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THE EXPLORERS 2006 - BP: Unlocking the viscous prize Marshall: If Ugnu technology issues can be solved viscous oil could take Alaska production well beyond 2050 Petroleum News
While BP Exploration (Alaska) Inc. can’t be described in traditional terms as an Alaska explorer, the company invests more than $100 million a year in viscous development in Alaska, aiming to produce just a small portion of the North Slope’s 20 billion barrel heavy oil resource.
Currently about 500 million barrels of North Slope viscous oil are economically recoverable or “proven” — a tiny fraction of the volume in place, but still enough to rank as one of the largest oil fields in North America.
In a viscous oil presentation on its web site, BP said “several times” that much is likely recoverable with existing technology, such as injecting water into the reservoir at high pressure to force more oil out of the ground.
“Invest-as-you-learn’ strategy In order to manage the risks, BP and its partners have adopted an “invest-as-you-learn” strategy for viscous oil on the North Slope, which overlies the main producing reservoirs in the Milne Point, Kuparuk River and Prudhoe Bay fields (see map).
The focus of BP’s initial development efforts has been the deepest and most prolific reservoir targets, with each new development more challenging than the last.
Because it’s cold and thick, viscous oil doesn’t flow to the surface as easily as oil from the main reservoirs.
The West Sak/Schrader Bluff and Ugnu formations where the viscous oil is located are much shallower than the main reservoirs — 2,000 to 5,000 feet beneath the surface, compared to 7,000 to 10,000 feet for the others.
That means they’re closer to the permafrost layer, so it’s not surprising that West Sak/Schrader and Ugnu oil ranges from 40 to 95 degrees Fahrenheit whereas oil in the main Prudhoe Bay reservoir is close to 200 degrees.
Cold, thick oil results in low well productivity and conventional wells in viscous reservoirs produce only 200-300 barrels per day as compared to 10,000 bpd for many of the early Prudhoe wells.
It’s one of the reasons investments in viscous oil development have trouble competing for capital.
That’s the bad news.
Largest known hydrocarbon resource in Alaska The good news is viscous on the North Slope is the largest single known hydrocarbon resource in Alaska and BP and its partners know exactly where it is.
Plus, it’s close to existing pipelines and production facilities. That means much of the existing infrastructure can be utilized to produce and ship it, which helps reduce development costs and minimize surface impacts.
And, according to BP, “new drilling technologies that tap multiple reservoir targets from a single well further reduce environmental impacts. It also means we can bring it on line in a matter of months rather than several years or longer once we’re ready to proceed with development.
“And North Slope viscous oil is low in sulfur and metal content and ideally suited to the needs of West Coast refineries.”
Plus, the company said, “well productivity has increased exponentially. Today, viscous wells routinely produce more than 1,000 barrels of oil per day, and a handful produce more than 2,000.”
But drilling and production costs have increased, too. BP said a conventional well costs less than $2 million to drill and complete, while the complex multilateral wells needed for viscous oil cost closer to $10 million.
Major technical channges But there are still major technological issues with producing viscous oil, such as the problem with sand from the producing formations — “it’s the consistency of Turnagain Arm mud,” BP said, “and by the summer of 2004, more than 1,000 cubic yards of it had accumulated inside one of the processing tanks at a production facility at Prudhoe Bay. It had to be removed manually, trucked to a disposal facility and reinjected into a subsurface formation at a cost of $150 per cubic yard.”
Engineers, the company said, also “continue to struggle with the challenge of separating produced water from crude oil due to the colder temperatures.
Through the end of 2005, BP and its North Slope partners, including ConocoPhillips and ExxonMobil, have spent more than $1 billion developing the slope’s viscous oil resource, which accounts for more than 5 percent of all the oil produced in Alaska.
“Viscous oil production could double over the next several years and provide more than 10 percent of Alaska’s total by 2010. It already accounts for nearly half the production at Milne Point, and in 25 years, it could amount to half of all the oil flowing through the trans-Alaska oil pipeline,” BP said.
BP Exploration (Alaska) President Steve Marshall said earlier in 2006 that the company has only scratched the surface of Alaska’s viscous oil resource.
“We’ve started to produce viscous, but there’s some really heavy stuff out there, called the Ugnu formation — sits just below the permafrost.”
Right now BP believes it can get maybe 8 percent of that resource, he said, but in Canada they’re producing close to 50 percent recovery “from that same kind of oil, but they don’t have permafrost, they don’t have the extremes of weather that we do.”
But if the technology issues around Ugnu oil can be solved — with steam, bacteria or CO2 — “that could be a huge business for many, many years to come, well beyond 2050,” Marshall said.
The next step The “next step” in increasing North Slope viscous oil production “could be a project to re-engineer the system for gathering and processing oil on the western side of Prudhoe Bay to accommodate the increasing volumes of viscous oil coming from the Orion and Polaris satellites,” but it would cost “hundreds of millions of dollars,” BP said.
BP and its partners said in September of 2003 that they would expand viscous oil production at the western edge of Prudhoe through development of the Orion accumulation, discovered in 2001.
The company said the Orion V-202 horizontal lateral delineation well was successfully drilled and placed on production in July 2003 with a flow rate in excess of 3,500 barrels of oil per day. BP said potential recovery is more than 200 million barrels of 16-23 degree API viscous crude. Processing would be at existing Prudhoe facilities.
Orion, a Schrader Bluff accumulation, overlies the Kuparuk River formation Borealis reservoir.
In early 2006 BP drilled the I-100PB1 Orion appraisal well from an ice pad to appraise Schrader Bluff. Prior to drilling BP said the well would cost up to $5.5 million.
“The well was drilled as a high-angle inverted lateral and plugged back before continuing to drill I-100, a Kuparuk appraisal well,” company spokesman Daren Beaudo said in October 2006. “The well confirmed Orion net pay in the Schrader Bluff Nb, OA, and OBa sands and in the Borealis field Kuparuk formation in the C-sands.”
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