Ivanhoe Energy Inc., Calgary, and its partners have advanced plans for a pilot development program on Duan Nan block in China's Dagang oil producing region (see map). Duan Nan is part of the Kongnan project, which includes five other blocks.
Over the past 10 years, Dagang Oilfield Group-one of Ivanhoe's partners in the Kongnan project-has drilled a total of 82 exploration wells on the project's six blocks. Upon recent inspection of certain oil fields in China, however, Ivanhoe Pres. and CEO Leon Daniel became convinced of the potential for major production improvements through the application of Western enhanced oil recovery technology.
"Ivanhoe Energy was the first foreign company to hold two contracts in China authorizing the application of enhanced recovery procedures on discovered, but largely unproduced, reservoirs," said Daniel. "Our Kongnan project will be introducing advanced drilling and well-stimulation technology, waterflooding, and new production equipmentellipsewhich we expect will lead to a full waterflood development and commercial production."
Late last year, Black Sea Energy Ltd.-which has since changed its name to Ivanhoe Energy (OGJ, May 31, 1999, p. 36)-acquired Sunwing Energy Ltd. It was through this acquisition that the Kongnan project became Ivanhoe's second pilot development program in China (OGJ, Nov. 30, 1998, p. 21).
Duan Nan development
The pilot program on Duan Nan will begin with the drilling and testing of five new wells and the workover of five existing wells by the end of next year. By the end of this summer, Ivanhoe will have worked over three wells that are among the 26 that produce oil from the six development blocks comprising the 22,400-acre Kongnan area.
Ivanhoe will drill the first of the program's five new wells, Nan 103, starting in September (see map). It is expected that Nan 103 will be drilled, completed, and tested by the end of 2000. It will be drilled to 3,500 m, fracture-stimulated, and placed on test production for up to 3 months before it is converted to water injection. Ivanhoe will begin drilling a second well, Nan 102, by the end of December 1999.
Ivanhoe estimates that the Kongnan project area has 394 million bbl of proved and probable oil in place. The crude has an API gravity of 30?.
Ivanhoe's long-term plan for Kongnan involves a development scheme that will comprise the workover and drilling of 100 wells, including 56 of the area's 82 existing exploration wells. With this project, Ivanhoe expects to increase production to 36,000 b/d by the end of 2003. Current production varies but is typically a few thousand barrels per day, says Ivanhoe.
Through its subsidiary Pan-China Resources Ltd., Ivanhoe will receive 82% of the operating cash flow from the Kongnan project during the cost-recovery phase; this will increase to about 49% after payout.
A production-sharing contract was signed in 1997 between Pan-China and China's state oil firm China National Petroleum Corp. And recently, Nippon Oil Exploration Ltd., Tokyo, increased its participating interest in the Kongnan project to 20% from 10% (OGJ, May 24, 1999, p. 46); the balance of the interest is held by Ivanhoe.
