Issue: September 2002

Welcome to the Petroleum Technology Digest, a joint effort by World Oil and the Petroleum Technology Transfer Council (PTTC) to provide independent producers with field-proven solutions to their technical problems. In this publication, the editors and PTTC staff present several recent case studies of exploration, drilling and production techniques that have been tested successfully in oil and gas fields within the U.S. These case studies have been solicited and developed by the PTTC. No specific application of products or services is endorsed by PTTC. Reasonable steps are taken to ensure the reliability of sources for information that PTTC disseminates; individuals and institutions are solely responsible for the consequences of its use.

Bottom line. To keep Edwards Lime and Olmos gas wells in South Texas unloaded for a full 24 hours, Silver Pines Energy Corp. installed automatic soapstick launchers. The production gain from four wells is 272 Mcfgd, equating to $588/day incremental revenue at a representative $3.00/Mcf gas price. Launchers, which cost only about $5,000, typically pay out within weeks, and the additional soapsticks cost only about $6/day, per well.

As a large-scale project pioneering central control and automation, Malampaya demonstrates how the technology improves data access while reducing personnel and maintenance requirements

Bottom line. Using newer foam fracturing technologies, Dominion E&P has unlocked reserves – an estimated 1.5 million bbl of oil from six new wells and three re-completions – in the lower porosity (10%-to-12% range) Prue sandstone. The site is in Roberson Ranch field, southwest of Oklahoma City. Fracturing of earlier, 1970- and 1980-vintage wells – using what were then state-of-the-art, liquid-based fluids – had not been effective there. However, toward northeast of the field, where porosities were higher, in the 16%-to-18% range, the fluids had worked to some degree.

Described here are a methodology and process being employed to redefine interval limitations in deepwater operations. Discussions include limitation of conventional methods, types of riserless fluids used today, and details of a new process that supplies higher-density fluids by mixing concentrated mud onsite with seawater to avoid high-volume storage / supply limitations. Selected case histories illustrate applications in more efficiently running 20-in. casing to provide the base for more efficient final-string design. Deepwater drilling is taking place in certain offshore areas through young sedimentary sections often characterized by narrow margins between formation pore pressure and fracture pressure. As a result, drillers are challenged to prevent the upper-hole section from collapsing.1 The traditional approach of running an additional casing string may not be viable in deepwater wells due to engineering constraints or contingency cost.

Since testing an initial prototype in 1999, Engine and Compressor Services, Inc. (ECSI), has been employing Sertco Model 350 compressors using 5.7-L, General Motors (GM) industrial engines in its compression leasing fleet. ECSI now has three units deployed in Oklahoma and Texas, in wellhead compression and well testing applications. Examples of production increases in well tests for three large independents include 100 Mcfgd from 40 Mcfgd, 200 Mcfgd from 5 Mcfgd, and 420 Mcfgd from 100 Mcfgd. Despite harsh conditions in many well testing environments, only minor breakdowns have occurred. ECSI is now buying production to directly benefit from compressor installation.

Bottom line. To decrease false alarms and unreliable notification of compressor downtimes, J-W Operating (JW) installed magnetically-attached, vibration sensor, satellite-based alarm systems on more than two dozen compressors in their field operations, starting in 1999. Several have been on location more than two years without a single problem, and J-W has not had to replace the first set of batteries. J-W has installed an additional 12 units on compressors that they monitor for others. Eliminating just a few hours of downtime pays for the low-cost ($1,600 installation, plus $30 to $40/month for air time) service. Due to utilizing the geo-synchronous satellites, there are no blind spots; the system is always up.

Applications of three proprietary control systems show how unstable wells, pipeline slugging and unwanted production changes can be monitored and corrected

Special feature, prepared by World Oil and PTTC, comprises four case studies on recent, successfully applied production technologies. These include field compression power, foam fracturing, automatic soapstick launching and a satellite-based, compressor a

Annual comprehensive listing of major manufactures’ commercial bits. Divided into six formation types, from soft/ sticky to extremely hard; tables show name, IADC code, size and performance of each firm’s offerings

Seepex has a brochure available on its semi-submersible, BE range pumps that are vertically installed. These units consume less floor space than horizontal PC pumps. Thus, they are ideal for offshore platforms, blending tanks, scum pits or any area where space is at a premium. The pump casings and universal joints are designed to accommodate pressures up to 175 psi and capacities up to 1,300 usgpm. These maintenance-friendly, low-operating-cost pumps can be constructed of carbon steel, 304 – 316 or duplex stainless steel, titanium or Hastelloy C4. A variety of elastomers and mechanical seals are also available.

JIP on underbalanced drilling in marine environments. Currently, underbalanced drilling (UBD) procedures have been used in about 100 marine locations by most major operators. Primary use has been where casing is set and cemented into or on top of a subnormal or pressure-depleted formation, which is then drilled under- or near-balanced to avoid lost circulation and reservoir damage. And new dual-gradient drilling techniques may be viewed as a subset of UBD." In U.S. OCS waters, MMS has required wells to be drilled overbalanced. For it to allow UBD in wells under its jurisdiction, it must be shown that it can be conducted in a safe and efficient manner. To that end, Maurer Technology and Texas A&M are going to conduct a joint industry research project (JIP) to enable state and federal regulators, and the drilling industry to be proactive in defining situations where UBD can be successfully applied offshore. This project will also extend to other international marine areas and regulators.

Gas outlook is scary. In recent testimony before the U.S. House Subcommittee on Energy and Mineral Resources of the Committee on Resources, Matt Simmons, President of Simmons & Co. International, described the growing natural gas supply imbalance and offered some solutions to correct it. Simmons says that natural gas demand will grow faster than once thought as America increases its electricity use, while supply continues to stay flat. Furthermore, the concept that gas supplies could grow to even partially meet a demand of around 30 Tcf a year is becoming a remote dream. If supply falls by as much as 10%, and the drop could be far worse, this could become America’s most serious energy wake-up call since the 1973 oil shock. In March 2000, the National Petroleum Council (NPC) issued a report that presented a compelling case as to why gas supplies must grow from 22 Tcf to almost 30 Tcf by 2010. However, the U.S. already has on stream a number of gas-fired power plants that is very close to that which the NPC study assumed would be built by 2010. Simmons says there are almost as many additional gas-fired plants still under construction as have been built thus far, despite cancellations right and left in the wake of Enron and other energy traders’ scandals.

Upstream activity remains disconnected from prices. When our readers and industry friends ask us where E&P activity levels are headed, we try to give them a short-term forecast based on supply-and-demand levels, and oil and gas price trends. Sometimes, we factor in overriding political issues or major news stories that rule the day. Occasionally, we run into periods where there are no good reasons for activity to be up or down. Right now is one of those strange periods. When was the last time that West Texas Intermediate and natural gas spot prices in the U.S. stayed consistently at or above $25/bbl and $3/Mcf, yet most E&P stats remained in the doldrums? Ah, you can’t answer that one, can you good reader, because these are not normal, reasonable times. What is underway at present is a distinct "disconnect" between price levels and industry behavior.

Can Norwegian and British activity be sustained? So far, high oil prices have strengthened the bargaining position of North Sea governmental landowners versus the oil and gas industry. Politically, the UK Treasury Department and Norway’s Finance Ministry have got the upper hand. The practical outcome is a tax increase on UK E&P operations, and the deferral of hoped-for tax reductions in Norway.

Offshore U.S. terrorism risk insurance. As reported by IADC in its August Drill Bits, the U.S. Congress has been deliberating the Terrorism Risk Insurance Act of 2002, (S.2600), which would provide the insurance industry additional security in the wake of the September 11 attacks. Lloyd’s of London has asked IADC for its support of key amendments to S.2600 necessary to provide adequate coverage for U.S. Outer Continental Shelf (OCS) oil / gas facilities. The amendments are also supported by the API.

A big Brazilian find. Petrobras announced a huge discovery north of Campos basin, with estimated reserves of at least 600 million boe. This was the result of appraisal drilling, when a horizontal extension, Well 3-ESS-110HPA, drilled last month by the Noble Paul Wolff, tested 3,000 bpd of 17°API oil. Calculations indicated that production could have been as high as 20,000 bpd. A six-month extended well test will now be conducted using the largest ESP ever installed, with over a 20,000-bpd capacity.

Ethanol mythanol. First and foremost, forget about the truth. There is none. Just opinions and distortions. The ethanol issue has become so politicized that I’m reminded of Dante’s sign at the Gate, "Abandon all hope [of truth], ye who enter here." There are at least 50 farming co-ops, state corn-growers associations, political action committees, methanol organizations and so on involved in this controversy, and they have pummeled the media with their own spin, be it pro or con, such that facts are impossible to discern. This is sort of a civil war: the Midwest corn-growing region versus the East and West Coasts. That being said, here’s this editor’s take on it, in the form of three myths about ethanol.

TotalFinaElf became operator of the Tempa Rossa oil field in the Bassilicata region of southern Italy with its purchase of Eni’s 25% interest in the Gorgoglione Concession. Development of this field is slated for next year with initial production in 2006.

A significant milestone was reached on July 28, 2002, when the 25th anniversary of the first oil flow through the Trans-Alaska pipeline was marked. On that date in 1977, Alaska’s first commercial oil reached the port of Valdez. Four days later, the Arco Juneau departed from Valdez as the first supertanker to carry North Slope crude to market. Since then, more than 13.5 billion bbl of oil have traversed the pipeline. In 1977, Alaska’s population was roughly 410,000, compared to about 635,000 today. Concurrently, the state government’s budget has risen to $7 billion from $1 billion. Noting the silver anniversary of first oil, Washington D.C.-based Alyeska Pipeline Service executive Willie Hensley said that Alaska’s ability to function as a state would not be possible without North Slope oil. "In my mind, had Prudhoe Bay not been (found in 1968), we might have had to revert to territorial status." Before that, Alaska struggled on federal subsidies.

Kerr-McGee Corp. elected Dave Hager corporate VP of exploration and production, responsible for worldwide exploration and production team. Ken Baker, Joe Callahan and Daniel McCaw joined Superior Energy Services as staff engineers for its well intervention group.

Sept. 2002 Vol. 223 No. 9  Industry Stats  Source: Baker Hughes Inc.

Sept. 2002 Vol. 223 No. 9  Industry Stats    International Geophysical Activity     Seismic crews working   Regions Aug 2002 Jul 2002 Aug 2001   Africa 24 24 24 &n

Sept. 2002 Vol. 223 No. 9  Industry Stats    International Offshore Rigs   U.S. Gulf of Mexico Europe/ Mediterranean    Worldwide    July 2002 Mobile Platform Mobile Platfo

Sept. 2002 Vol. 223 No. 9  Industry Stats    International Rotary Rig Count Monthly average   Jul 2002 Jul 2001 Jun 2001 Region Land Offshore Land Offshore Land Off

Sept. 2002 Vol. 223 No. 9  Industry Stats 

Sept. 2002 Vol. 223 No. 9  Industry Stats 

Sept. 2002 Vol. 223 No. 9  Industry Stats    U.S. Geophysical Activity     Seismic crews working   Regions Jul 2002 Jun 2002 Jul 2001   Rocky Mountains 6 5

Sept. 2002 Vol. 223 No. 9  Industry Stats 

Sept. 2002 Vol. 223 No. 9  Industry Stats  Red Line = 2001 Blue Line = 2002

Sept. 2002 Vol. 223 No. 9  Industry Stats    U.S. Rotary Drilling Rigs Monthly average   State and Area    Jul 2002 Average    Jul 2001 Average    Jun 2002 Average % Diff.   Jul 2002 &

Sept. 2002 Vol. 223 No. 9  Industry Stats    Workover Rig Count Source: Baker Hughes Inc.   Region May 2002 Jun 2002 Jul 2002 Jul 2001 % chng mth. ago % chng yr. ago   Texas Gulf Coast

Sept. 2002 Vol. 223 No. 9  Industry Stats  Source: Baker Hughes Inc. Red Line = 2001 Blue Line = 2002

Sept. 2002 Vol. 223 No. 9  Industry Stats    World Oil Production Million barrels per day        Jul 2002 Jun 2002 Avg 2001 Avg 2000   OPEC - Crude Oil   &n

Sept. 2002 Vol. 223 No. 9  Industry Stats 

Advanced Schedule of Articles Coming In November 2002. . .   What's New In Production     American Central Gas Technologies and eLynx detail their experience helping Devon Energy in East Texas field with 432 operating wells¾ one of the largest natural g