar positive effects that have been seen within these heavy oil developments.

The Captain Field first entered production in 1997 and consists of two platforms connected to an FPSO. Operator Chevron carried out a study to test the use of polymer chemical injection for enhanced oil recovery at the field, which proved positive. The project will involve an additional bridge-linked platform (BLP) to provide space for new EOR equipment, and may require a second BLP to replace the ageing FPSO. KBR, Amec Foster Wheeler, Wood Group Kenny and Jee have all been involved in the early engineering and design phase of the project. Chevron is also currently tendering for the subsea trees wellheads and controls and has also begun a long tender process for the EOR platform, with pre-qualification documents issued to multiple yards.

HPHT fieldsLike heavy oil fields, high pressure/high temperature (HPHT) fields have also benefitted from tax allowances, introduced in the 2014 budget. Maersk Oil’s US$4.7 billion Culzean HPHT gas and condensate field is one such project. Culzean is to be developed through three bridge-linked platforms comprising of a 12 slot wellhead platform (WHP), a central processing facility (CPF) and a utilities/living quarters platform. Produced condensate is to be exported by shuttle tanker via a newly installed floating, storage and offloading (FSO) vessel.

Maersk has approved the project internally and is awaiting approval from its project partners, BP and JX Nippon. Government approval and a final investment decision is expected to take place before the end of the year. Maersk has gone to market for the topsides for the three platforms and for two of the jackets, but have asked companies involved in the tender to revise their bids.

West of the Shetlands is a relatively unexplored region of the UKCS, largely due to the inhospitable environment for hydrocarbon exploration, but is soon to become a more integral part of UK production. Later this year Total will start production from its Laggan and Tormore gas and condensate fields having been delayed due to adverse weather and staff strikes. The project is expected to produce 494 million ft3/d at its peak and is expected to have a field life of 30 years.

Several other projects of note on the UKCS include the HPHT Jackdaw field, operated by BG Group. A decision on whether to enter the front end engineering design (FEED) stage for the project is to be

Pore to Process Optimization.What’s it worth to you?

From the early concept phase of subsea developments to brownfield rejuvenation, OneSubsea® integrates technologies from the reservoir sand face through the well completion and subsea production system to the export point. Our Petrotechnical, Production Assurance and Early Engineering teams will collaborate with you to address challenges and identify optimum Pore to Process™ development scenarios. Through early and continuous engagement, we provide you with an integrated, comprehensive life-of-field solution designed to optimize production and enhance recovery.

Learn more about our unique, unrivaled approach at www.onesubsea.com/engagement

OneSubsea Integrated Solutions: a one-system approach for optimized subsea field development.

AD

0191

8OSS

A4

made in 2017 after BG Group delayed a final investment decision on the project in October 2014.

The field will likely be tied-back to ConocoPhillips’ J-Block facilities or Shell’s Shearwater platform. BP is currently screening development options for the Marconi-Vorlich discovery, made in October 2014, with a tieback development thought to be preferred. If these projects do go-ahead, it could offer some relief to the subsea sector, which has hit a particularly lean spell of North Sea demand.

The Norwegian Continental ShelfPlenty of opportunity also exists across the border on the Norwegian Continental Shelf (NCS). The success story of the Johan Sverdrup field is well documented and the US$15.3 billion project has recently seen the award of three platform contracts worth approximately US$2 billion combined.

Statoil is also developing its Aasta Hansteen project in the North Sea. The project has been hit with several delays, most recently due to the slow progress on the construction of the complex Spar platform. Previous concerns for the project have included the cancellation of the Zidane development, which has led to Aasta Hansteen facing excessive transport tariffs in the Polarled Pipeline. This has left the government relying on new discoveries to be able to secure acceptable returns from the project.

With this, Statoil proceeded to announce three new discoveries in the vicinity of Aasta Hansteen within the space of four months. Statoil first announced the Snefrid North discovery in March 2015, then the Roald Rygg discovery in April and then recently the Gymir prospect, announced in June. The estimated total volumes in the three recent discoveries amount to 75 - 120 million boe, corresponding to about one third of the Aasta Hansteen recoverable volumes.

Statoil also recently submitted a development plan for the Shetland and Lista discoveries in the Norwegian North Sea. The two finds will be

tapped as subsea tiebacks to existing field facilities at Gullfaks A. It is estimated that the two discoveries hold a combined 40 to 150 million boe. The mid-range estimate of around 95 million boe would more than double remaining reserves at the Gullfaks field and enable its producing lifetime to be extended beyond the scheduled 2030.

The marginal field project marks only the third such plan to be submitted to the authorities this year, following the Johan Sverdrup and Maria schemes, as oil companies have put the brakes on development spending due to cost-cutting and low oil prices.

Earlier this year, Statoil also gained approval from the authorities to proceed with the US$570 million development of the Rutil gas and condensate field as part of its Gullfaks Rimfaksdalen fast-track project, which will further boost resource recovery at Gullfaks.

Statoil has proven itself to be at the vanguard of subsea development. One of the company’s goals is to achieve the first subsea factory. This target is gaining ground and quickly becoming a reality as work on the Asgard and Gullfaks subsea gas compression projects drive further ahead. Asgard is expected to start-up in Q3 of this year, followed by Gullfaks in Q4.

Subsea gas compression is a crucial step towards a full subsea factory, as it gives the operator the ability to control production flow, separate oil and water and inject water back, all from the sea floor. While these projects are the first of their kind, it is hoped that further use of such technology will become widespread, giving further encouragement to the subsea market.

Opportunities remainWhile there are many problems for the upstream industry in the North Sea, there also remains plenty of opportunity for those willing to make the necessary sacrifices. The cost of drilling rigs has fallen greatly over the last few months, relieving pressure on vital, but expensive, exploration and appraisal activity – essential if the estimated 24 billion bbls remaining on the UKCS are to be recovered.

Created and produced by

www.offshore-energy.biz

Register now

Your platform for the future

Supported by

Stay in touch @NavingoOE#OEEC Facebook.com/OffshoreEnergy OffshoreEnergyAmsterdam

sales@offshore-energy.biz +31(0)102092600

OE15_Adv_OilfieldTechnology_210x146mm_fc_16juli2015.indd 1 16-07-15 09:33

You will need to register to read the full edition. Please log in to www.oilfieldtechnology.com or alternatively click here to register for free!

For more information about Oilfield Technology subscription package, please contact us:

THAT WAS A SAMPLE OF

AUGUST ISSUE

DON’T WANT TO MISS OUT?

E: subscriptions@oilfieldtechnology.comT: +44 (0)1252 718999