What's new in production

	Vol. 225 No. 3
ROBERT E. SNYDER, EXECUTIVE ENGINEERING EDITOR

Wyoming EOR project. Derek Oil & Gas Corp. signed farm-in and joint operating agreements with Ivanhoe Energy, under which the partners are now proceeding with the pilot program and initial project development of Derek's LAK Ranch oil project in Wyoming, a potential 100-million-barrel oil resource. They are targeting a quick production ramp-up to 4,500 bopd, and more thereafter. Ivanhoe is the project operator. 

The 7,500-acre project is located in the prolific Powder River basin of NE Wyoming. The resource was explored from the 1960s forward. However, because technologies for the efficient recovery of “cold” oils – which require steam heating for liquefication and recovery – were not to come into widespread use until the 1990s, LAK Ranch wasn't developed at that time. Generically, “cold” oil is highly viscous and requires heating processes so it will liquefy and flow. 

Two technological breakthroughs, in particular, have been opening tremendous new oil resources of this type. The first of these newer technologies is the steam-assisted gravity drainage (SAGD) process utilizing pairs of horizontal wells 10 to 20 ft apart, with boreholes extending up to 3,000 ft along strike near the base of the reservoir. The upper well injects steam and the lower well produces the slightly heated free-flowing oil. The second advance has been development of new, more-accurate horizontal drilling technology. At LAK, the entire process is further enhanced by shallow reservoir depth (150 ft to 2,500 ft) and the steeply dipping bed angle of 30°, allowing the oil to flow by gravity down to the horizontal producing well. 

The oil found there is a mid-weight “cold” oil, and is naphthenic, with no paraffin and only low sulfur content. Thus the oil commands a full non – discounted price. Ivanhoe has successfully developed a large EOR project near Bakersfield, California, and is taking other initiatives relating to thermal recovery projects from California to China. It is also using the newest technological breakthroughs for upgrading and lower-cost recovery of heavier oils called Rapid Thermal Processing, developed by Ensyn Petroleum Int'l., of Boston. This process lowers by up to 70% the gas energy costs used to produce steam for the SAGD cycle while upgrading oil quality. 

The “secret” of the Ensyn process is that it reduces or eliminates need for high-priced gas conventionally used for steam generation, and which can comprise up to 40% of the extraction cost per barrel oil recovered. Derek and Ivanhoe are filing a development plan with the Wyoming Oil and Gas commission and expect to start steaming operations in first quarter 2004. Initially, steam will be injected into the existing horizontal steam well, and fiber optic equipment will be utilized to monitor temperature buildup along the 1,800-ft lateral. 

The partners are also targeting drilling five additional vertical steam-injection wells by mid-2004. Following the pilot phase, they will launch an expanded development. The initial program could grow to more than 20 producers and oil production rates exceeding 4,500 bopd. With more productive acreage, daily production could exceed 10,000 bopd. 

US energy and the Energy Bill. US Energy Secretary Spencer Abraham's talk to the Cambridge Energy Research Associates' annual conference, and an interview by the Houston Chronicle addressed federal concerns about long-term energy supplies. In some of Spencer's comments, he said, “What we want is an energy bill that modernizes the electricity sector, that allows for more energy efficiency and conservation on the one hand, and energy production on the other, and a bill that addresses some of the crises that we are always encountering.” 

But the long-term trends are for huge increases in the demand for gas that will be more than the supply levels projected for North America. “In 20 to 25 years, the expectation based on studies by the National Petroleum Council is that we may have to import as much as 25% of our gas from outside North America.” Spencer thinks LNG is going to be very important. “To meet our long-term gas challenges, we need first of all, to maintain a diverse fuel mix. We can't just have it the case that every new power plant is a gas-fired plant. We need to keep coal in the mix. We need to keep nuclear energy in the mix.” 

“One of the reasons the president has advocated more domestic energy production in oil and going into Alaska to produce more oil is to try to improve our energy security. One reason we need to pass an energy bill is to be able to begin addressing some of these issues of price spikes. We believe the long-term way to address our energy dependence, the environmental issues that surround the use of fossil fuel and the price of fuel in terms of motor vehicles is to make hydrogen the primary fuel source so that this very abundant fuel would be available to Americans.” 

LNG moving ahead, globally. The US Dept. of Energy Information Administration (EIA) forecasts that, during the next 20 years, natural gas will be the fastest growing component of world energy consumption. And liquefying gas provides a means of moving the resource long distances when pipeline transport is not feasible. Tanker transport capacity is increasing. Some 200 LNG tankers are expected to be in service by 2006--more than 50 are under construction, according to The Offshore International Newsletter. 

Higher gas prices, lower LNG production costs and the desire of gas producers to boost profits have moved LNG plans forward around the world. In 2002, 12 countries imported 5.4 Tcf of LNG. Japan is the world's largest importer. South Korea is second. Worldwide annual liquefaction capacity is around 6.6 Tcf and is expected to reach 9.4 Tcf by 2007. Currently, the world has a regasification capacity greater than 15.1 Tcf, OIN notes. In the US, the government has approved construction of an LNG port offshore Louisiana by El Paso. The project is the second approval issued under the Deepwater Ports Act of 1974 – the first approval, also for a project offshore Louisiana, was issued in November 2003 to ChevronTexaco subsidiary Port Pelican. 

McMoran Exploration is actively pursuing establishment of an energy hub to consist of a gas receiving, processing, storage and distribution facility and an offshore support hub for deepwater oil/gas operations at Main Pass Block 299 in the Gulf of Mexico.