What's new in production

	Vol. 224 No. 4
ROBERT E. SNYDER, EXECUTIVE ENGINEERING EDITOR

Panel studies Alaskan operations effects. A panel of scientists, oil industry consultants and environmentalists organized by the National Academies – the nation’s closest thing to a scientific arbitrator – recently completed a two-year assessment of effects of oil/gas development on Alaska’s North Slope. The panel’s task was to measure the effects of 35 years of seismic activity, drilling/production and pipeline construction. A short article by Andrew Revkin of the New York Times says a leading question in the debate over drilling in the Arctic National Wildlife Refuge is “whether wilderness can coexist with oil wells on America’s only Arctic Coast.” 

The research panel was not asked to weigh in on the fate of the Wildlife Refuge, but their report was eagerly awaited by both drilling supporters and foes. In general, the panel found that, “wildlife had generally adapted well; but the wilderness – in the sense of wilderness and sweep and emptiness – was another matter.” For example, photos from the air show faint marks of 15-year-old vehicle tracks across the tundra.

Even these faint trails left by the least-damaging vehicles could “affront the residents and degrade the visual experience of the landscape,” the report said. The report’s authors’ simple parting message was, “Continued expansion will exacerbate existing effects and create new ones. Whether the benefits derived from oil/gas activities justify acceptance of foreseeable and undesirable cumulative effects is an issue for society as a whole to debate and judge.” That sounds like fun.

Companies replacing reserves. Several oil companies have sent releases noting how new reserves have replaced their 2002 production. Notably strong activity was reported by one in particular. Marathon Oil Corp. reported that it replaced 262% of its worldwide oil/gas production during 2002, excluding net sales of reserves in place. These reserves were added at a competitive cost of $4.61/bbl oil equivalent (boe) through acquisitions, discoveries, extensions, revisions and improved recovery. Its total reserves increased 237 MMboe, or 23% at year-end 2002, to 1,383 MMboe. 

Of the total 183 MMboe of reserve additions, excluding sales and acquisitions, about 58 MM were in the US and 125 MM were international. The US additions were primarily in the Powder River basin, the Rocky Mountain area, and Alaska. It expanded its coalbed gas interests through a property exchange, resulting in addition of some 110 Bcf of Powder River gas reserves. Internationally, 103 MMboe of proved reserves were added through Equatorial Guinea Phase 2A and 2B expansion projects, which received government approval during 2002. Current net proved reserves in Equatorial Guinea total 300 MMboe. 

Big PEMEX contracts. Schlumberger Oilfield Services, in partnership with ICA Fluor Daniel, announced award of an unprecedented integrated oilfield services contract from PEMEX for the Chicontepec reservoir, the largest ever awarded in Mexico. The $500-million contract to recover gas, light and heavier oil spans four years. The consortium will undertake field studies, drilling, well completion and intervention services, surface infrastructure, and production facilities development in the Chicontepec onshore oil field for PEMEX E&P, a subsidiary of the state-owned company. The field is located 155 miles NE of Mexico City in the states of Veracruz and Puebla. 

The initial stage of large-scale development will comprise a field study of several blocks, drilling 200 wells and completion of 50 additional wells. The consortium will complete and fracture the 250 wells, and establish the production regime and injection strategies. The contract also includes providing manned rigs, all associated surface facilities and required infrastructure, such as pipelines, compression and storage. 

And in another PEMEX E&P action, Schlumberger Ltd. announced a $60-million, two-year contract to provide information management solutions to all PEMEX upstream asset units. The solution will comprise lifecycle information management services from Stumberger Information Solutions and SchlumbergerSema change management expertise, enabling the operator to significantly enhance data access, administration and analysis – leading to faster/improved decision making. 

Important world oil supply report. Douglas-Westwood Ltd. has completed a major study, the second edition of The World Oil Supply Report, a 280-page study that says the world is still drawing down its oil reserves, faster than ever. And, even assuming no growth in demand, it is likely that by the end of this decade, OPEC will have to be in a position to increase its output by over 1 million bbl/day per year, every year, to offset declines in non-OPEC output. The overall conclusion of the extensive research carried out for this report into all potential sources of oil, is that the world’s known and estimated, yet-to-find reserves cannot satisfy even the present level of production of some 74 MMbpd beyond 2020. Any growth in global economic activity only serves to increase demand and bring forward the peak year. One percent demand growth brings the year to 2016, when production is expected to peak at around 85 MMbpd. And with 2% growth, peak production of around 90 MMbpd occurs in 2012. Non-OPEC decline is expected to begin around 2007, whatever the demand. 

The report notes, “At the end of 2002, 99 countries had produced oil or were expected to produce it in the future. Of these, 49, including the US and Russia, are well past peak; 11, including the UK and Norway, are just beginning to see declining production; and 12, including Australia and China, will reach peak soon. The remainder will see peaks within the next 25 years. Demand hardly changed from 2001 to 2002, although demand growth over the next few years is still expected to average 1% per year. Whatever happens in Iraq, it is likely to have low output during 2003, but beyond that, an easing of constraints on investment should result in a rise in capacity to generate revenue for reconstruction.”

The report stresses that oil and service companies must develop strategies for survival. Decisions need to be made on where and what energy sources to focus on over the long term. Profits already need to be at least partly employed in bringing to market other forms of energy. For further information, see: www.dw-1.com, or e-mail John Westwood at john@dw-1.com.