Legislature(2005 - 2006)CAPITOL 124
03/03/2005 05:00 PM House OIL & GAS
| Audio | Topic |
|---|---|
| Start | |
| Overview: Viscous Oil | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON OIL AND GAS
March 3, 2005
5:06 p.m.
MEMBERS PRESENT
Representative Vic Kohring, Chair
Representative Nancy Dahlstrom
Representative Lesil McGuire
Representative Norman Rokeberg
Representative Ralph Samuels
Representative Berta Gardner
Representative Beth Kerttula
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
OVERVIEW: BP VISCOUS OIL 101
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
DON DUNHAM, Asset Manager
and North Slope Viscous Oil Strategy Lead
BP Exploration (Alaska) Inc.
Anchorage, Alaska
POSITION STATEMENT: Presented overview of viscous oil.
CHRIS WEST, Team Leader
Viscous Oil Technology
BP Exploration (Alaska) Inc.
Anchorage, Alaska
POSITION STATEMENT: Presented overview of viscous oil.
ACTION NARRATIVE
CHAIR VIC KOHRING called the House Special Committee on Oil and
Gas meeting to order at 5:06:07 PM. Representatives Kohring,
Dahlstrom, McGuire, Rokeberg, and Gardner were present at the
call to order. Representatives Kerttula and Samuels arrived as
the meeting was in progress.
^OVERVIEW: VISCOUS OIL
5:06:26 PM
CHAIR KOHRING announced that the only order of business would be
an overview of viscous oil. He commented:
That's a ... very significant issue because it
represents phenomenal potential as far as development
and extraction of oil in the future. And we're hoping
to move in the direction of getting that oil
developed, at least to a degree. And as technology
increases, we're able to access more and more of that
oil.
5:07:48 PM
DON DUNHAM, Asset Manager and North Slope Viscous Oil Strategy
Lead, BP Exploration (Alaska) Inc. (BP), presented an overview
of viscous oil using slides and graphs, and he began with a
brief outline of his presentation. He referred to a graph that
showed BP's share of oil production over the life of the North
Slope fields. He commented, "You'll notice that we see a 50-
year future as a possibility. I see this as not only what's
predictable but what's unpredictable, if we can solve a lot of
things that we don't know how to do." He explained that the
graph showed how over the years new oil fields had come online,
but there was a decline in production, and at present the fields
are "at a flattening point". He noted that there is viscous oil
"that we actually think we know how to do" called "water-
floodable".
5:11:11 PM
MR. DUNHAM commented that BP predicts there to be over five
billion barrels [in reserves] "if we can actually solve all the
problems that are out there, whether it be gas, whether it be
viscous oil, whether it be extended field life from Prudhoe Bay
and Kuparuk." He said that BP's strategy is to focus on
managing the decline of the light oil fields, to transform the
cost base, and bridge to gas sometime in the next decade.
5:12:33 PM
MR. DUNHAM pointed out that, of all the business units in BP,
Alaska is the biggest slice of BP, which in turn is one of the
biggest companies in the world. However, he said, the light oil
is almost all optimized and has been developed. He referred to
a graph that depicted, "the possibilities of things that either
we think we know how to do, or they're ... not quite economic or
they actually could be extensions in the future", as well as
things that are uneconomic, like gas, which cannot be exported
right now.
MR. DUNHAM, in response to Representative Gardner, clarified
that a graph showed several different business units around the
world and compared Alaska to those.
5:14:29 PM
MR. DUNHAM commented that his primary message was that there are
a lot of undeveloped barrels of viscous oil and gas in Alaska
that are tough to access. He explained that the heavier oil is
at a shallower depth, and it's colder because it's closer to the
permafrost. He noted that BP and ConocoPhillips Alaska, Inc.
have major interests in many of the viscous oil areas on the
North Slope, and most of it is in the Milne Point/Kuparuk area.
5:16:02 PM
MR. DUNHAM stated:
There are two major traunches of viscous oil in
Alaska. One is West Sak/Schrader Bluff; they're the
same formation, they just got named different things
by different people. And then there's the Ugnu, which
is even more shallow. There are in place something
like 20-23 billion barrels in the ground. ... It won't
all come out; it never will. The issue is how much
can you get out. In a light oil field like a Prudhoe
you might get 50-60 percent of it out, because it
flows better, it's better rock, it's got more
temperature. But in the viscous, right now, we have
found the first part of the West Sak and Schrader
[oil]; we've been able to get around 20 percent of it
out. The other 80 percent would be left. On ... the
rest of the West Sak/Schrader and the Ugnu, ... it's
going to be zero because it's the challenge part, it's
the part we've got to keep working for technology to
find. ... And you'll never get all of the oil that's
in there because some of it just will not come out.
Viscous is not just as prolific as light.
MR. DUNHAM pointed out the "water-floodable area" on a map,
where BP injects water to boost the pressure in the reservoir to
get about 18-20 percent of the oil out of the ground. He also
pointed out areas considered "nonwater-floodable" because BP
does not know how to water-flood it and therefore it can't get a
high recovery rate. He pointed out that in the western areas
like Ugnu, the sands that hold the oil get close to the
permafrost, whereas the sands are deeper in the eastern areas
like Orion and Polaris. There is also a big temperature
difference, he noted.
5:19:41 PM
CHAIR KOHRING asked what the overall known quantities of the
heavy oil on the North Slope were, and how much of it is
accessible right now.
CHRIS WEST, Team Leader, Viscous Oil Technology, BP Exploration
(Alaska) Inc. replied that BP had identified about 23 billion
barrels. About 2-3 billion barrels is within the water-
floodable area, and of that, industry can recover about 20
percent by today's methods, he explained.
MR. DUNHAM gave an overview of BP's work in viscous oil over the
past 20 years. He said that there are three eras: the Research
and Development (R&D) era, the piloting era, and the bigger
projects era. The R&D era spanned from the early 1980s to about
1999, during which the industry as a whole spent over a half of
a billion dollars. In 1999, BP was able to start testing and
doing pilots. In 2000, BP started on bigger projects, such as
the [S-Pat project] at Milne Point where BP spent over $180
million. He remarked that in 2004, BP developed over 30 wells
in all three areas of viscous oil: Prudhoe Bay, Kuparuk, and
Milne Point. He said that the technology folks at BP want to
find a way to develop about $1.2 billion of capital projects
over the next decade, including building facilities and gravel
pads.
5:23:32 PM
REPRESENTATIVE KERTTULA asked what Alaskan contractors BP uses
now.
MR. DUNHAM said that BP uses [Doyon Drilling, Inc.], VECO
Corporation, [Arctic Slope Regional Corporation Energy
Services], NANA/Colt Engineering, LLC, and others.
REPRESENTATIVE KERTTULA asked what percentage of the people
employed by those contractors are Alaskan.
MR. DUNHAM replied that he did not know.
REPRESENTATIVE KERTTULA asked what percentage of the employees
are in a union.
MR. DUNHAM replied that he did not know.
5:24:53 PM
MR. DUNHAM discussed what has been developed and produced from
the water floodable areas. He referred to a graph that depicts
the gross production and the BP net from the 1970s through
present day and then makes predictions for the future. He said:
Early on the production was all Milne Point, which was
100 percent BP. And as time went on, we developed
projects in Prudhoe Bay and Kuparuk. ... Today we're
actually close to 60,000 barrels a day of viscous oil
production. ... And all of the fields, Prudhoe,
Kuparuk, and Milne Point, are at peak viscous
production.... Looking forward, if we can do the
projects that we want to do, and they are as
successful as we hope, towards the end of the decade
we could get up to 100,000 barrels a day gross
production. That would be more than 10 percent of the
North Slope's production, and on the scale of an
Alpine, greater than a North Star.
5:26:22 PM
CHAIR KOHRING asked if there is viscous oil development anywhere
else in the world.
MR. DUNHAM replied:
In some ways we're breaking new ground, but there's a
lot of heavy oil. Heavy and viscous are somewhat used
interchangeably, but there's a lot of heavy oil
throughout the world. Our difference is we're cold,
and therefore it brings new challenges. Canada has
[about 2.2 trillion barrels] ... and Venezuela has
more than that, maybe by magnitudes of ten to a
hundred. Russia has a huge amount. We actually
believe that the world has a lot more heavy oil than
it really worries about it, because we've been
worrying about light oil.... But the world's running
out of light oil, and so you start moving to the more
difficult things.
5:27:26 PM
CHAIR KOHRING commented that most of the viscous oil on the
North Slope is mixed with sand, and he asked Mr. Dunham to touch
on that issue as well as environmental concerns.
MR. DUNHAM passed around a bag of oily soil and said that it's
unconsolidated, like beach sand; it's not like a rock, which is
what Prudhoe Bay is.
5:28:36 PM
MR. DUNHAM commented on the importance of having new well
designs, such as multilateral wells. He noted that at the Orion
field in Prudhoe Bay there is a quadrilateral well, and BP just
drilled its first pentalateral well. He said that the projects
being developed right now are the West Sak project, which is the
biggest viscous oil development on the slope; and the Orion and
Polaris in Prudhoe Bay.
5:29:53 PM
MR. DUNHAM referred to a slide entitled, "Evolution of Heavy
Well Design" on page 3 of a handout which showed what the well
designs look like. He explained that originally industry used
vertical wells, which drilled directly down and "could only
perforate or put holes in a very few numbers of feet, and we had
very slow oil production, and it oozed into the well bore." Now
the industry drills multilateral wells in which it can drill
four or five zones out of one well bore as well as drilling
laterals, which are drilled horizontally and can be up to a mile
and a half to two miles long. He said, "When you add all of
these laterals together, you can have more than five miles of
the reservoir actually connected to the well bore."
5:30:50 PM
REPRESENTATIVE GARDNER asked if oil in the traditional wells
falls down and prevents seepage from the lower levels.
MR. DUNHAM replied that there are pumps in the wells that lower
the pressure and lift the oil to the surface.
CHAIR KOHRING mentioned that he was looking for trips for the
House Special Committee on Oil and Gas to go on. He recommended
that a trip to the North Slope would be a great learning
experience.
5:32:31 PM
MR. DUNHAM moved on to the challenges industry faces in dealing
with viscous oil. He said:
A key thing here is low reservoir temperature, about
80 degrees in the area that we've been exploiting so
far. The deeper Prudhoe Bay, Endicott, North Star oil
is at 200 degrees." He then used the analogy of maple
syrup at different temperatures to explain how oil can
be more viscous when it's cold and less viscous when
it's hot. He said, "You may hear the term 'API
gravity'. ... That is a measure of weight. The real
issue about how hard and expensive, and the challenge
of this oil is viscosity, and most of it's caused by
the temperature. It also makes it very difficult to
separate the oil, and the water, and the sand that
comes out of the wells. These wells may produce all
... oil the first couple of days, and then water
starts coming in more ... with sand.
5:34:32 PM
MR. DUNHAM continued:
It also brings with it a lot of sand.... You could
try and shut off the sand, but then you shut off ...
the way the oil can ooze into the well bore. So we
have to find ways to deal with the sand. And the sand
actually is coming into facilities built for light oil
that didn't have this problem. So as we develop new
projects, we have to spend money upgrading the
facilities.
MR. DUNHAM related a story regarding Prudhoe Bay's shutdown in
production in last year in order to get rid of some sand.
5:35:12 PM
MR. DUNHAM commented that with all of these challenges, it's
very expensive to develop [viscous oil]. The multilateral wells
cost $8-9 million each, and the operating costs are also higher.
He turned to the top slide on page 4 of the handout entitled,
"Regional Schrader Bluff/West Sak Cross Section", which is a
side view of a reservoir. The map shows that Polaris is at a
depth of about 5,000 feet while Orion and Milne Point are at
3,500 feet, and West Sak is above 3,000 feet, which is very
close to the permafrost, and therefore the oil is more viscous
there.
5:36:49 PM
MR. DUNHAM pointed out the picture on the bottom slide of page 4
which reemphasized that viscosity is the issue, not the API
gravity. He explained that the units of measurement for
viscosity is the centa-Poise (cP). The viscosity of water is 1
cP and, in comparison, some of the oil in the North Slope has a
viscosity of up to 10,000 cP. He noted that the oil that BP is
currently dealing with has viscosities from 10-50 cP. Then he
showed the committee a short film demonstrating how fast the
light oil moves compared to the heavy oil.
5:38:43 PM
CHAIR KOHRING asked how the heavy oil is extracted.
MR. WEST explained that the heavy oil can be pumped out, but for
the very viscous oil the [operators] have to add some kind of
energy to the reservoir, such as heat or gas.
5:39:18 PM
MR. DUNHAM showed pictures of an oil dehydrator in Prudhoe Bay
that became almost completely filled with sand. He explained
that the facility was built for light oil, but as heavy oil is
brought in, new equipment such as sand jets need to be added to
the facility to get the sand out of the system. He pointed out
that the removed sand is taken to an approved grind-and-inject
well for disposal, which generally costs about $150 for each
cubic yard of sand.
5:42:06 PM
MR. WEST commented:
I'm lucky enough to work in an environment where we
have a lot of sharing of knowledge between the
operators. The operators, ConocoPhillips and BP, and
[ExxonMobil Corporation], a non-operator, have
probably shown an unprecedented amount of
collaboration of technology over the last years. We
have three separate teams working the three fields,
and ... we've created an environment where each team
can learn from the other teams' advances, and that's
really spurred technology growth....
5:43:49 PM
MR. WEST pointed out that BP is also experimenting with
different types of artificial lift and how to separate the oil
on the surface, as well as enhanced oil recovery (EOR). He
said, "We're looking at ways to use the CO2 that will be
available in vast quantities once we start selling the gas down
the pipeline. We would like to sequester that in the ground,
and also use it for enhanced oil recovery." He commented that
the oil industry is now able to drill one and a half to two
miles, and are able to target the wells within a foot of the
target.
5:45:50 PM
MR. WEST showing the committee a picture of the types of wells
that are being drilled in Venezuela called fishbone wells.
MR. DURHAM noted, "There's really only two surface locations
coming down, and then they had many wells ... targeting very
precise pockets of oil. And they can drill these kind of wells
for about a million dollars."
CHAIR KOHRING asked how long this technology had been around.
MR. WEST responded, "Not very long, a couple of years. We're
looking at applying this technology in Alaska now."
5:47:43 PM
MR. DUNHAM stated:
There's a huge amount of this viscous oil in Alaska in
place. ... The recovery factors, what you can get out
of the ground, are much lower for viscous than light,
and probably always will be. But the goal is to
broaden the area where we can get any of it, and find
a way to increase the areas we've already developed
higher than 20 percent. This is a big resource to BP:
we're in all of the viscous oil, we own part of all of
it, and are excited about it for us and for the State
of Alaska.
MR. DUNHAM summarized the challenge of viscous oil as "thick,
cold, and sandy." To unlock the value, there need to be some
technology advances, he said, and this will cost a lot of money
in R&D, and take a lot of patience.
5:51:21 PM
REPRESENTATIVE ROKEBERG asked if there is a method for grading
viscosity in order to relate it to API gravity.
MR. WEST reiterated that the measurement of viscosity is in cP.
He explained that water has a viscosity of 1 cP, olive oil is
about 100 cP, and molasses is about 1,000 cP. He said, "We
prefer to work in cP because it represents the degree of
difficulty of flow. API is rather ... misleading because a
certain API oil at different temperatures can have different
viscosities."
MR. DUNHAM further clarified:
For example, 19 gravity oil at 10,000 feet might be
very hot and have a low viscosity. That same oil, if
you brought it up close to the permafrost might not
move. ... [Gravity] is measured at 60 degrees
Fahrenheit, so it's [an] issue of weight but not of
flow, and that's why viscosity is the key thing here.
5:53:12 PM
REPRESENTATIVE ROKEBERG commented that the gravity would have an
influence on the quality of the oil. Regarding the use of CO2
for EOR, he asked, "Is that going to require substantial
refitting and additional capital investment? ... How do you
handle CO2; isn't that somewhat dangerous ...?"
MR. WEST replied:
The industry's fairly familiar with high CO2-content
gas, but it does require refitting of a lot of the
surface and down hole facilities. When CO2 is mixed
with water, it produces ... [an] acid and that tends
to eat away at the steel in the ground and on the
surface, so we have to employ stainless steel, [and]
plated steel. And that will require substantial
investment.
MR. WEST, in response to Representative Rokeberg, stated that a
certain amount of the [CO2 used to flood a bore] would come back
and be cycled around again.
5:55:27 PM
CHAIR KOHRING asked how the sands are disposed of and if they
pose any environmental problems.
MR. DUNHAM replied:
It's not an environmental problem. We have a place to
dispose of it. We literally, currently, take it out
of the vessels, and it goes onto trucks which then
drive to a ... Prudhoe Bay grind-and-inject facility,
where it's actually ground up further and pumped down
with water into a reservoir that's permitted to
actually these.
MR. DUNHAM said:
I will give you an example of something that happened
right before Christmas that shows the impact of this.
We had what's called Phase Three conditions on the
North Slope, which means no trucks can move and people
have to stay inside for safety; can't see, it's 40
below. And the sand pit that holds the sand gets
full. ... We actually had to shut in production
because we had nowhere to put the sand and we couldn't
take the dump trucks to Prudhoe Bay.
5:56:48 PM
CHAIR KOHRING asked if the current facilities could used for the
viscous oil or if all new facilities would have to be built.
MR. DUNHAM responded that it depends on where the oil is. Some
of the current projects are being drilled from existing gravel
pads, he said, but if the oil is in a place where there is no
pad, they'd have to build a new one. He said:
And that gets the oil to the surface, and then we need
to actually put heat into it, so we build heaters that
heat the oil up so it flows to the facilities. Now
our current facilities handle both light and heavy
oil. As heavy oil becomes a higher percent of the oil
up there, more issues of dealing with the mixture will
occur. In fact, if we could really unlock this, you
could see a day where a facility is built specifically
to handle the heavy oil and you only had heavy oil
coming into it, so you had certain metals and certain
sand handling.
5:58:04 PM
REPRESENTATIVE SAMUELS asked how much sand there is in light
oil.
MR. WEST answered that most of the light oil comes from the
consolidated formations, which are deeper and no sand comes up
with it.
5:58:27 PM
REPRESENTATIVE ROKEBERG asked how different the viscosity of the
oil from the Orion and Polaris fields are from the oil from
Schrader bluff area.
MR. DUNHAM responded that Orion has a sand problem, but because
of the deep depth, it is warmer, and therefore the viscosity is
lower than West Sak or Kuparuk, but it is still considered heavy
oil.
REPRESENTATIVE ROKEBERG asked if Polaris is the same.
MR. DUNHAM replied that Polaris is a separate accumulation but
it has the same sand problems because the reservoirs are much
shallower than in Prudhoe Bay.
6:00:50 PM
REPRESENTATIVE ROKEBERG asked if the capital costs are similar
to other highly viscous fields.
MR. DUNHAM answered affirmatively and said:
Orion/Polaris is part of this collaboration that's
going on between ConocoPhillips, BP, and Exxon in the
heavy oil forum, where we're all learning from each
other. The developments are ... learning from what's
going on at West Sak and Milne because they are the
similar types of reservoirs, similar designs of
drilling for the wells, the multilaterals, and having
to deal with the same facilities. It's even worse
because Prudhoe Bay's facilities are older. They were
built in the era of the mid-70s and don't ... have
quite some of the facilities that Milne and the
Kuparuk fields have. So you not only have all of the
heavy oil challenges, but you have facilities that
were designed in the era before, so there's more
facilities upgrades required.
6:02:16 PM
REPRESENTATIVE ROKEBERG asked what the production was on a per
well basis at Polaris, Orion, Schrader Bluff, and West Sak.
MR. WEST replied that the production rates in all those fields
are similar. He noted that West Sak and Orion have had some of
the highest initial rates, but stabilize rates for all the
fields are about 1,000 barrels per day.
MR. DUNHAM remarked, "We've actually designed ... a well-
predictive model for all the fields that we use. It's a similar
model to predict what the production per well will be."
6:03:48 PM
MR. WEST, in response to Representative Rokeberg confirmed that
most of the well bores are multilateral wells now. He commented
that [industry] has not tried steaming techniques, but has
instead drilled new multilateral wells and converted the old
wells to water injection.
6:04:34 PM
REPRESENTATIVE ROKEBERG asked if there are any permitted
reinjection wells near the fields so that the industry doesn't
have to truck the waste sand to the disposal sites.
MR. DUNHAM answered that the Prudhoe Bay grind-and-inject
facility is for the disposal of a number of things in a
permitted way and is set up to handle what [BP] used to produce.
But, he said:
now that Milne and Kuparuk are producing more viscous
and more sand, we are exploring the need for possible
other smaller grind-and-inject facilities west of the
Kuparuk River, because there's an added problem: the
bridges across the river are not accessible all times
of the year also, so we don't want production to be
stopped because we can't get the trucks over there.
We are definitely looking at all kinds of ways to be
more efficient from a cost point of view and a
handling point of view. It's not good to have people
shoveling things, and it's not good for trucks going
all over the place. We can do it a more efficient
way. We probably will be doing some better projects
in the next year to year and a half to fix this issue.
6:06:29 PM
CHAIR KOHRING announced that he would put together a trip list
of the possible locations the committee members could visit. He
mentioned a few possible trips, such as riding a tanker from
Valdez to Washington, visit the North Slope, visit oil platforms
at Cook Inlet, or tour the Valdez terminal.
CHAIR KOHRING mentioned that he would produce a list of
legislation that's in the committee. He also noted that the
Energy Council will be meeting from March 10-13.
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Oil and Gas meeting was adjourned at
6:08:04 PM.
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