Southern North Sea gas developers inspired by deregulation

Nov. 1, 1997
ARCO's Tyne platform, which came onstream last year. Conoco's recently installed Boulton platform. [19,070 bytes] Situation of the Waveney prospect in relation to Mobil-operated facilities. [42,686 bytes] Bure West and Deben development schematic. [18,875 bytes] Two years ago, events in the UK gas market left southern North Sea operators reeling. Most had responded to the dash-for-gas from Britain's power industry by investing heavily in new platforms or added compression. Then came

Liberalized pan-European market creating demand

Jeremy Beckman
Editor, Europe
ARCO's Tyne platform, which came onstream last year.
Two years ago, events in the UK gas market left southern North Sea operators reeling. Most had responded to the dash-for-gas from Britain's power industry by investing heavily in new platforms or added compression. Then came the gas price slump and numerous lawsuits as buyers tried to renege on long-term contracted supplies.

Events have since turned around for the better. The unblocking of Norwegian gas imports to the UK through the re-negotiated Frigg pipeline treaty, coupled with successful export deals through the new Interconnector line from Bacton to Zeebrugge, have opened the way to a fully liberalized, pan-European gas market.

Shell is now fostering hopes of a second Inter connector from Bacton to The Netherlands, offering two-way passage of supplies should Britain's natural resources grow thin. The Frigg deal could also spur various new Norwegian gasfield developments close to the median line with the UK.

Faced with this increased competition, the southern sector practitioners have re-discovered their appetite for new field developments, but the end-product must remain competitive in terms of price. To this end, long-term alliances are being formed with fabricators with the aim of holding down platform costs. Unfortunately, the gains are being swallowed up by inflated rig rates as the search for replacement gas continues.

Here are some of the recent key investments or upcoming programs:

  • Mobil has installed added compression at the Bacton gas terminal for its Lancelot Production Area facilities. This is allowing extra gas to be handled from third-party fields as well as Mobil, the aim being to shore up unused capacity in the Lancelot Area Pipeline System.
  • Phillips, too, is pondering improved compression to sustain production from its Hewett Field. This could be either through refurbishment of its existing compressors at Bacton, or through investment in a new one alongside Mobil's.
  • BP is set to assume operatorship of Ravenspurn North from BHP. The field, which came onstream in 1990, exports gas through BP's Cleeton compression system, using one central processing platform and three wellhead platforms. The move will allow BP to achieve operating efficiencies across these two fields and its own Ravenspurth South operation, partly through cuts in the offshore workforce. BP is also considering a wellhead platform for its 1989 Hoton discovery, or else a subsea tieback to the West Sole complex.
  • British Gas has drawn up plans for its Easington Catchment Area development, thought to include the Apollo, Artemis, Mercury and Neptune prospects. Develop ment could be phased, involving initially one riser and two wellhead platforms. A previous study, known as Olympus, was dropped when the gas price slumped.

Changing commitments

Unique among southern North Sea E&P companies, Arco British has resisted moving downstream into gas marketing on the mainland. However, it has changed its strategy as a beach seller.

Previously, says operations director David McManus, Arco would ensure that long-term gas sales from a new field were firmed up before launching into the development. "Now we're looking to sell Arco gas from a combination of fields rather than commit all the gas from a specific field."

Buyers have recovered their enthusiasm following the slump in gas prices of 1995. There is now a much better balance between supply and demand in the UK, McManus adds, and the situation looks good for field developers into the next century. Growth is coming mainly from gas-fired power generation schemes.

On the other hand, he adds, "I still expect further consolidation in the gas downstream sector. I personally feel there are too many marketers chasing the same customer base."

Southern sector developers may face stiffer competition in time from the Interconnector, which is engineered for gas imports as well as exports. But for the near future, traffic will be all one-way from Bacton to the Continent. Arco took these trends into account before backing development of Shell's Shearwater Field in the Central North Sea, in which it holds a 27% stake. Central Graben fields such as Shearwater, Elgin, and Franklin are likely to be contributing to gas exported through the interconnector.

Over the past couple of years, Arco has strengthened its position in the southern North Sea by establishing a new hub, the Trent/Tyne complex. Gas from the fields is being piped through the East Anglia Gas and Liquids Evacuation System (EAGLES), formerly BHP's Esmond/Gordon transportation system. This line is currently half-full; the capacity is 14 MMcm/d. Arco has two or three discoveries that it might tie into EAGLES, but there would still be room also for third party gas.

"We are likely to see more add-ons to existing pipeline systems in the Southern Gas Basin," McManus suggests, "though not too many new pipelines. There will also be further compression upgrades." Arco itself is considering adding compression to the Trent/Tyne facilities in blocks 43/24 and 44/18, depending on discussions with third party gas owners.

Candidate prospects near the platforms include Amoco's Cavendish in block 43/19a and Talisman's 43/22 discoveries, thought to contain 150 bcf combined. Arco itself is drilling more prospects via step-outs from the platforms. A recent Tyne development well flowed gas at 75 MMcf/d, possibly the highest rate recorded yet from the Carboniferous. However, McManus cautions that "drilling and appraising in the Carboniferous is lengthy and expensive - and significantly more difficult".

Concept choices

Changes in platform design are helping Arco and others push forward projects that would otherwise have been marginal. However, Arco was also open to subsea suggestions a year ago when it invited guidance from five UK contractors for its Thames Area expansion and other schemes.

"We weren't locked into one concept," says producing assets manager Jim Bradley. "We left it to the contractors to provide the most cost- effective solution." That turned out to be the Sea Harvester minimum facilities platform, adapted by Lowestoft- based Odeberecht- SLP Engineer ing from the design conceived by Atlantia for the Gulf of Mexico.

Odebrecht-SLP first applied this concept to Conoco's Boulton platform, which was installed 170 km off the Lincolnshire coast this summer. It's due to start exporting gas shortly through the Caister Murdoch pipeline system to Theddlethorpe. Installation took 10 months from the project sanction date.

The platform consists of a 337-ton deck and 463- ton jacket, with the well conductors inside the four jacket column legs. Initial production will be through two wells, one a dual-lateral.

"Our alliance with SLP worked very successfully," says Conoco's SNS OU manager Eric Bell. "They came forward with the design, while we provided operational experience in influencing how the design looked at the end of the day.

"Being a satellite platform, when the helicopter arrives for maintenance, accessibility is important. So for example, the lights have been positioned to be easily accessed for changing bulbs - no scaffolding is needed. Likewise, the gas detectors are easy to get at. Even for crane operation and loading of diesel fuel, we tried to embody all the best practices built up from our 25 years of operating the Viking complex."

Conoco's decision to test the water first suited Arco. "We didn't want to be the guinea pig," says McManus. Arco took a close look at the Boulton project, and was impressed that it went to schedule and within the budget. It was also comfortable with the idea of re-engaging Odebrecht-SLP, having employed the fabricator for the Trent/Tyne platforms.

Arco decided to award Odebrecht-SLP a five-year framework agreement covering design, procurement, construction and commissioning services.

According to Bradley, the Sea Harvester design "is flexible, it can be used to tie in other prospects, with space on the deck for extra meters...Other companies have chosen platforms that can be installed with drilling rigs. This one can't - but we're chasing a short project schedule, so that makes this concept OK."

Sailaway schedule

First off, the production line will be the Thames AR platform, which will produce gas from the Bure West field, and is due to sail out from Lowestoft next June, nine months after construction started. In fact, the discovery well was only completed this January - if production hits the targeted start-up date of October 1998, it will be Arco's fastest-ever gas production project.

The AR platform will be bridge-linked to the existing Thames complex and Bure West will be controlled via an 11.8 km, 8 in. flowline and umbilical. On Thames itself, only Deben (ex-N) will be tied back to AR through a 6.3-km 6-in. flowline and umbilical. Both Deben and Bure West are thought to contain 30-50 bcf. On AR itself, only minor modifications are planned initially, such as the addition of metering equipment for primary separation. A major upgrade starts next summer when existing compression is raised from 24,000-27,000 HP to extend the life of the Thames Field by up to five more years.

Another Sea Harvester is earmarked for Waveney, a 60-80 bcf Arco discovery from March 1996 in block 48/17c. This lies nearer Mobil territory, hence it will be tied in to the Lancelot Area Pipeline System through a 9.2 km tee. Two horizontal wells will be re-completed. Production could start late next year.

Other prospects for Sea Harvesters might include Bedevere in 48/12, which Mobil would operate. "Mobil drilled a well there this spring, which was suspended," says McManus. "The results were curious - it took us back to the drawing board in terms of the area's geology/geophysics. So that one's been pushed back while more geoscience is applied. It could also be produced through an ERD well from the Lancelot platform, or a subsea cluster."

Despite the recent hike in rig rates, Arco is looking at £30 million all told for each of its developments. Should exploration elsewhere result in similar commercial finds, the aim is for quick production, on the lines of Bure West and Waveney. "We can't afford to wait five years from drilling to development."

Arco has no current plans to re-use the platforms, however, even though this would be feasible. The southern North Sea bed is not flat, McManus points out - water depths and soil conditions differ. "Trent, for instance, is much deeper than Tyne. And by the time these fields reach the end of their life, the technology will have moved on."

Conoco expands

Arco is by no means straightjacketed with the Sea Harvester - other emerging, minimal facility designs will be considered for other fields. Likewise Conoco, which seems to be forever expanding or overhauling its southern sector infrastructure.

Last year, a new compression platform was added to Conoco's Caister-Murdoch gas-gathering system in Quadrant 44. This was bridge linked to the Murdoch production platform, which was in turn modified to handle third-party field tie-ins. The first of these was Shell's Schooner, 28 km from Murdoch. Dialogue continues on another Shell prospect - Ketch.

Exploration wells are planned soon in block 44/17, north of Murdoch, which if successful, could use up more spare capacity. There is the possibility that yet more compression could be added, either offshore or at Conoco's LOGGs terminal in Theddlethorpe.

In Conoco's other core southern sector area, the V fields (also off the Lincolnshire coast), Brown & Root is supplying its Gas Gatherer minimum facilities design for two new platforms being built by Barmac in Ardersier, Scotland. These will tap 500 bcf from Viking field satellites under a project known as Viking-Phoenix. All the gas will be routed into the Viking BD platform, then sped on its way through the Viking Transportation System to Theddlethorpe.

Viking B's four existing platforms, meanwhile, are being converted to normally unattended status, with a new 500-ton process module due to be installed on BD next October, partly to handle Viking-Phoenix gas. The previous equipment had been in service for 25 years.

Conoco hopes to prolong production through this complex by another 15-20 years. New seismic was recently reinterpreted around the V-fields, with a view to identifying locations for further development wells. "It may also reveal further prospectivity," says Eric Bell.

Jupiter Area Phase II is yet another new development under consideration. Both Odebrecht-SLP and Brown & Root may be in the frame. Conoco is open to more creative thinking, says Bell, particularly as regards jacket design and further cost reductions.

Conoco launched a half-price capex initiative in 1995 aimed at halving the cost of its future southern sector satellites, deriving lessons learned from Gulf of Mexico projects. Some of the points have been embodied in the functional specifications for the Viking-Phoenix platforms. Boulton would not have gone ahead without this initiative. Now there is a push to achieve similar savings in OPEX.

With rising rig rates swallowing gains from fabrication, Conoco wants to inculcate similar thinking among its drilling contractors, making more use of cost-reduction techniques such as multilateral wells. Scheduling field developments concurrently also improves cost by saving management time, Conoco believes.

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