Independents advance Chinese developments

Two North American independents are marking development progress in oil fields in northeastern China.

Sunwing Energy Ltd., Calgary, has completed its first quarter of oil production from Zhaozhou field under a pilot program and is proceeding with a 65-well development program in the area. Sunwing also detailed preliminary plans for a second field development program in China.

XCL Ltd., Lafayette, La., and its partners have completed an appraisal well on the Zhao Dong block and expect production to begin in first quarter 1999. Production from the adjacent Zhang Dong block, for which XCL is operator, will also begin next year.

Sunwing Zhaozhou

Canadian independent Sunwing Energy has drilled five pilot wells in Zhaozhou field, on Zhou Block 13 in the Songliao basin (see map, this page). The block lies in the Daqing region, China's largest oil-producing area.

Prior to Sunwing's entry into the area, China National Petroleum Corp. (CNPC) had drilled 14 delineation wells there. The wells all had oil shows and tested oil on pump, said Sunwing Pres. Gerry Moench.

"Block 13, which covers approximately 30 sq km, had been extensively explored by CNPC but had no producing wells until Sunwing completed five enhanced-recovery pilot wells that it began last year under its pioneering production-sharing contract (PSC)," said Sunwing.

During the first quarter of production from Sunwing's pilot wells, output totaled 23,000 bbl of oil, or an average of 255 b/d.

Although the project is small at this time, Sunwing is in the process of finalizing a development program for Zhaozhou.

Because of the climate in far northeastern China, the drilling season there lasts only 7 months-September through March. So Sunwing's Zhao- zhou development program will be complete in two seasons, with drilling slated to start in September 1999.

Zhaozhou production is expected to peak at 2,600 b/d in 2000, said Moench.

Under its Zhaozhou PSC, Sunwing receives 85% of all oil revenues until it has recouped its development costs. Thereafter, it will receive 49% of oil revenues.

Sunwing Dagang

Meanwhile, Sunwing is advancing plans for a similar pilot development program in China's Dagang area, farther south. Wholly owned Sunwing subsidiary Pan-China Resources Ltd. has a development contract covering a portion of Dagang.

According to Sunwing, the contract area "could contain original oil in place volume ranging from 400 million bbl to as much as 1 billion bbl of light oil (32° gravity)."

The Dagang project will begin with a pilot phase involving the drilling of five wells and the recompletion of another five. This could lead to a potential development involving as many as 100 wells, said Moench.

Drilling for this program will begin in March 1999.

These two projects typify Sunwing's strategy. "We are looking in new areas for both oil and gas," said Moench. "We want to focus more on development and not on rehabilitation or exploration."

Sunwing recently agreed to merge with Black Sea Energy, another small Calgary-based independent (OGJ, Nov. 9, 1998, p. 47). Black Sea has interests in China, Russia, Southern California, and Peru.

XCL Zhao Dong

U.S. independent XCL and partners are exploring and developing the adjacent Zhao Dong and Zhang Dong blocks, east of Beijing (see map, p. 22).

XCL is operator and 49% interest holder in Zhang Dong block. For Zhao Dong, Apache Corp. is operator, and XCL owns a 24.5% interest.

Other partners in both blocks are CNPC unit Dagang Oilfield (Group) Ltd. and China National Oil & Gas Exploration & Development Corp.

The firms tested appraisal well C-4-2 on Zhao Dong block. The well flowed 2,500 b/d of oil from one of six productive zones. It was drilled to 9,184 ft TVD and successfully appraised the C-4 discovery (OGJ, Sept. 29, 1997, p. 48). C-4 flowed 15,359 b/d of oil and 10.7 MMcfd of gas in October 1997.

Eight wells drilled on the block to date have combined test rates, or indicated test rates, of about 55,000 b/d of oil, said XCL. According to XCL Chairman and CEO Marsden W. Miller Jr., "The eight wells successfully tested 19 separate sands with approximately 575 ft of maximum net pay in six separate geological zones-the Pliocene, Mio- cene, Oligocene, Cretaceous, Jurassic, and Permian."

Well C-4-2 tested a deeper zone not encountered by the discovery well. It was drill stem tested and found to be productive in Permian sediments. The zone flowed as much as 2,500 b/d of 40° gravity oil from the Shihezhi at 8,960 ft.

On a test of C-4, three zones in the Oligocene Shahejie flowed at a combined rate of 2,668 b/d of oil and 5 MMcfd of gas. These zones were also encountered by C-4-2 and are productive by log and core analysis, says XCL.

The firm also said that several additional sands of Miocene and Pliocene ages, which were fault-separated and wet in C-4, are productive in C-4-2, according to formation test and log and core analysis. On test, the Miocene sands flowed at rates as high as 4,300 b/d of oil in other wells on the block, while Pliocene sands tested as much as 1,400 b/d.

"Test data from those same zones on the C and D (sub)blocks confirm their productive capability in the C-4-2 well," said XCL. "The zones were not further tested, in order to maintain the integrity of the casing and ensure that the well could be completed for production."

XCL plans to start production from Zhao Dong well C-4-2 by Mar. 15. The partners will begin completion of C-4 by Apr. 1, so both wells should be producing in the second quarter.

XCL Zhang Dong

On the adjacent Zhang Dong block, XCL and Dagang Oilfield plan to reenter and sidetrack six existing wells in December. Seven wells have been drilled on the blocks to date.

Production facilities have already been constructed on Zhang Dong, so production can begin as soon as the wells are completed.

In 1999, the Zhang Dong partners will drill two or three wells from an existing causeway, two from an artificial island, and one with a jack up rig. Drilling on the artificial island is expected to continue at a rate of at least six wells/year during 2000-02, says XCL. Each well will be put into production as it is completed.

"On the Zhang Dong block," said Marsden, "ellipseDagang has performed extensive 2D and 3D seismic that reveal the existence of a large geologic structure extending in depth from the shallowest through the deepest of the formations now proven productive on the Zhao Dong block.

"Dagang, by drilling seven wells, primarily on the flanks of the structure, has tested the Oligocene zone. Seismic data indicate that all other geologic zones proven productive on the Zhao Dong block are prospective on the Zhang Dong block."

XCL is also considering prospects for early production from C-D field on Zhao Dong block, using temporary facilities.