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Vol. 10, No. 7 Week of February 13, 2005
Providing coverage of Alaska and northern Canada's oil and gas industry

Burger delivers

MMS reappraises Chukchi well; may be largest hydrocarbon find on Alaska OCS

Alan Bailey

Petroleum News Staff Writer

With gas prices at major U.S. hubs above $5 per thousand cubic feet and the prospect of a North Slope gas line, MMS is encouraging people to look again at a major gas discovery in the Burger structure in the Chukchi Sea. The Burger well encountered the gas during a Chukchi exploration program headed by Shell between 1989 and 1991. At the time of the discovery people were searching for oil rather than gas and paid little attention to the gas find.

A newly released MMS re-appraisal of the Burger prospect has lifted the most-likely recoverable reserves from an original estimate of 5 trillion cubic feet of conventionally recoverable gas to a new estimate of 14 tcf. The estimate indicates a possible range from 8 tcf to 27 tcf. The corresponding estimates for condensate are a most-likely volume of 724 million barrels and a range from 371 million to 1.404 billion barrels.

“We did (the assessment) pretty much over from scratch,” Kirk Sherwood, an MMS geologist, told Petroleum News Feb. 3. “We went ahead and allowed for a more robust or complete filling in the prospect … and that generated a lot of additional resources.”

Higher oil and gas prices

MMS actually prepared this new appraisal of Burger in 2001 but the agency has only just released its report on the results to the public.

In 2001 companies were making development decisions based on $12 to $18 oil prices, said Larry Cooke, a supervisory geologist with MMS. We’re putting the report out now because people are looking at higher sustained oil and gas prices and we’re seeing a situation where this type of prospect can become economic, Cooke said.

“We have started getting … enquiries about Chukchi from industry,” Cooke added.

And with a known hydrocarbon accumulation that is probably very large, Burger provides a unique opportunity to assess a major prospect in the Chukchi Sea.

“We selected this as a test object because we knew something about it — we could estimate some kind of discovered resource figure,” Sherwood said.

Similar to Kuparuk

The Burger structure consists of a dome 25 miles in diameter, sitting on a structural ridge that branches southwest across the center of the Chukchi shelf, from a point on the Barrow Arch about 50 miles northwest of Barrow. The Jurassic sandstone reservoir at Chukchi is part of what geologists call the rift or Beaufortian sequence — this sequence is associated with the pulling apart of the Earth’s crust that occurred when the Canada Basin of the Arctic Ocean formed.

The Chukchi sandstone forms an exact analogy to similar rift sequence sandstones that form the reservoirs at the Kuparuk River field in the central North Slope, Sherwood said. And the prolific Pebble Shale hydrocarbon source rock that also occurs on the North Slope caps the Burger reservoir.

At the Burger well the sandstone reservoir is just over 100 feet thick and seismic data indicates that the reservoir may extend at a similar thickness through much of the dome. However, seismic interpretations of the Burger structure show a threefold increase in thickness of the rift sequence on the west side of the structure, where geologists believe that faulting during sedimentation has caused thickening of the sedimentary sequence. If the reservoir sandstone has increased in thickness in proportion to the rest of the sequence, you could find 300 feet to 400 feet of reservoir rock on the west side of the structure, Sherwood said.

Sherwood compared this possibility to the thickening of the Kuparuk sands in sunken fault blocks at Point McIntyre.

“So we draw upon that analogue to infer the potential for thick sands on the west side of the (Burger) structure,” Sherwood said.

The original assessment

Estimating the amount of gas in a prospect such as Burger critically depends on assessing the total depth of the gas column in the reservoir. The original 1993 MMS assessment of the Burger prospect estimated the gas depth by using well log data to identify the gas/water contact at the base of the gas. In particular, geologists assumed that the crossover point of the pressure gradients from the upper and lower parts of the reservoir marked the gas/water contact — sandstone saturated with gas exhibits a markedly different pressure gradient from sandstone saturated with water.

The geologists then assumed that a gas fill down to the depth of this inferred gas/water interface would represent a maximum fill model for the prospect.

The Burger well actually drilled through a flank of the Burger structure. So, with known gas from the Burger sandstone, the geologists assumed a medium fill model in which gas fills the reservoir from the crest of the structure down to the depth at which the well first entered the reservoir — a point some 60 feet above the gas/water contact inferred from the well log data.

For a minimum fill model the geologists assumed the same base for the gas as in the medium fill model but they subtracted a volume associated with a seismic “dim spot” at the crest of the Burger structure. The “dim spot” resulted from relatively weak seismic reflections and might indicate some change in the sandstone or the presence of an unconformity.

“Back in ’93 we said ‘we’re worried about that — let’s take that out — let’s say that area will not have productive reservoir in it,’” Sherwood said.

The new fill models

In its 2001 re-assessment the MMS geologists realized that large quantities of mud in the lower part of the Burger sandstone render the interpretation of the pressure gradients in the well unreliable. In fact, there is a distinct boundary between clean sands in the upper 60 feet of the drilled Burger sandstone section and the muddy sands of the lower 40 feet of the sandstone. A divergence between the neutron porosity and density log porosity curves from the well logs marks this boundary; the boundary also coincides with the crossover point of the pressure gradient curves. It’s likely that below the boundary the mud masks the effect of any gas on the pressure gradient, Sherwood said.

“The upper part of the sandstone … is clean, it’s a nice high permeability sand — the lower part’s muddy and has less permeability,” Sherwood said. “Also the mud acts to cancel those gas effects (on the pressure gradient).”

So the geologists now think that gas may fill the whole of the sandstone unit around the well. And the reported recovery of some gas and condensate from within the muddy layer below the pressure gradient crossover point supports this view.

But where is the base of the gas column in the Burger reservoir?

In the absence of delineation wells no-one knows. However, it’s reasonable to conclude that gas can’t have accumulated below a spill point at the lowest point in the trap that seals the reservoir. So, the 2001 reassessment used an estimate of this spill point to determine the maximum fill model for the reservoir. This approach resulted in a much larger potential volume of gas than in the 1993 assessment.

For the medium fill model, the 2001 reassessment used the exact same model as the maximum fill model of the 1993 assessment, with the gas fill extending down just to the pressure curve crossover point. The 2001 minimum fill corresponds to the 1993 medium fill model and assumes a base for the gas fill at the point where the well first entered the reservoir. The 2001 re-assessment did not consider the seismic “dim spot” as a significant factor.

In calculating conventionally recoverable reserves, the MMS assessment team applied some statistical analysis to the uncertainties associated with the maximum, medium and minimum fill models. This analysis resulted in a mean volume and possible range of volumes for each of the models.

The team’s estimate of 14 tcf as the most likely volume of gas in the Burger reservoir corresponds to the mean value for the medium fill model. The likely range of 8 tcf to 27 tcf corresponds to the range from most likely to mean for the maximum fill model. The team derived the estimated condensate volumes in the same way.

The upper end of the statistical range for gas in the maximum fill model gives a volume of 63 tcf but this volume of gas would require a combination of circumstances that seems very improbable.

Subsea completions

To assess the economics of developing the Burger prospect MMS had to consider how best to extract gas from a wide area in a remote offshore location.

“What we have here is basically … a thin reservoir spread over a large area and what ultimately controls your economic success is concentration of resources per well site,” Sherwood said.

So MMS petroleum geologist Jim Craig proposed the use of subsea well completions hooked into a single concrete platform.

“In the past we’ve modeled a fairly large number of platforms and one of the big changes that Jim had this time is that he had a single platform and had subsea completions to lower the cost,” Cooke said.

The MMS development scenario also assumes an 80-mile subsea gas pipeline from the platform to land and a 300-mile overland pipeline direct to a compressor station at the northern end of a gas line from the North Slope.

Craig compared Burger with several offshore gas fields in various parts of the world by plotting a graph of the development cost per thousand cubic feet of gas vs. field size. It turns out that Burger is probably bigger than any of these fields and could cost less per thousand cubic feet of gas than several fields in the North Sea.

“Burger amongst these (fields) would be a relatively high-cost project but also offers at the mean case a pretty good resource base,” Sherwood said.

The Norwegian Asgard field provides a good analogue for Burger, Cooke said. The Asgard field uses subsea completions in similar water depths.

Viable at $5 per mcf

Plugging the estimated development costs and gas reserves into a standard economic model resulted in a breakeven point for the development at a natural gas price of about $5 per 1,000 cubic feet.

“The standard NPV (net present value) model … that allows costs and gas prices to inflate at the same rate yielded a $5 (per thousand cubic feet) year 2000 price paid in Chicago to basically break even,” Sherwood said.

And the economic model predicted an economic field life of about 22 years, with 11 tcf of economically recoverable gas and 600 million barrels of economically recoverable condensate.

The MMS economic model also shows how different economic assumptions such as gas price inflation, general price inflation and discount rates affect the threshold gas price for a viable development project. Assuming a growth in gas prices 1 percent above general price inflation results in a threshold gas price of just $4.63 per thousand cubic feet. The standard model, but with no condensate sales, gives a threshold price of $6.71. The highest threshold price, $8 per mcf, results from an assumption that gas prices will remain flat.

Many uncertainties

Although the results of the resource assessment and economic analysis show a prospect that is on the verge of being economically attractive, Sherwood emphasized the many uncertainties that the MMS report addresses. For example, huge unknowns remain concerning the exact nature of the Burger prospect.

“It’s a single well test of a structure that’s 25 miles in diameter and a sand that’s about 100 feet thick,” Sherwood said. The discovery of a thicker area of reservoir on the faulted western side of the structure could, for example, make a big impact on the economics of the prospect.

But even with the volumes that MMS has now assessed, Burger may be the largest discovery on the outer continental shelf and could rank alongside some of the larger hydrocarbon accumulations on the North Slope.

“Even in our minimum case now — 7 tcf — that would be up there with Point Thompson,” Sherwood said. “At the mid case on a barrels-of-oil equivalent it’s about 3 billion barrels … that’s a Kuparuk size.”

The MMS report and a spreadsheet with the Burger economic model are available online at Fact Sheet.pdf

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