What's happening in production

November 1999 Vol. 220 No. 11  Production

Perry A. Fischer,  Engineering Editor

A whopper of a well; GTL looks promising

Shell announced it has set a new Gulf of Mexico production record. Well A-7 in Ursa field, located about 130 mi south of New Orleans on Mississippi Canyon Block 809, produced at a rate of 39,317 bopd and 60.67 MMcfg per day, or a combined 50,150 boe per day. This exceeded the previous production record of 46,475 boepd at the Troika development.

Shell, operator of the field, said the record was achieved by applying several new technologies, such as executing a frac and pack at the very high rate of 40 bbl/min., another GOM record, and by utilizing shunt tubes during the packing process to ensure a very solid pack. Additionally, using 5-1/2-in. production tubing, an unusually large diameter for the GOM, allowed for very high rates.

Ursa currently produces an average of 50,000 bopd and 75 MMcfg per day from two producing wells; a third well will be completed soon. The field, which is in 3,800 ft of water, has estimated ultimate gross recovery of 400 million boe. Shell’s Ursa field partners are BP Amoco (23% stake), Conoco and Exxon (16% each).

Commercialization of GTL is inevitable. At least, that’s what Mark Agee, president and COO of Syntroleum Corp. said in a speech to analysts and shareholders on September 28th. His argument was simple and compelling: "The sulfur content of U.S. refined crude has increased more than 30% over the past 15 years and is expected to continue to increase. The allowed sulfur content of fuels, however, is going down and probably will continue to decrease, driven by increasingly stricter state and federal regulations and a growing consumer preference for environmentally friendly products."

He went on to make other, hard-to-argue-with points.

"The challenge the industry faces in solving this conundrum is to produce cleaner fuels from increasingly dirtier oil at an acceptable price. As one option, fuels made with gas-to-liquids (GTL) technology have several clear advantages:

• They are made from natural gas, which is abundant in most of the world.
• Since they are petroleum-based fuels, they can use existing infrastructure from refinery to pump.
• They can be used to power existing vehicles, as well as future designs using advanced engine technology.
• They are as clean as any fuels in existence today.

"Despite all of these advantages, the reason GTL will be commercialized is because the cost of bringing existing refineries into compliance with new regulations is increasing, while the economics of GTL have improved to the point that, today, we believe we can produce synthetic fuels for less than the current price of oil. The barrier has always been economics. We believe that we, and perhaps others, have broken that barrier."

The reason for the event was to mark the successful operation of the company’s pilot GTL plant, completed in August with partner ARCO. Another reason was to update the company’s plan to build a specialty GTL plant with partner Enron. Dubbed Sweetwater, the plant will produce 10,000 bpd and should begin construction in 2000. Final negotiations are underway for sites in Australia and Trinidad, with engineering, procurement and construction selection expected before year-end.

Hydrate patent. Syntroleum also wants to ensure that its technology is available in stranded gas development, including yet-to-be-realized hydrate production. The company was granted a patent for invention of a comprehensive system for hydrate recovery. The system is said to "substantially eliminate or reduce many disadvantages and problems associated with other proposed methods of hydrate recovery."

The crux of the system’s advantage is that in using the company’s proprietary GTL technology, excess heat is recycled to free more methane from hydrate, which then undergoes GTL conversion, which allows more excess heat for hydrate disassociation, and so on. The system is also small enough to be barge or ship mounted. The company added that it "wanted to be the first to say that this technology, while promising, remains unproven."

Their timing could not be better. By the time this is published, Japan National Oil Co., leading a 10-company consortium, will be drilling offshore Japan in the first attempt at commercial exploitation of methane hydrates.

Ten new DOE projects. The U.S. DOE says these 10 projects could ultimately allow as much as 150 million bbl of additional production "that are at risk of being left in the ground." The department plans to provide $23 million to the projects and expects to negotiate agreements from the proposers to contribute another $46 million.

The projects help keep a commitment made in February to help sustain production capability of the U.S. petroleum industry in the wake of unprecedented price swings. The projects concern reservoirs with large amounts of oil in place that face imminent risk of abandonment.

Energy Secretary Bill Richardson said "The U.S. oil industry is increasingly an industry of smaller companies ... which account for nearly half of the oil produced in the Lower 48 states. Our support will help them develop and deploy technologies that otherwise would probably never make it into the oil fields, certainly not on a widespread basis. Our hope is that these projects will show hundreds of other small companies ways to keep their wells flowing."

In addition to heading up half of the projects, independent companies will be collaborating with universities and state agencies in most of the other projects. Numerous consultants, service companies and 23 independent oil producers are involved in the projects.

According to projections contained in the winning proposals, the projects will result in as much as 40 million bbl of additional crude production within the next seven years. The DOE estimates that federal taxes on the added production could be more than $100 million, and state taxes could take another $50 million. This would more than offset the program’s cost. The real payoff, however, would come if other producers adopt the tools and techniques demonstrated in the projects.

Comments? Write: fischerp@gulfpub.com

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Copyright © 1999 Gulf Publishing Company