Maximising Well Intervention Efficiency in the Gulf of Mexico: A New Best Practice Model

Transcription

1 Maximising Well Intervention Efficiency in the Gulf of Mexico: A New Best Practice Model Offshore Network Disclaimer: Whilst every effort has been made to ensure the accuracy of the information contained in this publication, neither Offshore Network Ltd nor any of its affiliates past, present or future warrants its accuracy or will, regardless of its or their negligence, assume liability for any foreseeable or unforeseeable use made thereof, which liability is hereby excluded. Consequently, such use is at the recipient s own risk on the basis that any use by the recipient constitutes agreement to the terms of this disclaimer. The recipient is obliged to inform any subsequent recipient of such terms. Any reproduction, distribution or public use of this report requires prior written permission from Offshore Network Ltd.

2 INTRODUCTION There are a number of factors increasing the appetite for investment and activity of platform and subsea well intervention programs in the Gulf of Mexico. However, project certainty and risk are still a stumbling block for greenlighting projects. To maximize project certainty and minimize risk, well intervention engineering planning needs to be met with innovative cost efficient processes from the getgo. This paper plans to illustrate a new method of achieving this. CONTEXT Since the peak of activity and market value in 2014, the spend of both CAPEX and OPEX has dropped significantly. By the end of 2017 CAPEX was approximately 2/3 (-33%) of what it was in 2014 and OPEX was in a similar situation (-29%), as demonstrated by McKinsey & Co at OWI 2017 in Houston last October. Of this, the spend on well intervention/well services between 2014 and 2016 was down 43% - showing that well intervention investments fell faster than the spend on other parts of OPEX. This begs the question, has the opportunity to generate positive returns from mature assets in the GOM gone? The answer is simply no. The opportunity is there and 2018 has demonstrated more operators taking advantage of this year s high oil prices to leverage greater returns from well intervention services. Based on a benchmark of 46 offshore assets (mix of platform and subsea), McKinsey & Co outlined that one in eight wells were shut in or idle. If well intervention services were used to reinstate these wells and remove production deferment (simply bring them to a median level of production) the results would be an additional 149,000 boe/d just from the 46 assets. To put this into perspective it is equivalent to a giant discovery. This market opportunity is huge and has not gone unnoticed: 1. Operator well intervention and M&A activity is increasing. The industry is really starting to chase this prize. If we look at recent acquisitions on the GOM shelf for example, even the most mature assets are seen as having significant production value and are being sold to new owners rather than being decommissioned. 2. During the downturn new contracting models and innovations have cut well losses/npt so well intervention is more efficient and ultimately cheaper than ever before. 3. GOM rig activity has steadily increased and the past three months. This shows growth from the lowest point of rig activity. 4. Experience from a global operator with a mix of both subsea and platform wells, demonstrates that in the current climate you can get 10% to 20% gains or more from well intervention alone and at a small cost ($4-$9 per barrel). TOTAL GULF OF MEXICO RIG COUNT CHART April 18 May 18 June18 1 Gulf of Mexico Rig Count, Y-Charts, https: /ycharts.com/indicators/total_gulf_of_mexico_rotary_rigs PAGE 2

3 To take advantage of well services in the quest to effectively maximize hydrocarbon recovery, operators need to do two things well: 1. Implement a well intervention strategy that can be delivered from idea to execution across multiple and varied interventions continuously. This means not seeing well intervention as a reactive discipline associated with problem wells, but a proactive production enhancement investment. 2. Reviewing your organizational set up to ensure individuals and teams have commercial responsibility and accountability for the contract model and are incentivised to push ideas and projects through. This paper will focus on a real world example of this idea in action and demonstrate how this best practice that can be utilized in the GOM to take advantage of production uplift and reduce P&A liability. DEVELOPING AN ACTIVE INTERVENTION STRATEGY There is a significant volume of idle or deferred wells that offer incredible value. Well intervention is proven to give the cheapest additional barrels in the portfolio, with the most efficient operators achieving costs of just a few extra dollars on each barrel. This is significantly cheaper than drilling. Well intervention is the perfect solution to meet demand right now, but it must be planned and executed with a strategy suitable for the current market. Perhaps the most significant and unified well intervention strategy has been delivered by PETRONAS MPM. Speaking at OWI EU 2018 in Aberdeen on April 25th 2018, Shahril Mokhtar, Head of Completions for PETRONAS MPM detailed their strategy, implementation and benefits. The Malaysian NOC and other private operators who are governed by PETRONAS MPM knew they had to address their idle well stock, deferred wells and also integrity/diagnostics work across platform and subsea assets. So generally, they are subject to the exact same works and demands as the GOM. Initially PETRONAS looked into the history of well intervention performance, and it became clear that between 2013 to 2015, an average 35% of well intervention expenditure did not yield any returns due to job failure, inefficiency and value leakages. As they were not winning the barrels they had hoped for, it was necessary to address this quickly in order to sustain production levels within the confines of a low oil price environment. To address this, a new model was created that focussed on total wells management. This involved three key elements: 1. Critical Candidate Selection 2. Efficient Success Rate Driven Contracts 3. Integrated Execution Through KPIs, targeting and an integrated approach the efficiency targets were raised from a 65% success rate to a minimum of 85%. Below is an overview of the KPIs and targets: Improve the success rate to at least 85% Improve the operational efficiency to at least 85% Deliver a production gain factor of 12 i.e. total of 12 + YY KBD Deliver more production while maintaining the cost factor similar to 2014 An industry based integration model that promotes clear collaboration via a risk sharing mechanism to deliver the above results And this was all delivered for less than the annual spend of well intervention in 2014, by utilizing a lean and sustainable model (this was not just a cost cutting exercise, which will be outlined later in this paper). This was called the Cost Reduction Alliance (CORAL 2.0) - LEAN Win. PAGE 3

4 ORGANIZATIONAL SET UP AND CONTRACTING What is Cost Reduction (CORAL) Lean Well Intervention (WIn) Initiative? The goals of CORAL were to optimize well intervention cost and performance by improving efficiency and driving innovation. CORAL is extremely beneficial and the value generated was quantifiable and immediately evident. 10% overall reduction of total well intervention cost was targeted by 2020 but 25% of savings were actually realised within the first year of the program. Is a model like this viable in the GOM? Although this is a top down guideline influenced by government, the steps and methods could be executed independently by any operator who has enough well stock to ensure the appropriate volume of work or by multiple operators of any size joining together to create the necessary volume of work. The key is to be fully integrated with your suppliers, ensuring you are active and have a significant volume of work to do. This allows the operator to benefit from reduced group rates and the contractor benefits from much larger utilization of tooling, well access systems, vessels etc. (basically consistent annual utilization). Below is an overview of this model and how you can apply it to your well programs: WI Operating Model (planning) WI Fit-for-Purpose Cost & Performance (Execution) WI Contract and WPB/ACV Management Optimising WI jobs by doing sharing resources Selecting equipment, e.g. slickline vs. e-line, CT for P&A or P&A vs complicated straddle Minimising NBVA steps in operations, e.g drift run for slickline, meeting time, waiting time 74% Saving Standardize equipment and tools requirement Removing standby costs when tools are offshore and only when it is in-hole Removing 3rd party surcharges, e.g pumping 14% Saving Finding the most competitive rates, e.g farm-in, duration, discounts Negotiating better vessel rates, e.g. via bundling components, zero-rate mob/demob Capping the cost of equipment 12% Saving Most savings were found in the operating model. This can simply be achieved by a change in mindset. For example, if you CAN do job A with wireline then WHY mobilise coil at all? As a region, the GOM is familiar with intervention technologies and have expanded the technical scope of their capabilities, so it is important we utilize the more efficient option at every possible opportunity, if regulations allow. In the GOM specifically, an over reliance on coil has often increased project costs and caused projects to be mothballed during the planning stages due to them being commercially unviable. For success the operator needs a focussed team to assemble, commercially manage and target the suppliers within and throughout the value chain. This tried and tested model could be applicable to the GOM, even for the most complicated subsea wells in the current market. With a defined strategy and a KPI based contract model for all suppliers, quantifiable efficiencies are proven to exist. It s important to stress that these new agreements do not say that buyers will not be paying for equipment or even paying less. They simply say that the equipment or service acquired performed as planned and as per the proposal from the supplier. This is a fair risk sharing agreement which is ultimately defined by the contractor. 2 Shahril Mokhtar, Driving Efficiency in Idle Well Restration/Production Enhancement through Risk Sharing Intergrated Operations and COR- AL 2.0, OWI EU 2018, http: / PAGE 4

5 GOM P&A LIABILITY: The combination of the intervention strategy and commercial model is also applicable to the multiple P&A programs which need to be executed across the shelf and deepwater GOM. Taking into account the quantifiable savings demonstrated by the CORAL model, this could in essence reduce P&A liability by 25% immediately. However, the savings could be even greater as the GOM is well positioned to leverage further efficiencies for P&A works. The maturity of P&A experience in the GOM gives owners/operators a significant advantage when applying a lean well service model to future campaigns. This is due to the P&A discipline being well understood, access to a huge documented history of P&A lessons learnt and the availability of advanced P&A equipment that has been developed or is available locally in Houston. Advanced P&A solutions available include: Advanced Section Milling. For example dual sting section milling, offered by companies including Weatherford, can save 4.9 days of operation time. 3 Melting Cap Rock: Melting the cap rock utilizes a thermite plug to seal the well by melting both the well components and the rock formation around them to recreate the cap rock, i.e. Caprock barrier. This has been tested by Spirit Energy (Formally Centrica), Shell and Imperial in Canada. The results demonstrated that this technology could reduce well P&A costs by more than 50% 4 Resin Plugs: Resin can formulate free of solids, allowing it to penetrate microchannels and effectively seal leaks which may not be possible to seal with cement. Resin application in P&A includes squeezing for annular fluid flow; shut-off gas source and squeezing a previously leaking plug 5 Advanced barrier diagnostics and monitoring. Leading to less invasive barrier assurance diagnostics and reducing the frequency of traditional monitoring by having a constant solution Suspended Well Abandonment Tool (SWAT) from Claxon, (offered by Intermoor in Houston) offers great rigless efficiencies for well abandonment 6 The volume of P&A liability and abandonment experience within the GOM gives operators and service providers a unique position to demonstrate globally how efficient P&A can be. By utilizing the game changing best practice model demonstrated by PETRONAS, with access to the most advanced P&A toolbox and rigless technology, huge savings and efficiencies can be made over and above the 25% that can be made by simply utilizing traditional technologies in the new model. 3 Offshore Mag, New P&A technology cuts operational time in half, https: / 4 Mike Richardson, Spirit Energy,SPE Aberdeen, https: / 24-Jan-2018-FINAL.pdf 5 Mark Plummer MSc BEng, Latest Well P&A Decommissioning Technologies and Strategies, http: / item/45-latest-well-p-a-decommissioning-technologies-and-strategies 6 Intermoor, Rigless Well Abandonment Services, http: / PAGE 5

6 CONCLUSION It s no secret that the majority of well intervention work has been restoration and remediation work to stop wells from failing rather than winning valuable barrels. Throughout 2018 there has been a focus on achieving incremental production enhancement by leveraging the full capabilities of well intervention technologies. By adopting the proven best practice model of organizational and contractual change, huge gains can be achieved from mature brownfield assets and gushers alike. The exact same successful philosophy can be applied to P&A projects. Active operators utilizing this best practice could increase recovery for as little as $2 - $7 per barrel and reduce P&A liability by 25% simultaneously. Well intervention for experienced operators has always been a high value proposition, however if nothing else, this paper goes to show the further value that can be achieved from implementing a well understood process and methodology. OFFSHORE NETWORK WOULD LOVE TO HEAR FROM YOU Offshore Network Ltd. is an independent business intelligence & conference provider catering specifically to the offshore oil & gas industry. We exist to facilitate a safe and efficient future for the exploration and production of oil & gas around the globe. We do this by uniting the most in-fluential figures in the industry to challenge the status quo and share cutting edge innovations. This all happens at our industry leading conferences and through our original content. If you would like to contribute to this discussion or are interested in taking part in a future Q&A or article, please contact Offshore Network ( today: info@offsnet.com Join the Offshore Engineering Group on LinkedIn UK Telephone: (0) US Telephone: Follow Offshore Network on Twitter PAGE 6