Pemex launches massive Cantarell project

Petroleos Mexicanos, Mexico's state-owned petroleum company, is launching a project to use nitrogen injection to boost oil production from the supergiant Cantarell oil producing complex in the Bay of Campeche.

Pemex plans to use nitrogen injection to increase Cantarell production to 2 million b/d by 2000 from the current 1.24 million b/d.

The first phase of the project includes construction and start-up of a nitrogen plant at Atasta, Campeche, near Ciudad del Carmen. The plant will supply 1.2 bcfd of nitrogen for injection into Cantarell area fields.

Pemex awarded the nitrogen supply contract to a group BOC Gases 30%, Marubeni Corp. 30%, Westcoast Energy Inc. 20%, Linde AG 10%, and ICA Fluor Daniel SRL de CV 10%. The group will build, own, and operate the $1 billion plant-the world's largest by far.

The first train of the plant (300 MMcfd) is scheduled to start up April 1, 2000, with the remaining three trains coming on stream Jan. 1, 2001.

Development plans

Cantarell, Mexico's largest oil producing complex, has produced a cumulative 11.8 billion bbl of oil in 18 years of production. According to Pemex, total ultimate reserves at Cantarell are 17.1 billion bbl, and original oil in place is about 62 billion bbl.

Pemex hopes nitrogen injection will allow it to recover an additional 2 billion bbl from Cantarell over the life of the field.

The Cantarell expansion is expected to involve the installation of two drilling platforms-one eight-pile and one four-pile. Plans also call for adding three compression platforms, two injection platforms, and two accommodation platforms.

In addition, 34 existing platforms will be renovated, and 288 km of 12-36 in. pipe will be laid.

A large portion of the infrastructure work for the project will be tendered to private companies through bidding.

Long-term funding, a perennial problem with large-scale Pemex projects, is looking solid. A group of banks led by Citibank, Chase Manhattan, and J.P. Morgan has granted a $1 billion line of credit to Pemex. The bulk of the funds is expected to be used in the Cantarell project.

Doubts raise

Some independent observers in Mexico have expressed reservations about the project, saying the government is boosting output to serve short-term financial goals and using the wrong technology to do it.

Ricardo Gómez Saavedra, a retired Pemex field engineer and member of a group of ex-Pemex workers that acts as a watchdog organization, points out that Cantarell has huge deposits of natural gas as well as oil. By injecting nitrogen, he said, the inert gas would mix with the natural gas and render it commercially unsalable, at least without expensive separation facilities.

"Why not inject carbon dioxide or reinject natural gas, which are more proven technologies?," asks Gómez.

Jeff Vickers of Geo Resources Inc., which uses nitrogen in certain aspects of petroleum drilling in the U.S., agrees that injecting the gas into a field could be problematic.

"As far as I know, at most reservoir pressures, nitrogen doesn't dissolve in the oil," said Vickers, "so at some point in production, it's going to follow the gas. It would almost be a contaminant to the gas. So in order to make the gas commercially viable, you'd have to scrub the nitrogen out of it."

Gómez claims Pemex has tested only core samples and has not tried pilot tests in any part of the basin. He considers core tests insufficient to assess the reaction of a massive, fractured producing complex such as Cantarell to nitrogen injection.

"But Pemex seems willing to spend $5 billion on it anyhow," said Gómez. "The companies building the nitrogen plant don't care if the project succeeds or not, because Pemex has guaranteed to buy the nitrogen.

"Cantarell is producing at an excellent level now. Why not use the money to explore identified formations to find new deposits, instead of pumping Cantarell dry?," asked Gómez.

Doubts refuted

Pemex Exploración y Producción Director José Antonio Ceballos responded to Gómez's allegation of insufficient investigation.

"In this field, because of the characteristics of fracturing and density, injecting water is a risky technique," said Ceballos. "Because of this, we opted to inject a gas. And, after analyzing the options of natural gas, hot air, nitrogen, and carbon dioxide, nitrogen was chosen."

Pemex chose to inject nitrogen mainly because it is less expensive than natural gas and because reinjecting natural gas would crimp plans to boost Mexico's domestic gas production, which Pemex expects to grow considerably in the next few years, Ceballos said. He added that Pemex has received advice from Bechtel Corp., San Francisco, and Netherland, Sewell & Associates Inc., Dallas, in planning the nitrogen project and designing the necessary infrastructure.

Both Bechtel (Pemex's surface advisor for Cantarell) and Netherland, Sewell & Associates (subsurface advisor) said they are contractually prohibited from discussing the project.

According to Tomás Limón, director of the Cantarell project, Pemex considered that nitrogen will mix with the natural gas.

"Obviously, if we inject nitrogen, it will contaminate the natural gas," said Limón. "We have planned installations to separate out the nitrogen when the gas is produced."

Asked if this would not make using nitrogen more expensive, Limón said, "According to the economic studies we've made, injecting nitrogen and then separating it out is still less expensive than using CO₂ or natural gas."

Although nitrogen is not used to repressurize fields as often as water, CO₂, or natural gas, Pemex had visited fields in the U.S. where nitrogen is being used. Among them was Yates field in Texas, operated by Marathon Oil Co.

"It's a similar field (to Cantarell) in that it's fractured limestone," said Limón, "although, of course, it's not as big as Cantarell. In Yates field, first water was injected, then CO₂, then combustion gases, and finally nitrogen, and they concluded nitrogen worked the best."

Nitrogen supply

The nitrogen plant will be built in a federal wildlife preserve wetlands area called Laguna de Términos. Pemex claims the land on which the plant will be built has been totally exhausted by years of cattle ranching and that the legal structure of the wildlife reserve allows certain industrial activity in certain areas.

Local environmentalists, distrustful of Pemex because of alleged contamination of the wetlands during past drilling projects, oppose construction of the plant but appear to have no legal recourse to stop it.

Pemex let a 15-year nitrogen supply contract to the BOC-led group, which will build the plant and retain ownership. ICA Fluor Daniel and Linde will be responsible for detailed engineering and construction of the plant. BOC is responsible for its basic design and for its operation throughout the contract period.

Nitrogen will be generated via cryogenic air separation. Each of four trains will produce 300 MMcfd of high-purity, high-pressure nitrogen.

The plant will include a 200-MW dedicated power plant. In addition, four heat-recovery steam generators will power four compressors. Including steam-generation capacity, the power section's production will be equivalent to 400 MW, according to Seifi Ghasemi, president of BOC Gases Americas.

The project partners designed the power generation facility with capacity excess to facility requirements. Although the group has no immediate plans to sell power to the local grid, Ghasemi says it would consider doing so under the right circumstances.

The nitrogen will be transported via a 95-km, 36-in. pipeline to the injection point, about 80 km offshore. Westcoast will design and operate the pipeline system.

Other required flow lines include a 14-km onshore nitrogen lateral, a fuel gas line, and seawater intake and outfall pipes.

The consortium members are responsible for financing the massive nitrogen project. Ghasemi said that, given the state of Mexico's economy, the partners are thinking in terms of 20-30% equity, with the balance being financed through limited-recourse debt.

Pemex will pay fixed capacity charges for the nitrogen under a take-or-pay contract with the nitrogen project group. In addition, Pemex will incur a monthly operation and maintenance charge. Payments will be made in U.S. dollars.

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