DUTCH SEEK TO SPARK OFFSHORE DEVELOPMENT

The Dutch government is negotiating with operators in a bid to keep offshore development going.

Operators in the Dutch North Sea view the area as played out under current fiscal terms.

Prospective areas are almost covered by 3D seismic surveys, and a large part of available acreage is licensed to operators. A number of marginal fields await development, but operators say fiscal terms need to be more favorable.

The government move follows a report by, operators' association Nederlandse Olie en Gas Exploratie en Produktie Associatie (Nogepa), which proposed a number of changes that would make further investment in the sector worthwhile.

Meanwhile, Amoco Netherlands Petroleum Co. has begun production in what may be one of the last major field developments in Dutch waters: the P15/P18 fields. The company plans to make this a hub for further projects in the southern sector.

In the near shore area, a 10 year moratorium preventing drilling on environmentally sensitive licensed acreage in the Waddenzee has expired. License holders are preparing to begin exploration on one of the few remaining undrilled areas in Dutch water.

NOGEPA REPORT

Nogepa sent a report to the Dutch Ministry of Economic Affairs last September, outlining requirements to keep development going in the sector.

"Most acreage on the Dutch continental shelf has been investigated thoroughly, including widespread coverage by 3D seismic surveys," a ministry official told Oil & Gas Journal.

"Based on this information," he said, "the Dutch Geological Survey estimates more than 6 tcf of gas lies undiscovered. There are 75 marginal fields still undeveloped, typically having reserves of 150 bcf of gas or less."

Nogepa said 25% of these reserves could be developed profitably if the Dutch government improved the exploration and production climate.

The operators' group suggested these main areas for change:

Offtake terms under current gas purchase contracts.
Fiscal conditions, particularly government take and royalties.
The state right to buy into projects at development approval stage.

GAS POLICY

Under current terms, monopoly gas supply company Nederlandse Gasunie NV sets offtake conditions for gas fields. These form part of the government's small fields policy, which is designed to deplete small gas reservoirs in a bid to prolong the life of the massive onshore Groningen field.

"Up to now the small fields policy has worked," the ministry official told OGJ. "Small offshore fields have helped eke out Groningen field reserves. Groningen is a national asset because gas can be turned on and off like a tap without spoiling reservoir characteristics."

Groningen's estimated 95 tcf of original gas reserves are said to be about half depleted. If that is correct, another 30 years field life is expected. The government aims to keep the field on stream another 50 years.

Until recently, Gasunie demanded that the rate of depletion of large gas fields should be set so field life is at least 14 years. This affected the economics and methods of field development.

For small gas fields, with less than 4 bcm (140 bcf) of reserves, a higher offtake rate was allowed. Gasunie recently decided to raise the limit to cover fields with less than 6 bcm (210 bcf) of gas reserves.

Gasunie also requires each development to have enough facilities to handle production of as much as 50% more than the agreed plateau level. This is so all fields can be used to cope with demand peaks. The extra capacity increases costs of field developments.

STATE BUY INS

Under current conditions, the Dutch government can buy into any project at development approval stage. Participation is handled through Energie Beheer Nederland (EBN).

When the government approves a development, EBN can take either a 50% or a 40% interest in the license and pay back a proportionate share of exploration costs. In this way, the government avoids paying for unsuccessful exploration.

Nogepa said either state participation should be abolished or the state should participate fully after the award of an exploration license.

"It is important that Holland has a stable fiscal climate to enable oil and gas companies to carry, out long term investment planning," said the government official. The government wants to keep a stable climate but accepts that something is needed to make marginal fields attractive. The government wants to see them developed. We are going to see what we can do to attract investment by oil and gas companies."

NEGOTIATIONS

While the government is holding discussions with Nogepa with a view to revitalizing the Dutch offshore sector, it is concerned that it may not be able to offer enough incentive with oil prices low and expected to remain so for some time.

The official said the ministry will enter negotiations with no fixed limits on incentives in mind but aware that any agreed package of changes must ultimately be approved by the Dutch parliament.

"The politicians can compare the costs of offshore production with what it would cost to raise production from Groningen field," said the official. "Extra Groningen output would be very cheap compared with further offshore development."

Other factors affecting future offshore gas developments were said to be the possibility of purchasing imported gas and the relative cheapness of developing onshore gas discoveries.

"Bearing all these factors in mind, there is a limit to what the ministry can offer," the official said.

Government was also said to want a commitment from oil operators that an)7 concessions from the ministry will meet with investment by companies.

P15/P18 FIELDS

Amoco's $500 million P15/P18 development is rated as one of the company,'s most successful projects in the last 10 years by Scott Urban, president and general manager of Amoco Netherlands.

Urban based his claim on the exploration and appraisal drilling record, technical challenges overcome in the first Dutch gas field to have offshore processing to sales specification, and use of facilities for processing third party reserves.

The P15/P18 project involved use of a central gas processing platform, four satellite wellhead platforms, three subsea tie backs and a new gas export pipeline to develop eight gas reservoirs.

The P15 D central processing platform is bridge linked to Amoco's Rijn C oil production platform on Block P15. Gas liquids are sent ashore through Rijn's oil pipeline, while gas is sent via a 26 in. pipeline to Maasvlakte 40 km away, for transmission to the national gas grid.

P15/P18 earlier was scheduled to reach average production of 300 MMcfd during first quarter 1994. But Amoco reached the target volume in December and has raised production for short periods to full capacity of 500 MMcfd Ashen asked to do so by Gasunie.

Amoco decided to link development of P15/P18 to existing Rijn infrastructure to trim costs, extend the life of Rijn facilities, and share offshore support facilities.

The P15/P18 operations center is on Rijn C platform. Existing Rijn platform crews operate the unmanned platforms of P15/P18. Development involved no increase in the crew of 2530, although crew members had to be trained in gas processing operations.

DEVELOPMENT CHOICES

Amoco's decision to process gas offshore was not clear cut financially, said Michael Baur, P15/P18 project manager. But comparing the cost of building an onshore plant with the cost of an offshore platform was favorable when environmental impact was considered.

An offshore platform would not involve onshore construction with potential disruption of local communities, while Rijn platform facilities would result in some investment saving, extend the life of Rijn, and provide facilities for produced water clean up.

Wellhead platforms were chosen for reservoirs where drilling of other prospects was planned and where reservoir depletion will be slow. Baur estimated overall field life at 15 20 years.

P15/P18 gas contains 2% carbon dioxide and is mildly corrosive. Hence facilities for twice weekly pigging of pipelines are required.

Single well subsea developments were chosen for small reservoirs that will be drained quickly.

Because the export pipeline is the only one in the southern Dutch North Sea, Amoco was able to bring third party, developments into the project.

The P15 D platform processes from a Wintershall AS field development on Block P14.

Amoco also has a letter of int from Nederlandse Aardolie Mij. By (NAM), the Shell/Esso operating company, to process and transport gas from a reservoir on Block Q16 to the southeast.

NAM plans to place its Q16 field on stream in October 1995, using a subsea development tied back to Amoco's P18 A platform, 10 km away.

AMOCO'S PLANS

Urban said, "In the current environment, Amoco Netherlands plans to develop what it has and expand in core areas. The Dutch offshore sector is very mature. Beyond our core developments, where we have established infrastructure, we could not make a profitable return."

Amoco may have opportunities to expand P15/P18 production. However, the prospects are small and under the current fiscal regime are not considered commercial.

Amoco and partner Veba Oil Nederland By plan to drill on Block P/11, which was won in the eighth and last offshore licensing round. A 3D seismic survey was completed late in 1993. From this, Amoco expects to drill two wells in 1995.

Urban said any discovery on Block P/11 would be developed separately if it were large enough to support offshore processing. If not, discoveries would be tied into P15/P18 as it came off plateau production.

On P15/P18, Amoco expects to add compression to be ready for operation in fourth quarter 1995. Tenders are being sought for compression equipment, while detailed engineering will be completed during. the next few months.

WADDENZEE EXPLORATION

A voluntary 10 year moratorium on exploratory drilling in the Waddenzee area along the north Dutch coast expired Jan. 10.

NAM and Elf Petroland By were awarded exploration licenses for the Waddenzee 10 years ago but agreed on the moratorium because of the area's environmental sensitivity.

Waddenzee is a shallow sea between the Dutch coast and the Friesian island chain. The area attracts millions of migratory birds each year, along with thousands of Dutch and German tourists.

Last Dec. 21 the Dutch government reached a 5 year agreement with NAM and Elf that would allow exploration drilling under certain terms.

Operators must show that prospects to be drilled could be developed from onshore using extended reach drilling. Drilling rigs can operate in the Waddenzee during the exploration stage.

Wood Mackenzie Consultants Ltd., Edinburgh, said the companies plan to drill 11 wells on existing licenses in the Waddenzee during the 5 year period. No new license awards are expected.

Elf also was said to have won permission to conduct further development drilling from an existing platform in Zuidwal field in the Waddenzee.

The Dutch Geological Survey estimated the Waddenzee could hold potential reserves of 2.5 7.8 tcf of gas. Wood Mackenzie said about half those potential reserves could be accessed under the 5 year plan agreed among the government and NAM and Elf.