VOLUME FIFTY FIVE DEVELOPMENTS IN PETROLEUM SCIENCE HYDROCARBON EXPLORATION AND PRODUCTION 2ND EDITION DEVELOPMENTS IN PETROLEUM SCIENCE 55 Volumes 1-7, 9-18, 19b, 20-29, 31, 34, 35, 37-39 are out of print. 8 Fundamentals of Reservoir Engineering 19a Surface Operations in Petroleum Production, I 30 Carbonate Reservoir Characterization: A Geologic-Engineering Analysis, Part I 32 Fluid Mechanics for Petroleum Engineers 33 Petroleum Related Rock Mechanics 36 The Practice of Reservoir Engineering (Revised Edition) 40a Asphaltenes and Asphalts, I 40b Asphaltenes and Asphalts, II 41 Subsidence due to Fluid Withdrawal 42 Casing Design – Theory and Practice 43 Tracers in the Oil Field 44 Carbonate Reservoir Characterization: A Geologic-Engineering Analysis, Part II 45 Thermal Modeling of Petroleum Generation: Theory and Applications 46 Hydrocarbon Exploration and Production 47 PVT and Phase Behaviour of Petroleum Reservoir Fluids 48 Applied Geothermics for Petroleum Engineers 49 Integrated Flow Modeling 50 Origin and Prediction of Abnormal Formation Pressures 51 Soft Computing and Intelligent Data Analysis in Oil Exploration 52 Geology and Geochemistry of Oil and Gas 53 Petroleum Related Rock Mechanics 55 Hydrocarbon Exploration and Production VOLUME FIFTY FIVE DEVELOPMENTS IN PETROLEUM SCIENCE HYDROCARBON EXPLORATION AND PRODUCTION 2ND EDITION By Frank Jahn, Mark Cook and Mark Graham TRACS International Consultancy Ltd. Aberdeen, UK Amsterdam Boston Heidelberg London New York Oxford Paris San Diego San Francisco Singapore Sydney Tokyo Elsevier Radarweg 29, PO Box 211, 1000 AE Amsterdam, The Netherlands Linacre House, Jordan Hill, Oxford OX2 8DP, UK First edition 1998 Second edition 2008 Copyright r 2008 Elsevier B.V. All rights reserved No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise without the prior written permission of the publisher Permissions may be sought directly from Elsevier’s Science & Technology Rights Department in Oxford, UK: phone (+44) (0) 1865 843830; fax (+44) (0) 1865 853333; email: [email protected]. Alternatively you can submit your request online by visiting the Elsevier web site at http://www.elsevier.com/locate/permissions, and selecting Obtaining permission to use Elsevier material Notice No responsibility is assumed by the publisher for any injury and/or damage to persons or property as a matter of products liability, negligence or otherwise, or from any use or operation of any methods, products, instructions or ideas contained in the material herein. Because of rapid advances in the medical sciences, in particular, independent verification of diagnoses and drug dosages should be made Library of Congress Cataloging-in-Publication Data A catalog record for this book is available from the Library of Congress British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library ISBN: 978-0-444-53236-7 ISSN: 0376-7361 For information on all Elsevier publications visit our website at books.elsevier.com Printed and bound in Germany 080910111210987654321 CONTENTS Principal Authors ix Introduction: About this Book xi 1. The Field Life Cycle 1 1.1. Gaining Access Phase 1 1.2. Exploration Phase 2 1.3. Appraisal Phase 3 1.4. Development Planning 4 1.5. Production Phase 5 1.6. Decommissioning 6 2. Petroleum Agreements and Bidding 9 2.1. The Invitation to Bid 9 2.2. Motivations and Form of Bid 12 2.3. Block Award 13 2.4. Fiscal System 14 2.5. Farm-in and Farm-out 14 2.6. Unitisation and Equity Determination 16 3. Exploration 19 3.1. Hydrocarbon Accumulations 19 3.2. Exploration Methods and Techniques 24 4. Drilling Engineering 47 4.1. Well Planning 47 4.2. Rig Types and Rig Selection 48 4.3. Drilling Systems and Equipment 52 4.4. Site Preparation 60 4.5. Drilling Techniques 62 4.6. Casing and Cementing 72 4.7. Drilling Problems 76 4.8. Costs and Contracts 79 v vi Contents 5. Safety and the Environment 83 5.1. Safety Culture 83 5.2. Safety Management Systems 86 5.3. Environment 88 5.4. Current Environmental Concerns 91 6. Reservoir Description 95 6.1. Reservoir Geology 95 6.2. Reservoir Fluids 108 6.3. Data Gathering 141 6.4. Data Interpretation 152 7. Volumetric Estimation 173 7.1. Deterministic Methods 173 7.2. Expressing Uncertainty 177 8. Field Appraisal 191 8.1. The Role of Appraisal in the Field Life Cycle 191 8.2. Identifying and Quantifying Sources of Uncertainty 192 8.3. Appraisal Tools 194 8.4. Expressing Reduction of Uncertainty 195 8.5. Cost-Benefit Calculations for Appraisal 196 8.6. Practical Aspects of Appraisal 199 9. Reservoir Dynamic Behaviour 201 9.1. The Driving Force for Production 201 9.2. Reservoir Drive Mechanisms 203 9.3. Gas Reservoirs 210 9.4. Fluid Displacement in the Reservoir 217 9.5. Reservoir Simulation 222 9.6. Estimating the Recovery Factor 223 9.7. Estimating the Production Profile 224 9.8. Enhanced Oil Recovery 226 10. Well Dynamic Behaviour 229 10.1. Estimating the Number of Development Wells 229 10.2. Fluid Flow Near the Wellbore 231 10.3. Horizontal Wells 234 10.4. Production Testing and Bottom Hole Pressure Testing 237 10.5. Tubing Performance 241 10.6. Well Completions 244 Contents vii 10.7. Completion Technology and Intelligent Wells 249 10.8. Artificial Lift 254 10.9. Subsea vs. Platform Trees 260 11. Surface Facilities 265 11.1. Oil and Gas Processing 266 11.2. Facilities 291 12. Production Operations and Maintenance 311 12.1. Operating and Maintenance Objectives 312 12.2. Production Operations Input to the FDP 312 12.3. Maintenance Engineering Input to the FDP 319 13. Project and Contract Management 325 13.1. Phasing and Organisation 325 13.2. Planning and Control 329 13.3. Cost Estimation and Budgets 332 13.4. Reasons for Contracting 334 13.5. Types of Contract 335 14. Petroleum Economics 337 14.1. Basic Principles of Development Economics 337 14.2. Constructing a Project Cashflow 339 14.3. Calculating a Discounted Cashflow 351 14.4. Economic Indicators 356 14.5. Project Screening and Ranking 357 14.6. Sensitivity Analysis 359 14.7. Incorporating Inflation 360 14.8. Exploration Economics 362 15. Risk Analysis 365 15.1. Risk Definition and Unit of Measure 365 15.2. Summary of Risk Analysis Techniques in Exploration and Appraisal 366 15.3. Risk Analysis for Major Capital Investments in Projects 369 15.4. Managing Commercial Risk 383 16. Managing the Producing Field 385 16.1. Managing the Subsurface 386 16.2. Managing the Surface Facilities 394 16.3. Managing the External Factors 399 16.4. Managing the Internal Factors 401 viii Contents 17. Managing Decline 405 17.1. Infill Drilling 405 17.2. Workover Activity 407 17.3. Enhanced Oil Recovery 410 17.4. Production De-Bottlenecking 412 17.5. Incremental Development 415 18. Decommissioning 419 18.1. Legislation 419 18.2. Economic Lifetime 420 18.3. Decommissioning Funding 421 18.4. Decommissioning Methods 422 References and Bibliography 427 Terms and Abbreviations 429 Subject Index 433 PRINCIPAL AUTHORS Frank Jahn has worked as a Petroleum Geologist in Brunei, Thailand, the Netherlands, the UK and Australia. After 11 years with a multinational oil company he co-founded TRACS International in 1992. He has designed and teaches multidisciplinary training courses related to oil and gas field exploration and development worldwide, particularly graduate development programmes. He is now based in Perth, Australia where he works as a petroleum consultant. Mark Cook joined the oil industry in 1981 as a reservoir engineer, and worked for 11 years in a multinational oil company in the Netherlands, Oman, Tanzania and the UK. In 1992 he co-founded TRACS International, where he is currently CEO, based in Scotland. His specific technical interests lie in petroleum engineering, risk analysis and economics, and he remains involved in training course development and delivery. Mark Graham has 29 years of oil industry experience, working initially as a wireline logging engineer with Schlumberger in the Middle East, followed by more than 10 years with a multinational oil company in both operations and petroleum engineering positions in the Far East and North Sea. He co-founded TRACS International, where he is a Director, currently responsible for general business development in addition to working as a petroleum engineer, economist and project manager. We thank Fiona Swapp for support in the graphics and publishing of this book, and for technical updates provided by TRACS International team members, particularly Liz Chellingsworth, Bjorn Smidt-Olsen, Jonathan Bellarby and Jenny Garnham. TRACS International Training Ltd., and TRACS International Consultancy Ltd., can be contacted through:- Tel: +44 (0)1224 321213 Fax: +44 (0)1224 321214 email: [email protected] website: http://www.tracs.com Address: Falcon House, Union Grove Lane, Aberdeen, AB10 6XU, United Kingdom ix This page intentionally left blank INTRODUCTION:ABOUT THIS BOOK ‘Hydrocarbon Exploration and Production’ takes the reader through all the major stages in the life of an oil or gas field, from gaining access to opportunity, through exploration, appraisal, development planning, production and finally to decommissioning. It straightforwardly explains the fiscal and commercial environment in which oil and gas field development takes place. This comprehensive and current introduction to the upstream industry, is useful to industry professionals who wish to be better informed about the basic technical and commercial methods, concepts and techniques used. It is also intended for readers who provide support services to the upstream industry. It draws together the many inter-disciplinary links within the industry in a clear and concise manner, while pointing out the commercial reason for the activities involved in the business – each chapter is introduced by pointing out the commercial application of the subject.