OTC: OFFSHORE E&D EXPANSION NEEDED FOR FUTURE WORLD OIL, GAS SUPPLY

Future contributions of offshore oil and gas to global energy needs was a recurring theme at the 25th Offshore Technology Conference last week in Houston.

OTC maintained the focus on frontier offshore technology by giving the 1993 Distinguished Award for Individuals to F.P. Dunn, a recent retiree from Shell Oil Co. Dunn was honored for his contribution to the design and construction of Shell deepwater structures.

Freeport-McMoRan Resource Partners won the Distinguished Award for Companies, Organizations, and Institutions for designing and constructing an offshore oil production system/sulfur mine in the Gulf of Mexico, the world's largest system of interconnected and stand alone offshore structures.

In addition, OTC awarded the first Meritorious Achievement Citation to Cullen Inquiry Chairman W. Douglas Cullen for the public inquiry into the 1988 Piper Alpha accident in the North Sea.

More than 250 technical papers were presented during the 4 day event at the Astrodomain complex.

OTC HIGHLIGHTS

Among OTC highlights:

• Daniel Yergin, president of Cambridge Energy Research Associates (CERA), Cambridge, Mass., contends that as petroleum industry privatization and deregulation continues to create many exploration and development opportunities around the world, competing oil and gas projects increasingly will vie for funding on an environmental as well as an economic basis.

• Viet Nam estimates that foreign investment in 470 joint ventures, 100% foreign owned enterprises, and business contracts operating in the county totals more than $4 billion since passage of a foreign investment law in December 1987.

• Matthew R. Simmons, president of Simmons & Co. International, Houston, said offshore oil and gas activity will have to grow at a staggering rate to keep the world's economy running smoothly, because it is unlikely that coal or nuclear power will replace hydrocarbons in the global energy mix.

• Dale Jones, president of Halliburton Co. and chairman of National Ocean Industries Association (NOIA), warned that if the U.S. is to increase gas use as desired without becoming more dependent on imports, federal officials must end moratoriums barring development of offshore oil and gas outside the Central and western Gulf of Mexico.

• Until the administration of President Bill Clinton sets a U.S. energy policy, NOIA Pres. Bob Stewart said, the U.S offshore industry must continue working at all levels of government to maintain orderly development of oil and gas resources in the Gulf of Mexico.

• BP thinks its Forties field in the North Sea may produce oil into 2010, 6 years beyond expectations, because of a special partnering relationship between BP and Brown & Root Marine.

• Seven technical papers detailed the scope and findings of the DeepStar project led by Texaco Inc. Texaco and partners began DeepStar in the Gulf of Mexico in 1991 to study commerciality of an estimated 3.5 billion bbl of oil in place in 3,000-6,000 ft of water. DeepStar is focusing on development of appropriate deepwater infrastructure, development and production strategies, and technology.

• Technical sessions also focused on offshore pipelines. The Central Area Transmission System (CATS) was the subject of a session organized by Amoco (U.K.) Exploration Co., London, operator of Everest and Lemond fields and pipelines in the Central North Sea and a major CATS interest owners. Another OTC session was devoted to developments in and projects using new offshore welding technologies.

YERGIN'S KEY TRENDS

Among key trends affecting global oil and gas markets, Yergin said:

• Global oil consumption will increase by 16 million b/d by 2005 as oil suppliers scramble to meet demand.

• More energy taxes likely will be enacted by nations around the world to achieve environmental goals and raise needed revenue.

• Despite declining oil production in the U.S. and former Soviet Union, international supplies are more abundant than believed during most of the past decade.

• Government policies can be expected to continue driving increasing oil conservation and efficiency of energy use.

"While we see greater efficiency coming, we also see astonishing economic growth in Asia and perhaps South America," he said. "Along with that will come higher standards of living and greater energy consumption."

Yergin said more than $1 trillion will be needed in Asia the next decade to meet expected energy demand. While funds likely will be available for Asian energy development, questions remain about the speed with which investors will be able to mobilize them.

CERA estimates Russian oil output could fall to 6.5 million b/d by yearend from 11.6 million b/d in 1988. Russian oil production could decrease by as much as 2 million b/d by the mid-1990s and at the end of the decade could be as little as 6 million b/d, depending on the success of rehabilitating damaged wells.

"The big developments in Russia will take time to happen. It's not until political stabilization provides a strong foundation that people will feel comfortable making large capital investments," Yergin said.

Russian officials in the meantime must decide what role they want foreign investment and technology to play in their petroleum industry, he pointed out. Strong nationalist elements retain the attitude that Russia had the world's largest OD industry, still has the world's largest gas industry, and can go it alone.

INVESTMENT IN VIET NAM

Vietnamese officials estimated 23 oil and gas projects have generated about $1.1 billion of investment, about one fourth of total foreign investment.

Petrovietnam's Ha Do Van said more onshore and offshore is to be offered to foreign oil and gas companies. Acreage is to be awarded through private negotiation and competitive bidding rounds.

Viet Nam in 1992 exported a net 5.5 million tons of crude oil. This year oil exports are expected to reach 7 million tons.

The country is a net importer of refined petroleum products, mainly for residential consumption. Products imports in 1992 totaled about 3 million tons.

During the past 2 years, the Vietnamese economy has struggled to replace markets lost in eastern Europe after the collapse of the Soviet Union.

Officials said Viet Nam's foreign investment law assures fair, equal treatment of foreign investors and prevents requisition, expropriation, or nationalization of foreign owned capital or assets.

Enterprises funded partly or wholly with foreign capital are subject to a 15-25% profits tay depending on the economic sector in which the investment is made.

SIMMONS INDUSTRY OUTLOOK

Simmons speculated about how the global offshore oil and gas industry must change by 2018 to meet projected energy demand.

He estimated offshore oil and gas production in 25 years based on current output, historical production trends, and the latest oil and gas industry forecast through 2010 by the International Energy Agency (IEA).

His conclusions raised concern about whether adequate production can be achieved in the next quarter century and had "staggering implications for the offshore drilling business over the same period of time."

If offshore oil and gas production's share of global supplies remains unchanged in the next 25 years, Simmons said offshore oil production must increase by 180% and offshore gas production by 210%. At those rates, offshore oil output by 2018 would have to grow by 15 million b/d to 35 million b/d and offshore gas production by 7 million b/d of oil equivalent (BOE/day) to about 13 million BOE/day.

However, if offshore oil and gas production increases as a percentage of world supplies at the same rate as the past 25 years, oil output must rise by 350% and gas by 300%, he said. That would put global offshore oil output in 2018 at 51 million b/d and gas at 18 million BOE/day.

For offshore oil and gas production to achieve those results, Simmons said, twice as many offshore drilling rigs will have to be available by 2018, with virtually every rig operating now replaced with newer units. Also, the makeup of the world fleet will change greatly--if drilling contractors can find the funding needed to build new units.

Simmons said if offshore rig costs increase in the next 25 years at the same rate as during the past 15 years, a semisubmersible rig for the North Sea would cost about $1.75 billion and a jack up for 300 ft of water almost $300 million. By comparison, when OTC began in 1968, the most expensive offshore rigs cost about $10 million.

More likely is Simmons's prediction that more offshore rigs in 2018 will be capable of operating in very deep water. Today, only four rigs in the world can drill in water 5,000 ft deep, including two capable of drilling in more that 6,000 ft of water.

"The number of this type of rig almost has to soar by 2018," he said. "Also, the industry will use a far greater number of floating rigs as temporary production platforms by 25 years out with the capability of moving on to other fields when production falls to a point where a platform needs to be removed."

MORE OFFSHORE ACREAGE

Halliburton's Jones said promoting large increases in gas use as a way of reducing U.S. pollution and dependence on foreign oil could become a problem if more offshore acreage is not opened for exploration and development.

In 1992--while U.S. gas output neared national productive capacity--marketers and end users still had to import about 2 tcf of gas to serve demand of 19.7 tcf. Meanwhile, gas reserves in the Gulf of Mexico--the source of about one fourth of U.S. gas production--are declining because of low levels of drilling activity.

NOIA's Stewart said the Gulf of Mexico is one of the most prospective hydrocarbon areas in the U.S., with undiscovered reserves estimated at 100 tcf of gas and 10 billion bbl of oil.

Drilling in the Central and western Gulf of Mexico has been climbing since the first of the year. But Jones said substantial new gas reserves in the eastern gulf and off North Carolina might not be developed because of i political opposition.

In March, NOIA called on the House interior appropriations subcommittee to end offshore oil and gas development moratoriums and increase funds for Minerals Management Service environmental studies. But at the same hearing, Greenpeace stumped for a 1 year ban on leasing off Alaska and all prelease activity because of a lack of environmental data on the region.

"The irony is that environmental data is gathered and an environmental impact statement developed during the prelease step," Jones said.

DEEPSTAR

A DeepStar paper Texaco presented contends the main problem with developing deepwater oil and gas reserves in the Gulf of Mexico appears to be a lack of industry confidence that the discoveries are commercial because of infrastructure and technology limits.

Nine producing companies and 25 oil field service and supply companies joined Texaco in the first phase of Deep Star.

Texaco said almost all currently leased deepwater acreage in the gulf could be developed by tying subsea production systems in deep water to several existing or new small platforms in water 600-800 ft deep. The shallow water platforms could be as far as 60 miles away.

According to Texaco's paper, deepwater discoveries could become commercial if development is carried out in phases.

In the first phase, during exploration and delineation, long term testing would be required on three to five wells. An evaluation and early production phase would follow to determine whether full field development is justified.

Production could be ramped up in stages by developing groups of wells producing through a common subsea manifold. That would allow operators to start production after committing only 15-30% of total field development costs.

Texaco examined two reservoir types to develop production scenarios, one produced by depletion drive with an increasing gas/oil ratio and 42 gravity oil and the other by water injection a low gas/oil ratio and high viscosity 18' gravity oil.

The heavy oil reservoir probably would require boosting of mud line pressure and artificial lift.

Both types of reservoirs would need a floating mobile drilling unit to support subsea production. The unit would not include complete production equipment but serve only as a source for hydraulic and electric power, chemical injection, and gas lift.

In another DeepStar paper, Brown & Root and others reported the cluster subsea well concept would offer more flexibility and better economics than template based subsea wells for the phased development planned for DeepStar.

The authors found the preferred system would included a diverless well jumper connection system, guidelineless well systems, and remotely operated vehicle (ROV) intervention capabilities. Jumpers can extend out to about 150 ft. The North Sea has a number of such cluster systems. In the past 5 years, almost all North Sea subsea systems have been clusters with diver assisted connections.

In a third paper, Chitwood Engineers, Amoco Production Co., and Mobil R&D Corp. concluded the main element needed for commercial production is technology upgrades. Areas where further work is needed include formation of hydrates, well workovers, and the deposition of paraffins, asphaltenes, and scales in wells and pipelines. With proper field testing to solve the problems, operator confidence will grow, and deepwater development will proceed in the Gulf of Mexico and in other operating areas, they said.

PARTNERING EXTOLLED

At an OTC luncheon, David Gair, BP Exploration's contracts manager, said partnering in 1992 saved Forties field partners about $70 million of the original planned expenditure of $390 million. In 1993, the field is expected to have an operating cost of $4.80/bbl. BP is investing about $100-$150 million/year in the field.

Increasing operating costs and reduced product prices in the 1980s caused cost overruns of as much as $450 million in the Forties field redevelopment project.

The field has produced about 90% of its commercial reserves. Forties field, commissioned in 1975, had original recoverable reserves of 2.48 billion bbl.

BP estimates current reserves are 304 million bbl. Current field production is 150,000 b/d. Production peaked at 500/000 b/d in 1978.

BP and Brown & Root in January 1991 began a 5 year partnering agreement under which Brown & Root agreed to perform design engineering, procure components and equipment, and manage construction in Forties field. The agreement eliminated design rework and duplication of effort.

In the first year of the contract, elimination of duplication of effort saved $2.5 million, and offshore productivity improvements saved another $2.5 million. In 1992, partnering saved $39 million, of which $14 million was cost reduction, $6 million was cost avoidance, and $18 million was revenue enhancement from wells coming on line ahead of schedule, Gair said.

A key to the success of partnering on Forties field is the openness of the contract. Either party can review payment terms as frequently as necessary. Brown & Root's payment is tied to the field's performance.

Four major engineering projects have improved production on four of the field's platforms: water injection for pressure support, gas lift facilities, electric downhole pumps on Echo platform, and upgraded drilling facilities for infill wells. Other improvements include safety related modifications, more efficient drilling facilities, and improved efficiency with increased water throughput and lower oil throughput.

Brown & Root engineered, managed, and built a major part of the original four Forties platforms in the early 1970s. A fifth unit was built in the mid-1980s,

BP has established seven similar partnering arrangements with other suppliers for Forties. As the workload lessens in Forties field, BP's partnering business there will drop from $100 million/year to $30 million/year by 1995. BP has about 15 partnering ventures in its North Sea operations and is developing agreements with drilling and well management contractors.

CATS OVERVIEW

CATS provides transportation for gas produced by one of the largest projects ever undertaken off the U.K. The 255 mile, 26 in. CATS connects Everest and Lemond to a gas receiving terminal, an adjacent gas processing plant, and Europe's largest gas fired electric power generating plant, all at Teesside, England.

Commissioned last month and on stream this month with initial throughput of 300 MMcfd, CATS provides the spare capacity--another 1.3 bcfd of gas--to function as the spine of a long planned gas transportation infrastructure for central North Sea gas fields that individually are otherwise noncommercial.

CATS's primary customer is Teesside Power Ltd.'s 1,875,000 kw Teesside power generating plant.

Teesside Power includes Enron Power (U.K.) Ltd., ICI Chemicals & Polymers Ltd., and four regional U.K. electricity companies.

M.D. Haynes of Amoco presented an overview of CATS, tracing the contractual negotiations up to a mammoth 4 hr signing session for about 50 different agreements requiring about 300 signatures and through the line's design and specific safety case analyses.

Haynes provided an overview of the pipeline, platform, and deck design philosophies that guided design and construction of the facilities. He also reviewed the major directionally drilled land crossing of the Tees River that used an 8 ft wide tunnel about 100 ft underground.

CATS WELDING

An OTC paper by Amoco and Brown & Root Vickers covered the offshore welding for CATS project. The pipeline was installed from the shore terminal to the North Everest riser platform by McDermott/ETPM with the lay barge LB200.

Submerged arc welding (SAW) was used for the double joints and ETPM's proprietary gas metal arc welding (GMAW) system for the mainline welds and the root pass of the double joint welds.

CATS line pipe--for offshore and well as onshore--is 36 in. API 5L Grade X-65, 1.12 in. wall thickness (WT), fabricated with double SAW to form the longitudinal seams. A small portion of the pipe has a "T of 1.33 in. The line's design pressure is 2,600 psig with a 1,500 ppm/4 psi maximum hydrogen sulfide specification. Welding on the line was performed in two production lines, the double joint line and the main line.

Double jointing was accomplished by joining two 12 m lengths of 36 in. pipe. Root and hot passes were made with the Saturne 8T automatic gas metal arc welder. The third pass was made on the inside diameter (ID) with SAW and the fourth and fifth passes on the outside diameter (OD) with SAW.

For mainline welding, four welding stations were established. The first three used ETPM's automatic GMAW system. Cap passes were made at the fourth station with either mechanized innershield flux cored welding or the GMAW system.

A fracture toughness evaluation was conducted on the girth weld in the pipeline to assess the effect of hydrogen embrittlement on the toughness of the Mannesmann AG produced line pipe and to determine acceptance criteria, taking into account the lower crack tip opening displacement values that could result in wet hydrogen service.

In addition, the fatigue and fracture mechanics department of the Institut de Soudure, Ennery, France, performed a simulation to determine to what extent the pipeline could tolerate defects with the steel charged with hydrogen and at the temperature of the bottom of the North Sea.

Other papers presented by Amoco, Brown and Root, and ABB Impell Ltd. discussed the North Sea Central Graben's platforms and jackets, safety management system and fire protection design, and approval and restoration of the environmentally sensitive landfall portion of CATS.

AUTOMATIC WELDING SYSTEM

Automatic welding was the focus of two papers that discussed CRC-EVans' automatic welding system used in last year's installation of the Zeepipe project and for 1991 flowline installation in Fairway field in Mobile Bay off Alabama.

B.S. Laing of CRC-Evans Automatic Welding, Houston, said the automatic welding system--introduced in 1968--has girth welded more than 3,700 miles of offshore pipeline and more than 14,000 miles of cross country line. The system consists of three components:

• A pipe facing unit that machines in the field the multifaceted joint preparation of the pipe ends.

• An internal lineup clamp and automatic welder that aligns and holds the two pipe sections and deposits the root pass on the pipe ID.

• External welders that deposit all other weld passes from the pipe OD.

Copyright 1993 Oil & Gas Journal. All Rights Reserved.