SLIM OPERATIONS: THE CHALLENGE FOR COST RED UCTIO N

Peter Oosterling, KSEPL; George Beasley, SIPM

OUTLINE

OF PRESENTATION

What is slim and why do we want it? History? The Shell choice. The SHD-EC initiative. Status, current experience. Economic gains realised. Future, technical and economical. Conclusions, future requirements.
Definition of a slim well

Integrated fundamental understanding of Drilling Engineering (by KSEPL). Mature electronics, computing.
The technical options

Continuous Coring. Downsized conventional. Identified application . . . throw-away exploration wells: Shallow wells, < 3000 m, vertical; low pressures; low temperatures; no production.
Continuous coring

Definition 1: Smaller than 43 in at total depth. Definition 2: Minimum installation meeting Operators requirements.

TOO small: Restricted production; Incomplete evaluation. Too big : Excessive capital expenditure; Nonoptimal production. Lower profitability.
History

Early and complete geological information. Small, light rigs available.

Small diameter wells in 50s. Increasing global production, no room for small/ cheap well engineering. Increased operating costs by mid eighties. This led to : The SZPM Drilling Spearhead.
Drivers

but.. . Required radical change from traditional culture. - Mechanical limitations, unconventional well control. - Slow drilling progress. - Pursued by others, e.g. the Amoco SHADS project.
-

The Shell choice

Downsized conventional system Compatible to traditional culture. Retro-fit to existing rigs first. - Spin-offs would benefit traditional drilling: e.g. the Kick detection system, 1 barrel detection at any depth; Generic system applicable to conventional hole sizes. but ... - No special rig, prove Product first.
-

In the face of constant oil price

The cost, and the cost trend: Smaller reservoirs; Developments in high cost areas. Technology pull from operating centers; Deep high pressure-high temperature wells.
Enablers

The SHD initiative

-

Better mechanics of drilling: e.g. Top Drives, MWD, etc.

Proceedings of the 14th World Petroleum Congress 0 1994 The Executive Board of the World Petroleum Congress Published by John Wiley & Sons

Awarded 3 year development contract to Eastman Christensen, now BHI.

21 5

21 6
-

NEW DRILLING TECHNOLOGY

[414

Joint and parallel development of subsystems and integration of available knowledge. - Changed focus due to business pull: High pressure/High temperature deep drilling; OnShore AND off-shore; Development wells; hence production. - Included Evaluation and Completion development: Monobore; Slim hole logging and testing.

Concern

DP/DC connectors; Limited drilling options; Bits; Formation eval. limitations; Motors (diameter and cost); Fishing; Kick detection; (ranked 5 out of 10)

SHD System HC-HT connection (others

Slim production

The 34-44 in Monobore completion: 4000 barrels/day liquids gross or 50 MM Scf./day gas. - New Wells: Appraisal wells; Infill drilling; Observation wells. - Side-tracks : Access bypassed Oil/Gas ; Avoid water coning - Avoid gas cusping; Circumvent mechanical damage; Through Tree under drawdown operations to avoid impairment.

developed). Review contingency strategy, focus on well cost. PDC in all sizes available. ; Down to 4 in none, 2 in tools avail. SH motors (24-4; in), 170C rating. With Truster, reduced fishing time. Few perceived problem, but Shell KDS dev. took 50% of budget.

Current Economic benefits

- Land development; 25-35% savings.
-

Off-shore Dev/Expl; 10-15% savings. Land remote area Exploration: 50% savings possible; 68% savings realised. Potential for higher profits to Contractor and Company still exists!

Status, current experience, 1

- Retrofit kit developed. - Final hole size at least one step smaller. - Full Suite Slim Hole evaluation down to 4 in

Economic benefits Field case 1

holes possible. - Kick Detection capability to One Barrel influx proven: WBM and OBM, On-shore and Offshore. - Economic potential proven.

Remote area exploration : Madagascar. 4 land wells, 6-8000 ft: 3 wells conventional, size 65 in, total cost *US$ 39 Min.; 1 well, light rig with retrofit kit, 4 in total cost US$7 Min. : - Slim well savings US$ 4-7 Min. versus previous 3 wells. - Potential for further US$ 1-2 Min. savings remained.
-

Status, current experience, 2 Application of SHD retrofit kit

-

Field case 2 Remote area exploration : Guatemala. - 1 land well. 4500 ft : Used mining rig (long year) in destructive Drl. mode. - Detailed estimate made for conventional drilling. - Work awarded on agreed lumpsum basis. - Actual cost to Operator US$ 4.7 Million less than conventional AFE.

> 100 wells with Diameter at TD < 6a in: Deepest well 5.5 km, Max Temp. 170 OC; Max mud density 2.3 SG (19 ppg), OBM/hematite; 2 holes <46 in and (2; in at 5400 m); 27 holes 4i-4: in (1 from Drill ship); 72 holes <6+ in (3 from Semis). 23 wells with SH-Kick detection system. 22 Horizontal wells (total length 8.5 km). All wells drilled on a commercial basis. All wells reached their geological objective.

The special Slim Hole Rig Status, current experience, 3

Recent global market survey showed SHD problem areas:

Believed to be unattractive, unless financed by operators. - The drilling contractor, rig owners dilemma: todays economic climate; Rig rates are low, No

Pl4

NEW DRILLING TECHNOLOGY

217

economic return on new investment; Much hardware available.. . Where is the market; The ageing rig fleet, need to decide on what to built. - The service company as partner?: Financially healthier; Make money on products, not rig services.

Future
The key areas

The Slim Hole R i g

Reduction of OPEX = extension of field life, and: Reduction of Unit Technical Cost allows marginal developments. - The bigger market is the one addressing reduction of OPEX, Incl. of workovers/re-entries.
-

New, special SH rig costs: 4-6 Million dollar! Hence: If work in previous examples had been carried out on a lumpsum basis, then the Drilling Contractor could have payed out a SH-Rig and still gained.

Future
Where is the beef.. . ?

Economics The hidden message

For remote area exploration, the cost of an optimised rig to capitalise on the Slim Well savings potential is recoverable in one or two wells. The focus has to be on total well costs (or the popular life cycle costs). - Contract structure move to lumpsum.. . - ... and Profit to be de-coupled from revenue: Focus on Margin, Focus on the costs.

Reduction of Well Construction costs facilitated by SHD-EC technology, but goal is reduction of UTC. - Also needs Improvement of Well Productivity. - Underbalanced operations offer high potential for maximum PI. - Reeled systems (Coiled Tubing) offer safest technical option. Future
Reeled systems, coiled tubing

Economics
Requirements for optimisation

Reeled systems surface equipment is small and offers same potential as special SHD rig. - CT units score high on HSE aspects. - No technical drawbacks for TTWO/Horizontal, Multi-root wells, etc. but.. .
-

Better planning to be carried out: Close liaison of Operator and Contractor; Understanding of lifecycle needs and priorities. - Attack the cost base: Personnel costs, +50%; Maintenance, 10-15%; etc, etc.. . - Operators to offer an adequate market.
-

Future
Reeled systerns-conclucionc
-

Economics

A SH-Rig, Why not.. .?

CTD and UB operations not fully developed yet. Need to change culture. Current cost level and pricing is (too) high.. . Reeled systems, as a Break Through Technology, are in danger of strangulation if only short term profits are pursued. A vast potential market will remain untrapped.

Are we suffering from the speculative rig building in the seventies and eighties? Rigs were built in response to Operator demand/ oil price projections. However, building could be driven by the margin on system wells versus cost of wells drilled by less suitable rigs.

Scope of operations (excl. U.S.A./Canada)

-

Number of Producing fields Number of Producing wells

340

218

NEW DRILLING TECHNOLOGY

P l4

Number of closed in wells - Producing strings - Number of strings on artificial lift - Number of wells natural flow
-

> 2500
3300 > 2900

Avoid being all things to all men (poorly defined/ researched market surveys) - Identification of opportunities by suppliers. - Entrepreneurial spirit for operators/suppliers. - Opportunities for/commitment to niche benefits.
-

Requirements for the future

Better communication between Operator and Service Industry. - No more shepherds and sheep. - Total well cost and systems approach - Performance related contracts. - Performance indicators related to Lifecycle well costs. - Speeding up of technology implementation into the field via contracting/aligning goals. Focus on solutions.
-

Recommendations

Operators and Service industry to work and plan closely together. - Operators need to work together, sharing noncore information, with a view to : avoid duplication of efforts by service industry; re-invent the wheel; link opportunities per (remote) area to enlarge market opportunity; share essential development costs of new hardware.