Small oil companies are chasing big rewards from North Sea fields of passing interest to the majors. Occasionally, unu-sual opportunities arise. Heather is a classic example. The field, which lies in Northern North Sea block 2/5, east of the Shetlands, has been producing since 1978, but always below the level set by other fields in the area.
Over the years, the partners failed to come to grips with the reservoir's complexities, and operator Unocal became somewhat distracted by greater successes in the Far East. By the mid-1990s, Heather's oil production had subsided from an early peak of 35,000 b/d to just 7,000 b/d. Yet, only 110 million bbl had been produced, out of an original in-place estimate of 460 million bbl. Due to disinterest, abandonment looked to be the only option.
However, DNO, one of the minority partners, had other ideas. This small Norwegian independent was revived in 1996 by a new management team who approached Unocal to buy its controlling interest in Heather - an action sanctioned by the UK government in 1997. DNO thereby became 37.5% operator, with partners Texaco and BG retaining the remaining interest.
"It was not an easy process," says Stewart Watson, Chief Executive of Aberdeen-based DNO Heather Ltd, "bearing in mind the cultural changes required, the size of the Heather platform (around 30,000 metric tons) and the perceived task ahead. There was a lot of interest in our new company and what we planned to do, but the Department of Trade and Industry and the Health & Safety Executive also had to satisfy themselves that we had core competency to do this."
As a non-operator, he points out, "you can manage your business with a handful of people. But, operating a first generation large platform demands a core workforce of around 100 people, which includes health, safety and environmental expertise and specialists for production, maintenance, drilling, reservoir modeling and so on." However, DNO managed to demonstrate that it would build on Heather's existing skills base, and complement this with its own expertise in reservoir characterization and drilling. "At the same time, we built up a network of specialist consultants, many of which are based locally in Aberdeen."
New management strategy
Heather accorded with the new company's strategy, which was to focus on brownfield mature areas in the North Sea. "We believe we can make money using existing technology in an innovative way," Watson says.
DNO's new reservoir description program revealed potential of more than 1 billion bbl oil-in-place in Heather, discovered satellites, and the general catchment area. Unocal, by contrast, had only focused on the main field as it had largely been in exit mode since the early 1990s.
One of DNO's first acts as the new operator was to commission new 3D seismic over block 2/5 by Geco Prakla. "That was intended primarily to refine our reservoir description so that we could confirm areas of unswept oil that could be drilled and brought into production," Watson explains. DNO also moved swiftly to refurbish the Heather platform's drilling facilities, which had lain idle for nine years. Modifications included a new top drive, supplied by Maritime Hydraulics.
During the 1970s, three discoveries had been made close to the main field. These were North Terrace and South West Heather in block 2/5, plus West Heather, which overlaps into block 2/4. "All had been drilled and drillstem tested, but never exploited," Watson says.
Fields too small
"Other companies weren't interested due to the risk element - these fields were seen for a long time as too small, too complex and too far from the platform, all of which added to the risk of early abandonment exposure. However, we felt confident in 1997 because two technologies in particular had come of age - horizontal drilling, which was by then proven to be capable of penetrating more of the reservoir, and subsea technology, which was becoming more reliable and less expensive," Watson said.
In 1998, DNO also acquired 100% of block 210/29a which lies immediately north of 2/4. Previous operator Elf had almost by accident discovered oil there in 1990 within the Brent formation, 15 km from the main Heather Field. However, Elf had declined to follow up the discovery, mainly because they had no infrastructure in this area. DNO, however, recognized the possibility of linking appraisal and development of block 210/29a with plans for the development of satellites in blocks 2/4 and 2/5.
The 210/29a discovery well had encountered oil 2,800 ft below the seabed. DNO's recent review of the 600 km of 2D seismic acquired over the block and a 1995 3D survey over 2/4 suggests the presence of a cliff system several thousands of feet deep, which must have been geologically active. "The indications are that we may be dealing with submarine fan systems reminiscent of the Brae and T-block fields to the south," says Watson.
These various surveys convinced DNO that a further 80 million bbl could be produced from Heather over the next decade, plus potentially a further 150 million bbl from hitherto unexplored prospects. But first, it had to halt Heather's continuing production decline, as falling oil prices threatened to make any output sub-economic. It responded by bringing down platform running costs in one year from £22.5 million to £15.5 million, through minimizing flaring, optimizing gas lift, job-sharing and other measures. "Prod-uction reached an all-time low of less than 5,000 bbl/d in early 2000, but is now increasing and the operations is profitable at less than $14/bbl," Watson insists. Through incremental field development, output will hopefully be ramped up to 25,000 b/d by 2004-05. Initially, DNO will focus on unswept areas within the main Heather reservoir, before exp-loiting the North Terrace and West Heather. "Also, there is an untapped Triassic reservoir below the Brent formation on Heather itself. Watson points out that Shell has had great success in the same formation on the Cormorant and Tern fields to the north.
By 1999, however, all was not going to plan. Just as Unocal had done earlier, the current partners BG and Texaco were not minded to make further investment. This was preventing DNO from drilling any new wells, and threatened to jeopardize Heather's future altogether.
DNO's leverage turned out to be the potential decommissioning bill facing the partners if production was to be terminated early. The partners agreed to cede their combined equity in Heather and the surrounding interests totally to DNO, while retaining liability for their share of abandonment when it came. The thinking was that if DNO could single-handedly prolong output for a significant period of time, cheaper shutdown solutions should by then have emerged to the mutual benefit of all concerned.
DNO was now free to resume drilling on the main field using the refurbished platform rig. The first well on Heather's southwest flank got under way this January. It was actually drilled as a water injector, but in fact, discovered high oil saturations within a small compartment.
As there are no spare slots on the platform, contractor KCA Drilling has employed a slot recovery technique, which entails drilling the target from a starting point halfway down existing wellbores. "That way," Watson claims, "you get the first 6,000 ft of drilling effectively 'free,' which means relatively low well costs. However, that first well did take longer than expected - this was due to the rig reactivation process, following 10 years out of service."
A second infill well located close to the boundary between two of the main field fault blocks was nevertheless spudded on schedule reaching its targeted total depth of 13,500 ft. This too encountered unexpectedly high oil saturations throughout the Brent sequence with parts of the reservoir being highly over-pressured by the reservoir waterflood. At the time of writing (August), the well is being completed as a gas-lifted producer and is expected to be capable of producing around 1,000-1,500 b/d of oil. A third well is planned to commence in September: "We can drill quite sophisticated wells using the re-drill technique for £2-3 million, which would normally cost £5-7 m in this part of the North Sea," Watson says.
DNO plans to mobilize a semisubmersible rig to drill the North Terrace, which has an estimated 12 million bbl recoverable. This and West Heather with reserves of 15 million bbl will be developed as subsea satellites to Heather, using a combination of flowlines, control systems, production and injection centers, with ultimately 7-8 wells tied back to the platform. North Terrace could be onstream mid-2001 followed by West Heather in 2002. "In addition, we plan to explore the Upper Jurassic in block 2/4 and to 'chase' this north into 210/29a. Ultimately, 3D seismic may have to be acquired."
Despite its experiences, DNO is still prepared to bring in a new partner on Heather in order to accelerate appraisal and development of the area - "preferably, providing technology skills and with a similar vision to ours," says Watson, "because the days of partner drag in the North Sea must be left behind in order to maximize the benefit, not only to Heather but to the industry as a whole."