Shell/Mobil may seek Camisea appraisal delay

Shell Development & Prospecting Peru BV (SDPP), the operator in Peru's Camisea natural gas/condensate megaproject, and partner Mobil Exploration & Producing Peru Inc. are considering requesting a 6-month extension to their 2-year appraisal contract.

The contract to evaluate the Camisea fields expires on May 16, 1998, when Shell/Mobil must give Perupetro SA, the state oil regulatory agency, a decision on whether they will go ahead with the $2.8 billion project. The contract, however, also provides the possibility of a 6-month extension for technical reasons. The partners have until Apr. 15 to present a technical report to Perupetro on data obtained so far in order to formally request an extension.

Technical issues

"We are looking at technical issues before making a decision whether to apply for an extension," Andrew Vickers, SDPP's manager of external affairs, said Mar. 25 in response to press reports that an extension had already been requested.

SDPP General Manager Alan Hunt was at the same time in London and The Hague presenting proposals on the project to company shareholders. SDPP needs shareholder approval to move ahead with the Camisea development. Camisea is located in Peru's Ucayali basin in the central southern jungle 500 km east of Lima.

The Peruvian government is anxious for the project to get under way. It is counting on the development of Camisea to pull its petroleum production out of the doldrums and turn around the country's negative trade balance. Although Camisea's production will not solve Peru's crude oil deficit, it will eliminate high LPG imports and at the same time generate revenue from exports, turning Peru overnight from a net importer to a net exporter.

Background

Royal Dutch/Shell Group discovered the Camisea fields during a $200 million exploration campaign in 1981-87, when it estimated reserves at 11 tcf of natural gas and 600 million bbl of condensate.

At the time it was unable to reach agreement with the Peruvian government to develop the gas, but began new talks after President Alberto Fujimori took office in July 1990.

Shell said that the bulk of the gas and condensate reserves are in two major fields known as San Martin and Cashiriari, which lie on opposite banks of the Camisea River. San Martin holds roughly one third of reserves and Cashiriari two thirds. A smaller accumulation lies to the northwest in a field known as Mipaya.

SDPP over the past year has drilled the Cashiriari 2 and Cashiriari 3 wells, where testing has shown that the reservoir is quite heavily fractured, making it more difficult to manage the condensate and to recycle the gas. Vickers said that this could mean redesigning key parts of the project infrastructure.

The company expects to produce 50,000 b/d of LPG and condensate, of which about 10,000 b/d would be consumed locally and the balance exported from coastal ports.

Drilling update

On Mar. 25, SDDP was transporting a helirig from the Cashiriari 3 site, where it had earlier planned to drill another well, to the site of the San Martin 3 well on the opposite bank of the Camisea River.

The company expects to start drilling the new well within a month. The well will be drilled vertically to 2,500 m and is scheduled to be completed by mid-July. Shell drilled two wells in San Martin field in the 1980s, when it discovered Camisea.

The company had projected five wells during 1997-98: Cashiriari 2 and 3, already completed; Cashiriari 4; San Martin 3; and Pagoreni 1.

The Pagoreni 1, located in Block 75 adjacent to Camisea Blocks 88A and 88B, will be an exploratory well 1.2 miles from the San Martin/Cashiriari area of Block 88B.

Shell/Mobil signed a license agreement early in 1997 with Perupetro to drill one well on Block 75.

Shell said the Pagoreni structure was identified from seismic data obtained during the 1980s and since reprocessed and analyzed.

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