3D, horizontal drilling changing Clair development economics

Recent high flow tests may end 20 years of confusion

Neil Potter
Contributing Editor

Clair's location west of the Shetland Islands. Once the development gets under way, an oil export pipeline may also be installed to the processing terminal at Sullom Voe [21,115 bytes].
Semisubmersible Sedco Explorer, with tanker Dicto in the background, performing extended well tests on the Clair Field in 1996. (Photo courtesy British Petroleum) [45,101 bytes].
A very basic schematic illustrating the Clair EWT configuration [11,917 bytes].

The recent BP battle cry of "fast development," aimed at cutting down the traditional period from discovery to development to four years, from nine, could never be applied to Clair. This giant field, discovered in 1977, 64 km west of Shetland in 150 meters water depth, contains some 5 billion bbl of oil within a complex, highly fractured reservoir. The field also stretches over five blocks, with the main part of the reservoir in UK block 206/8.

Clair has been dubbed "the sleeping giant." Periodically over the past 21 years, efforts have been made to bring it to life. At one time it was hoped to have an early development plan ready in 1996. Now, the partners seem to be on the brink of success, at least for the first-stage development of the core southern area, where the aim is to produce 80,000 b/d in 2001.

Here, recoverable reserves are put at around 200 million bbl. Brown & Root has been working, albeit at a slow pace, on preliminary FEED work, while Dresser and KCA have been performing pre-sanction engineering and design studies for platform drilling and well engineering.

The project is said to be on track for sanction later this year, although BP had hoped to be in this position last year. the producer's latest move has been to invite qualified contractors to a presentation of its development concept and ask them to come up with cost-effective solutions. Bids were due in at the end of April, with BP then making its choice in June.

But snags have arisen. Some of the partners are none too keen on moving ahead at this moment. Over the years, the line-up has chopped and changed. Last November, Amoco swapped its 4.34% interest in Clair with Conoco as part of a bigger trade-out in UK block 206/9. That made Conoco the second largest participant in Clair, with 20.73%. The others are Amerada Hess, Chevron, Conoco, Elf, and Enterprise.

Last year, BP transferred Judy Wagner - then BP business team leader for the Troika field in the Gulf of Mexico - to Europe to manage the newly formed Clair business unit. She views the partnership issue on Clair as perhaps her biggest challenge. "Technically," she says, "we can deliver, but we must make progress through consensus, working together so that everyone understands why decisions are being taken. People are more willing to run with decisions, if they are part of the process."

The next complication was this year's oil price slump, which cast further doubts on the project. Although, it has to be remembered that it is not today's oil price which would affect the field's economics, but rather what the price will be around mid-2001, when production supposedly begins.

Matters were not helped by the recent announcements in the UK Budget by Gordon Brown, Chancellor of the Exchequer. It had been assumed that Brown would leave North Sea oil tax untouched, following a vigorous and logical campaign conducted jointly by the British operators associations (UKOOA and Brindex) and the UK contractors' organization (OCA). They had warned the Treasury and the Department of Trade and Industry that any changes might impact future North Sea development activity, with serious consequences for the industry.

However, Brown has in fact done nothing for the moment, thus aggravating the uncertainty. He may have made matters worse by extending for another year the consultation period for a new UK offshore fiscal regime. The government also has stated that the present tax system is inappropriate for ensuring an acceptable level of revenues, while underpinning a high level of industry activity.

Two main options are being mooted - an extension of petroleum revenue tax (PRT) to include all fields given development consent after March 16, 1993, and the introduction of a supplementary corporation tax charge on profits from production of oil and gas.

Clearly the payment of PRT would hit the very marginal Clair project hard. Analysts Wood Mackenzie have calculated that PRT would reduce the NPV from its present #365 million to #273 million.

BP and its partners had been striving for some time to get to grips with the economics of the development. A BP spokesman said: "Now there will be a re-assessment which adds to the continuing uncertainty. Clair has always been an economic challenge. Even in a perfect world, to obtain sanction would have been a big challenge."

Flow improvements

Clair has always been a complex field, technically as well as commercially. However, in the light of relatively high and apparently stable oil prices, as well as cost-effective alliances pioneered by BP for other projects, it began to look a feasible proposition for development. At the same time, appraisal drilling and extended well tests had proved that the oil would flow.

Discovery well 206,8-1a encountered an oil column in a thick sequence of Devonian and Carboniferous mudstones overlying a Pre-Cambrian basement. A test flow rate of 1,500 b/d of 25 degree API oil was recorded from the best quality reservoir.

During the 1977-1985 period, 10 appraisal wells were drilled in and around the discovery by four competing licence groups. BP said these wells demonstrated that while Clair was one of the largest accumulations in UK waters, in terms of aerial extent and oil in place, none of the short well tests flowed sufficiently to make it a viable development contender. That was because the technologies available in the 1980s offered no solutions to understanding the complexity of the structure and the problems of poor productivity, and hence recovery.

A major breakthrough came in 1990, however, when the companies involved in Clair signed a joint appraisal agreement with a new commitment to work together to overcome the obstacles. New seismic data was also obtained that year, and in 1991 two wells were drilled, each more productive than the discovery well.

During a two-well drilling program in 1992, one well flowed at 7,300 b/d while another disappointed at 2,545 b/d. A 3,200-km 3D seismic survey was then shot over the north-east part of the structure.

Throughout 1993-1994, the partners puzzled over the data and looked for possible development options. In 1994, it was agreed to drill a high angle well in the core area and carry out an extended well test. This well (206/8-10) was drilled in 1995, but bad wether prevented testing until 1996. The objective was to produce 15,000 b/d and maintain this rate over an extended period. Flow rates of 18,000 b/d were reported to have been achieved.

Last summer, further appraisal wells were drilled in block 206/8, but BP has kept the results very close to its chest. Recently, though, chief executive John Browne did say that "the project has worked out well technically so far, in that the wells have flowed and the flow rates are high."

BP, the pioneer of alliancing, has made it clear that this concept must be taken further than the recent Andrew or ETAP projects, and with tighter profit margins, if Clair is to succeed. BP is looking for development costs of $3.50/bbl.

The present plan is for two steel platforms - one for drilling and process facilities with topsides weighing around 8,000 tons and another for accommodation and utilities with topsides of around 5,000 tons. There could be 12 extended reach multilateral wells, as it will be essential to ferret the oil out of the complex fractures.

Modern seismic techniques have been invaluable in identifying and distinguishing between fractures that improve well productivity, and those which act as barriers, thereby restricting flow. Advances in horizontal drilling, too, have been advantageous.

BP has now agreed to negotiate an exclusive agreement with Sullom Voe on Shetland for processing and storage of Clair's oil, which could arrive at this terminal by pipeline. It has not ruled out some initial offshore loading. But all this is, of course, dependent on the project going ahead.

Many years ago, a study was carried out for a pipeline route from west of Shetland to Sullom Voe. The terminal fought hard for the Clair business. The commercial negotiations are handled by Shell and Oryx as substitute pipeline operators to prevent any conflict of interest arising from BP operating both Sullom Voe and Clair. It is indicative of the delays in reaching a development decision that the deadline for receipt of tenders was mid-August 1997.