- Kakap Field location.
- Location of the three wells drilled to date by Enterprise off Cambodia.
- Kakap Field development schematic.
This year, Edinburgh-based Cairn Energy has initiated Bangladesh's first offshore gas development. Premier Oil, London is helping to drive Myanmar's second such project as Texaco's partner in Yetagun. Hardy Oil & Gas has a sizable stake in Phillips' Timor Sea block discoveries, where development could start next year. In Indonesia's Natuna Sea, Lasmo has announced plans to drill a well in its Cumi Cumi PSC.
Another independent, Enterprise Oil, has been an active explorer in Southeast Asia since 1989. The investment looks like paying off at last with what may be Cambodia's first offshore gas development.
In 1991, Enterprise became the first oil company in two decades to sign an exploration contract in Cambodia. It gained entry via the contacts of French conglomerate CPP, which at the time was also a partner in acreage off Vietnam. An office was opened in Phnom Penh to support forthcoming seismic and drilling operations, and this remains the only full-time operations branch of a foreign oil company in Cambodia, despite the recent exploration successes.
Enterprise's own initial breakthrough came in 1994 with the Angkor-1 gas/condensate discovery. It then commissioned Western Geophysical to acquire 860 sq km of 3D seismic in blocks I, II and the south of block III in the Khmer Basin. This was Cambodia's first and largest 3D acquisition. A 30-fold 3D stack was completed onboard the seismic vessel Western Atlas, subsequently processed in the UK by Geco-Prakla.
Analysis of this data was used to locate two further wells this year targeting the Da prospect at the southern end of the Khmer Basin, and Preah Khan to the east of Angkor-1 in block II. The Da well brought gas shows with a good indication of hydrocarbons, though not sufficient to warrant a test programme.
Drillship Canmar Explorer III went on to spud another well nearby for Campex, which operates blocks IV, and the vessel is expected to return next month to Enterprise to drill a third well in block II, close to Angkor-1. This drillship is a long-time servant of the company, also undertaking assignments for Enterprise off Vietnam. The multi-well contract keeps drilling costs down and aids efficiency, even though different formations are being drilled.
According to Enterprise's Area Manager for Southeast Asia, John Shute, Angkor-1 was difficult to drill because of the high temperatures involved, exceeding the stability range for water-based mud. Since 1994, Total and British Gas have been brought in as partners on blocks I and II: Total's experience of deviated wells off Thailand has been put to effect on the two Cambodian wells so far this year, the aim of which was to improve understanding of the formation and to maximize net pay.
Depending on the third well and Campex's campaign, the partners should have a clearer idea of the development potential. With little demand for gas currently on the under-developed Cambodian mainland, the aim is to tie the gas into Thailand's pipeline infrastructure. Enterprise expects to benefit from Total's expertise in gas marketing and British Gas' in pipelines, with first gas technically feasible by 2000.
Water depth is just 75 metres, allowing a conventional platform solution. The accumulation should not be too expensive to develop, says Shute, and the Gulf of Thailand is not an area frequented readily by typhoons. And unlike Angola's seasoned guerrillas, the Khmer Rouge have so far not interfered with offshore operations via gunfire, nor have there been any passive threats.
Shute says Cambodia's oil and gas fiscal regime is comparable with Thailand's and better than Vietnam's or the recently improved terms offered by Malaysia. The Ministry of Mines is co-operative, not harboring unrealistic aims in the short term. In time, power stations and feedstock plants may be built along the Cambodian coast leading perhaps to a spur gas line being installed, as Total and Unocal are planning with their Myanmar Yadana project.
Further contract areas in the disputed zone of the Gulf of Thailand may also be offered soon. "We'd be interested in increasing our exposure to these areas," says Shute. Enterprise is doing its cause no harm through providing employment at its Phnom Penh office and training Cambodian geologists in the UK. It has also built a visitor centre for the country's recently opened Preah Suramarit Kossamak National Park.
Following the award of operatorship of blocks 17 and 21 in 1989, Enterprise became the first western oil company to drill offshore Vietnam for 10 years. So far it has less to show for its effort than the eastern oil companies, but it is more hopeful for its current campaign in block 17. (Block 21 was relinquished three years ago).
Mobil farmed into 55% of block 17, easing the cost of the recent well by Canmar Explorer III. This was targeting the Vai Thieu prospect, following a 154 sq km full-fold 3D survey of the area last autumn performed and processed by PGS - partly processed onboard the vessel Orient Explorer in order to advance the drilling programme.
Enterprise's enthusiasm was stimulated by the oil discoveries of JVPC and Petronas Carigali which were also in the Cuu Long Basin. Released data concerning Bach Ho and Rang Dong has also improved understanding of the granite basement, where most of the Basin's oil has been found to date.
"The difficulty is not so much source migration as reservoir characterization," says Shute. "We are relying on fractures having being formed." If this well proves positive, the block 17 partners (including Cairn) would like to drill a follow-up well soon.
Unlike Indonesia, where Enterprise sold its assets to Conoco this year, Vietnam presents the company with the chance to "build a business", according to Shute. Like others, it remains interested in the four further blocks in the Cuu Long Basin currently being licensed by Vietnam's authorities.
Clyde's double deals
In the space of nine months, Clyde Petroleum has doubled its global core production assets through acquisitions in Indonesia and Japan. Nearer-term offshore yield will come from the Kakap Fields in the Natuna Sea.
Early this year, Clyde became operator of the Kakap North and South PSC through buying the share capital of previous operator Marathon Petroleum Indonesia for $51 million. The PSC was signed in 1975 and is due to expire in 2005. Aside from Clyde's controlling 31.25% interest, the co-partners include Novus, Discovery Petroleum NL, and LL & E Indonesia.
According to Clyde's group managing director, Roy Franklin, Indonesia is seen as a natural extension of the company's strategy in The Netherlands: moving into a maturing market as an operator where established players are pulling out. "At the same time, we wanted to diversify and not be caught in a sellers market, which would have been the case if we'd stayed solely in the UK and Dutch sectors."
Clyde had the cash to expand through its shares in numerous producing North Sea fields, which include Wytch Farm and Gryphon in the UK. It was alerted to Kakap partly by ex-BP contacts working for Novus, who knew that Marathon was willing to sell, and who wanted to bring in an enthusiastic operator (Novus' policy is not to be an operator itself).
The four producing fields, KH, KF, KG, and KRA, are located in Kakap South, each with a dedicated platform and partial processing facilities. Oil is then transferred by pipelines to the Kakap Natuna FPSO, a converted tanker with 650,000 bbl storage capacity. The 38! API crude is then exported to bow loading tankers.
As the incoming operator, Clyde performed its own surveys, including the pipelines: according to Franklin, the facilities were "reasonably to very well maintained". A major refurbishment had just been completed of the FPSO, which involved changing out the single point mooring system, strengthening of plate welds and tanks, followed by recertification.
The platforms are a mix of fit-for-purpose, Gulf of Mexico installations, with the exception of one unit which was built to more complex, North Sea standards. But all are perfectly capable of enduring at least until the current PSC expires in 2005. Combined current production is around 40,000b/d, but this will climb to 50,000b/d next year when three new subsea satellites come onstream as tiebacks to the KG and KRA platforms. The fields were discovered last year: McDermott is installing the flowlines.
Consultations are currently under way with the field partners over a further three-well plus options exploration programme in Kakap South: a semisub will hopefully be secured to begin the work in mid-1997. Semisubs are particularly scarce in Indonesia currently, but the 350 ft water depth above the new targets is just at the limit of jack-up operations - although a jack-up is currently doing development drilling on KRA. Kakap North is less of a priority, the geology there being more complex and therefore higher risk to explore.
Associated gas from the four fields has up to now been reinjected, with the remainder flared at 70-80 million cm/d. However, there are thoughts of exploiting positively the 250 bcf still in place through the proposed West Natuna gas gathering scheme. Some gas from adjacent blocks is also being flared, at Conoco's Belida and also an Amoseas-operated field, although there are other undeveloped gas discoveries in these blocks.
Pooling all the various quantities, around 1 tcf is probably recoverable which could perhaps be piped to Malaysia through an existing pipeline 30 km to the west that handles output from Petronas' Duyong Field and several others operated by Petronas Carigali. The real challenge would be commercial, involving three different PSCs and potential cross-border negotiations involving Petronas and Pertamina.
Kakap currently is netting Clyde an extra 11 MM bbl of oil. The new tiebacks to KG and KRA are 5 MM-10 MMbbl accumulations. As it turns out, says Franklin, it looks as if the spare well slots are on the wrong platforms, in terms of the location of future prospects. But there is no likelihood at present of a separate subsea well centre on South Kakap.
The industry's mentality in Indonesia is the same as the North Sea's five years ago, according to Franklin: not much attention is paid to costs with these being tax-deductible. Some oil companies are still leaving because of the tough tax regime, leaving developed acreage open to the likes of Clyde. But even if Indonesia softens its terms, Clyde will still win as the country needs new reserves to soften the blow of becoming a net oil importer by the next century.
Clyde has also strengthened its position in Australia by recently completing the purchase of the entire share capital of Brisbane-based Crusader. This company's main is a share of the Cooper Basin Unit onshore South Australia, but it also has numerous interests offshore. These include 7.5% of the Kipper discovery in Victoria's Gippsland Basin - rated by Wood Mackenzie at 600 bcf - as well as stakes in Esso's Basker and Manta Oil discoveries. However, these are not high priority developments currently for Esso.
Clyde's own priority is to buy into or develop 50-100 MM bbl finds off the North West Shelf by applying its Dutch sector experience in horizontal wells and FPSO experience from UK fields such as Balmoral, Gryphon and Ross. The type of plays Clyde will look at will be close to Ampolex's Wandoo and to BHP's Jabiru and Challis, where FPSOs currently operate. Clyde feels small FPSO developments in areas lacking infrastructure can be profitable, given Australia's fiscal terms.
Traditionally, Franklin points out, the industry has chased large oil and gas reserves off the North West Shelf. But Clyde is less interested in very big projects such as Undan/Bayu in the Zone of Co-operation, where there is uncertainty over investment required and development timing.
Buying Crusader has brought Clyde a 25% stake in Timor Sea joint venture AC/P17, led by Cultus, north of Jabiru and Challis. Two wells are due to be drilled here shortly, including one this year. Clyde itself has interests in three licences off the North West Shelf, EP399/400, WA259P and WA254. Two wells are planned later this year on this acreage.
Like Kakap, Crusader has added substantial extra reserves to Clyde's global pool, but without putting gearing under extra pressure, according to Franklin. Having a base in Brisbane will allow the company to intensify its search for further Australian opportunities.
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