What's new in production

	Vol. 225 No. 2
ROBERT E. SNYDER, EXECUTIVE ENGINEERING EDITOR

Shell in the news. Shell and BP's Na Kika development in Mississippi Canyon 474 in the deepwater US Gulf began producing in December. Initial production from the first well was over 100 MMcfd gas, and the field is expected to produce at an estimated 110,000 bopd and 525 MMcfd gas. The 300-MMboe Na Kika complex comprises five independent fields, including Kepler, Ariel, Fourier, Herschel and East Antsey. The Na Kika semisubmersible production facility is moored in 6,300-ft water.

Kepler, Ariel and Herschel are primarily oil, while Fourier and East Antsey are mainly gas. A sixth field, Coulomb, in 7,600 ft of water and 100% owned by Shell, will be tied back to the host facility in the near future. Shell and BP each own 50% in Na Kika. Shell was operator during construction; BP will reportedly take over for the production phase.

New LNG terminal. In Baja California, in northwest Mexico, the Royal Dutch Shell Group and Sempra Energy have agreed to build a $600-million LNG terminal to take advantage of more demand and higher prices. The companies will form a 50/50 JV to build, own and operate the receiving terminal. Each will pay an equal share of the investment and take half of the terminal's capacity. The project is among the first of more than 30 North American LNG projects proposed to help cover an expected supply shortfall in the coming years.

Construction on the terminal is to begin in mid-2004, with operations to start in early 2007. The terminal, to be located in Costa Azul on Mexico's west coast, will be able to supply one Bcf of gas per day. About 500 MMcfd will be used to meet demand in western Mexico, while surplus gas will be used in the southwest US. Sempra said it agreed with BP to buy 3.7 million tons of LNG annually for 15 years from Indonesia's Tangguh fields to supply the terminal.

World gas production to double. Among the facts/ figures contained in a new study of future global gas supply launched in December by energy analysts Douglas-Westwood, global annual production of natural gas, currently some 2,600 Bcm (92 Tcf) is expected to grow to 4,755 Bcm (168 Tcf) per year by 2025, or 2.75% per annum. Estimates of capital required for this range from $25 billion (B) to $40 B/yr, with a total expenditure to 2025 up to $630 B. Of this, some $520 B will be required to build infrastructure; the remainder will be for E&P. And, considering LNG alone, over $39 B could be spent over the next five years on LNG plants, carriers and import terminals.

Study author Dr. Michael Smith of EnergyFiles Ltd. said, “Total remaining gas reserves are huge, estimated at 275 Tcm (9,708 Tcf), with Russia holding the largest share. A significant portion is low-risk gas, located in the Middle East and other moderately remote areas.

“The international gas supply trade is set to double from around 24% in 2003, to perhaps 50% by 2025, a level at which oil trade is now,” Smith added. “And a surge in pipeline building across countries and borders is forecast. Since 1980, LNG exports have increased by 6.5% per year to over 150 Bcm, from 38 Bcm. LNG is now the world's fastest growing fuel, and growth is expected to average 10% per year, so that by 2025, it will be conveying 1,240 Bcm (43.8 Tcf) of gas equivalent or 26% of total yearly production.” For more information, contact John Westwood at: john@dw-1.com.

Alternative solutions for stranded gas. Nexant, Inc. announced that commercial prospects for synthetic fuels and commodity chemicals produced from low-priced stranded gas reserves appear increasingly favorable. These findings are detailed in a recent report, “Stranded gas utilization: Steps to commercialization.”

There are several options for monetizing natural gas, of which the use of pipelines is the most mature and developed, followed by liquefaction and transport as LNG. Emerging technologies to convert remote gas to higher-value fuels and chemicals have already been commercialized by Sasol and Shell. Other technology developers are now approaching the commercialization stage, offering potential products that include synthetic fuels and chemicals produced directly from gas, fuels and chemicals from gas via methanol and electric power from methanol.

In the gas-to-fuels and gas-to-power categories, some of the value-added options for monetizing natural gas are: 1) gas-to-liquids – naphtha, middle distillate and diesel fuel; 2) fuel grade methanol for power and fuel; 3) dimethyl ether for power and as a diesel substitute; 4) methanol-to-gasoline; 5) olefin to gasoline and distillates; and 6) fuel cells – both vehicle and stationary applications.

From a market perspective, fuel products produced from natural gas (gasoline and diesel) represent the largest potential global market and are essentially sulfur free, an important consideration. Production of low-sulfur diesel substitutes shows the most promise on a rate-of- return basis. Technologies for producing synthetic fuel via GTL processes are in various stages of development, with the more commercially proven ones showing a great potential for the production of fuels and higher value products. An analysis shows that these GTL technologies are not competitive with conventional petroleum-based fuels at stranded gas prices as high as $1.00/MMBtu, but are highly promising at $0.50/MMBtu.

China's first solid expandable tubular system. China Petroleum and Chemical Corp. (Sinopec), and Enventure Global Technology have successfully installed the first Solid Expandable Tubular (SET) System in China. The cooperative effort resulted in the installation of 1,178 ft of 4-1/4-in. Openhole Liner (OHL) run through 5-1/2-in. base casing and expanded in a drilled, reamed and cemented open hole. The new hole was drilled through a 100-ft window milled through the base casing. The new liner was expanded and sealed into the base casing to recomplete the well.

The system was installed in a well in the Shengli field of Shandong Province, near the city of Dongying. The SET System, used as a production liner in this application, enables Sinopec to step out farther into the reservoir, recomplete the well and restart production from the oil reservoir with a larger hole size than conventional oilfield technology could provide. This first application of SET technology in China and its 200th SET installation are important milestones for the entire Enventure team, the company said.