MORE NORTH SEA GAS ON STREAM

Two gas fields have begun production in the U.K. North Sea, one containing big reserves and the other the first multiwell subsea development in the southern basin.

That's the only good news coming out of the North Sea of late.

Here's the bad news:

• Midland & Scottish Resources plc (MSR), London, wrote off the entire value of its Emerald field development because of further drilling costs and dwindling reserves estimates.

• Further confirmation of the decline in North Sea exploration and appraisal drilling came with a report cataloging major cuts off all producing countries. Arthur Andersen & Co., London, recorded 59 E&A well starts on the U.K. continental shelf in first half 1993, a 28% drop from first half 1992. Only 23 of this year's wells were wildcats. Most were appraisals.

• The Norwegian Petroleum Directorate (NPD) refused to approve a plan to export oil from Troll field off Norway through a $125 million pipeline to Mongstad terminal on the grounds that it is too risky, based on available information. In a report to Norway's Ministry of Industry and Energy, NPD warned that Troll oil development partners would lose 170 million kroner ($23 million)/month in production if the pipeline were not ready to begin oil shipments Jan. 1, 1996.

FIELDS ON STREAMS

BP Exploration Operating Co. Ltd. started gas flow from Bruce field, which it terms one of the largest gas/condensate fields in the U.K. North Sea. Bruce, in Block 9/8a, holds reserves of 220 million bbl of oil and condensate and 2.6 tcf of gas.

Bruce gas went on stream Aug. 4 at a rate of 140 MMcfd. Oil and condensate production, which began in May, has reached 25,000 b/d (OGJ, May 24, p. 36).

Commissioning and performance trials will continue until Oct. 1, when gas sales contracts totaling 530 MMcfd with British Gas plc and East Midlands Electricity plc take effect.

Bruce oil moves 250 km by 24 in. pipeline to Unity platform near Forties field, where it feeds into the Forties pipeline for export to Cruden Bay. Gas is sent 6 km by 32 in. pipeline to join the Frigg system for transport to St. Fergus terminal.

In addition, ARCO British Ltd. began gas production from Orwell field in Block 50/26a Aug. 3, ahead of schedule by 8 weeks. ARCO said conceptual design to production start-up required only 18 months, a record in fast track development.

Another record claimed for Orwell is for the longest control and chemical injection umbilical. The field was developed as a subsea project tied back via 16 in. pipeline to ARCO's Thames platform, 34 km west.

Orwell will produce 120 MMcfd of gas at plateau, while field life is expected to be 10 years. Gas is being sold to National Power plc.

EMERALD FIELD

MSR delayed publication of its 1992 financial results to study the costs of further Emerald field development drilling. It decided to increase the amount of the writeoff to 97 million ($145 million) from 80 million ($120 million) on hearing the outcome.

MSR said, "Recovery of maximum reserves from Emerald field can be achieved only through further drilling of additional wells to replace poorly located wells and enlarge the area under development."

Uncertain economics of required drilling were cited as reasons to write off the field in Block 2/10a, which went on stream in summer 1992 using a floating production unit after a troubled development program (OGJ, Aug. 31, 1992, p. 28).

"Although production from Emerald field will continue to provide a positive cash flow, the extent to which that cash flow will service related debt will depend on the number of additional wells drilled in the field and thus the reserves recovered."

In March 1992 Emerald reserves were estimated by Wood Mackenzie Consultants Ltd., Edinburgh, at 35 million bbl of oil. But in April 1993 the U.K. Department of Trade and Industry estimated Emerald reserves at only 26 million bbl of oil.

DRILLING DECLINE

1993 will be the third year U.K. E&A drilling has fallen. It will be the lowest level of activity on the U.K. continental shelf since the oil price collapse of 1986, Arthur Andersen said.

One reason for the U.K. decline lies in the new petroleum revenue tax regime adopted by the government in March, which removed tax relief on E&A drilling (OGJ, Mar. 22, p. 31).

Cash flow also is restricted by a depressed average oil price, which hit a 3 year low on the International Petroleum Exchange of London at less than $17/bbl for Brent blend crude.

This year will see transition of the U.K. drilling scene as operators adjust budgets in line with tax changes and reevaluate prospects.

"Rumors suggest companies also are approaching the government to defer or cancel high risk commitment wells in favor of drilling new acreage awarded in the recent licensing round," Arthur Andersen said.

The analyst predicted a U.K. focus on low risk prospects, so success rates will rise despite a reduced tally of wells. Mobile drilling rigs will continue to leave the North Sea, driven out by lower well numbers and a trend toward extended reach E&A drilling from platforms.

By the end of the second quarter, Andersen recorded six successful wildcats, giving the U.K. offshore sector an exploration success rate of 26%. However, no significant finds were reported from wells spudded in the first half.

Norwegian drilling activity is headed for a severe fall, with 16 E&A well starts in first half 1993, down 30% from 1992.

"The drop in E&A drilling has been made to accommodate growing development activity, restricting the amount of cash available for exploration," Arthur Andersen said.

Norwegian operators are growing more selective about the propects they drill. The expected announcement of 14th licensing round acreage in the third quarter is making operators hesitant to commit budgets that may be needed for 3D seismic surveys of new acreage.

Of 10 exploratory wells spudded in the first half, two were successful. Norsk Hydro AS tested 6,158 b/d of oil from its Block 30/9-14 wildcat, and Den norske stats oljeselskap AS tested 8,428 b/d of oil from its Block 15/9-19SR deviated wildcat.

Six exploratory wells were spudded off Netherlands in first half 1993, a 40% decline from the same period of 1992.

Arthur Andersen polled operators before 1993 drilling began, to discover that 28-30 E&A wells were planned for the year. With only six well starts to date and 11 planned in the next 6 months, the resulting 39% E&A decrease from the previous year represented the largest decline in Northwest Europe.

The success rate for this year's wells was 17% - one well. Nederlandse Aardolie Maatschappij BV, the Shell/Esso combine, found gas with its K/15-15 well. It likely will be tied back as a satellite to the K/15 production platform.

No E&A drilling was reported off Denmark, Ireland, or Germany in the first half, compared with six wells off Denmark and four off Germany in first half 1992.

TROLL FIELD

The Troll field pipeline proposal was submitted by operator Den norske stats oljeselskap AS in May after a technical dispute broke out among West Troll oil province licensees over choice of route.

West Troll oil development operator Norsk Hydro AS was in favor of export to Sture. Hydro said this route has been proved by an existing pipeline from Oseberg field to Sture terminal.

Most partners preferred the Mongstad option because terminal modification costs and tariffs for Mongstad would be lower. However, a pipeline to Mongstad would have to cross a 1,800 ft deep trench. Hydro felt this posed technical problems and hence refused operatorship of the pipeline.

Now the ministry has said NPD doubted Statoil's planned pipeline would meet schedules and proposed costs. Statoil was given until the end of August to provide more technical information to prove the case for export to Mongstad.

A Statoil official said the proposed pipeline depends on new technology. NPD had asked for more information on certain points, including spanning, pipelaying and maintenance methods, and seabed currents.

West Troll oil development depends on innovative techniques to deplete thin oil layers among vast gas reserves. All production wells will have horizontal sections, and output will be processed

Troll field is covered by two production licenses, each one of them unitized. Owners of license PL 054 for Block 3-1/2 are Statoil 58.8%, AS Norske Shell 25.9%, Norsk Hydro AS 4.9%, Elf Aquitaine Norge AS 3.105%, Conoco Norway Inc. 5.191%, and Total Norge AS 2.104%.

Ownership of License PL 085 for Blocks 3-1/3, 3-1/5, and 3-1/6 is split among Statoil 82%, Norsk Hydro 9%, Saga Petroleum AS 6%, Elf 2%, and Total 1%.

Norsk Hydro is operator for West Troll development, and Shell is operator of the East Troll gas project.

Copyright 1993 Oil & Gas Journal. All Rights Reserved.