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Facilities Engineering Coursework

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Development analysis of an offshore field

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Facilities Engineering Coursework

  1. 1. FACILITIES ENGINEERING COURSEWORK Tentalum Field Lionel Wandfluh
  2. 2. FACILITIES ENGINEERING COURSEWORK Nov. 2009 Summary Considering Tentalum Field development, two options are considered: - Option 1: to export produced oil to X land based facility (50km offshore – 500km onshore) - Option 2: to create a blend with Palladium Platform existing processing capabilities Tentalum Field is in relative shallow water of a tropical climate, has an estimated recoverable oil of 100 million barrels and an expected peak production rate of 62,898 bpd, and is sweet light crude. All these specificities would imply: no water depth limitation, hurricanes, a cost effective offshore structure with processing facilities The type of development scheme for option 1 would be: a fixed piled structure with an exporting pipeline route (50km offshore – 500km onshore). The advantages of the fixed piled structure are: its price, its resistance to hard weather, and its simple installation. The advantages of the pipeline are: continuous production, cheaper maintenance, and no offshore storage & loading facilities. Decision was made by cost & efficiency comparison between the different options. Option 2 development would be initially less expensive and would allow faster starting production. However it will not be as financially interesting as it seems on the long run. Tentalum oil can be measured without adding additional equipment thanks to the “by difference” accounting system. We recommend option 1, because option 2 without building another offshore structure seems extremely jeopardize. 2 Lionel Wandfluh © |
  3. 3. FACILITIES ENGINEERING COURSEWORK Nov. 2009 Table of Contents Summary ................................................................................................................................................. 2 1. Introduction ..................................................................................................................................... 4 2. Tantalum Field ................................................................................................................................. 4 3. Option 1 ........................................................................................................................................... 4 4. Option 2 ........................................................................................................................................... 7 5. Conclusion ....................................................................................................................................... 8 6. Bibliography..................................................................................................................................... 9 Appendix 1............................................................................................................................................. 10 3 Lionel Wandfluh © |
  4. 4. FACILITIES ENGINEERING COURSEWORK Nov. 2009 1. Introduction An oil development company has appointed us as facilities’ advisor in its new development field “Tantalum”. Two options have been considered: First, to export the produced oil to the land based facility owned by X, 500 kilometres from the nearest landfall; second, to use Palladium Platform existing processing capabilities to blend Palladium depleting oil with the new produced one. Recommendations were based on commercial, technical and to a certain extent on economical factors. 2. Tantalum Field Before focusing exclusively on one of our options, it seems interesting to mention certain specific features of Tantalum’s field. First, Tantalum’s field is situated in relative shallow-water (100m or 328ft), thus the type of platform we can use will not be technically limited by water depth. However, Tantalum’s field is situated in a tropical region and tropical sea regions such as the Gulf of Mexico tend to often be subjected to hurricanes (National Oceanic and Atmospheric Administration, 2009), thus the offshore structures should be built to resist extremely hard weather conditions. The estimated recoverable oil is 100 million barrels with an expected peak production rate at 10,000 cubic meters per day (62,898 bpd), at this rate our oil resources will be quickly depleted (62,898 bpd = 22,957,770 bpy), therefore, the cost of the whole project is of particular importance and very expensive installations should also be avoided, at least assuming no other major discoveries are expected in that area. The crude oil is also sweet which means it doesn’t have that much sulphur (especially H2S) in it. This tends to make the oil much less corrosive (Francis S. Manning, 1995, p. 168). Finally the crude oil has 40 degree API which means that the oil is pretty light (bellow 20 API, the oil is considered as heavy oil and over 50 API, the oil is considered as very light (Stoneley, 1995, p. 29)) and thus is full of condensates and pretty unstable. All these specific features would generally encourage us to consider piled platforms (good ratio between price, loading capacity (need for processing equipments due to unstable oil), and resistance to rough weather) and a pipeline as an exporting route (due to hurricanes and non-corrosive oil). However, other considerations such as distance from shore, existing offshore & onshore infrastructures, seafloor structure, etc might change our opinion (William L. Leffler, 2003). 3. Option 1 As explained in the previous passage, Tantalum oil is probably quite unstable, so carrying it directly to X processing facility by tankers or pipelines would be extremely difficult. Thus, the oil has first to be at least slightly stabilized before undertake this trip. Furthermore, even though the oil might not need much support in its early development, gas or water injection will soon be required not only to enhanced oil production but also to maintain reservoir pressure over its bubble-point .It is convenient to maintain the reservoir pressure over its bubble-point as long as possible because if the pressure drops below it, the more volatile components of the oil will be liberated from the liquid and the relative amount of liquid to gas will dropped rapidly. The gas instead of being released and 4 controlled at the surface in tubing and separators will then be liberated in the reservoir and will change production dynamic) (Frank Jahn, 2008, p. 122). As most of these equipments cannot be operated subsea (actually this is not perfectly true, new well production technologies such as subsea separation systems have been tried out recently, however they are only at their first development Lionel Wandfluh © |
  5. 5. FACILITIES ENGINEERING COURSEWORK Nov. 2009 stage, and therefore won’t be considered here (Society of Petroleum Engineers, 2009)), an offshore structure will need to be built. In order to choose the best structure for our need, we will take into account the following: - Tantalum Field’s specificities. As explained in the previous passage, the choice of structures is not limited by water depth (it could be limited by the seabed’s constitution but as nothing has been mentioned, we will assume no limitation), but it will need to withstand very hard weather. Thus, converted tankers production systems such as FPSOs won’t be recommended, although new vessels with complex mooring systems allow the vessel to disconnect from the system and move away to safety in case of an emergency (Frank Jahn, 2008, p. 300). - The exporting route (pipeline or tankers) to X processing facility. Indeed both options will have an enormous impact in the choice of our structure, influencing, its weight requirement, the need for storage facilities, its development timing, and correlated to the previous requirements, its cost. The advantages of a pipeline are numerous: no need for offshore storage facilities, no discontinued production, generally smaller operating costs (this, however, highly depends on the length of the pipeline), and pipelines are also usually more environmentally friendly. The disadvantages of a pipeline are: its high installation cost, longer installation time before production, and cautious route selection (Noreng, 1983, p. 78). Transportation by tankers will probably allow a more rapid start in oil production. Furthermore installation costs seem much smaller. However the need for offshore storage facilities in order to continue producing oil between vessels’ trip, loading facilities, and production’s delays during bad weather conditions, heavily lower its interest for medium and large size field development. Thus, transportation by tankers is generally used for long distance or remote area offshore (Noreng, 1983, p. 78). Considering everything that was mentioned above, we would tend to favour the pipeline solution as long as its cost doesn’t drastically exceed the tanker’s one. A quick estimation of these costs would confirm our recommendation: Pipeline cost = cost of 50 km pipeline offshore + cost of 500km pipeline onshore (the cost of a pipeline subsea is generally far greater than a pipeline onshore (Arulanantham, Pipelines, 2009, p. 2) We will use a $20 per inch per meter for our onshore estimation and a $40 per inch per meter for our offshore estimation as it seems to be the normal first-cut estimates (Razavi, 1996, p. 117). What diameter should we use for our pipeline? The expected peak production rate is 22,957,770 bpy which equals roughly 3,060,933 tons (TNK-BP conversion calculator). Thus, a 16inch diameter that could carry 4 to 8 million tons a year would seem perfectly reasonable. Pipeline cost = 50,000*16*40 + 500,000*16*20 = $192,000,000 5 Even though this figure is quite rough and would probably be higher as it lacks taking into account costs such as pump stations, it will not drastically exceed the cost of using tankers (approximately Lionel Wandfluh © |
  6. 6. FACILITIES ENGINEERING COURSEWORK Nov. 2009 $150 million the vessel without counting storage and loading facilities (Arulanantham, Transportation, 2009, p. 5)). Consequently we would definitely recommend the pipeline option to export Tantalum’s oil to X processing facility. Considering the pipeline choice and everything that was said previously, we recommend this flow diagram for the overall option 1 theme: Wellsite: Depending on a correlation between reservoir permeability, drilling cost and expected production rate, production will be carried from multiple single wellheads or wellhead clusters (Frank Jahn, 2008, p. 295). From the wellsite a group of different pipes will join an offshore structure after being gathered at a riserbase. The different pipes will be: a control umbilical pipe, a production flowline, a test line, a gas injection pipe, and probably a water injection pipe (this will depend on the amount of gas at disposal after being used to run our utilities). Offshore installations: Our offshore installations will incorporate: one or two separators, gas turbines as prime movers to provide the energy needed to run the platform, different set of pumps (at least one to help the production flow line and one to help the exported processed oil), a gas compressor & injector, water & 6 sand filters to be able to release cleaned up water & sand, and a water injector (Arulanantham, Hardware, 2009). Lionel Wandfluh © |
  7. 7. FACILITIES ENGINEERING COURSEWORK Nov. 2009 Structure As explained previously a piled platform offers a good ratio between prices, loading capacity, and resistance to rough weather here. Of course, the structure has a few disadvantages, first its installation time is much longer than a gravity platform thus installation needs to be cautiously planned (we don’t want to face a hurricane during it) and its needs ship construction fabrications skills which are unfortunately limited. However its cost and its simple installation, makes it the most common type of platform in shallow water (Frank Jahn, 2008, p. 298). Pipeline: Only one pipeline would need to be built between our offshore structure and X processing facilities because all the gas processed will be used to run the offshore equipments or will be injected in the reservoir. If the decision of a 16inch diameter pipe went through, pump stations would need to be built every 40 to 100 miles in order to keep the oil pressure over its bubble-point (see Appendix 1). Processing facility: The land based facility seems to offer all the installations to prepare Tentalum oil & gas for the market except the capability to export Methane & Ethane. Hopefully, our platform separators would have done this job and the methane & ethane would have been used for power or injection. However the remains should be in such lower quantities that it could probably be flared without too much trouble. 4. Option 2 Option 2 implies using Palladium platform to develop Tantalum field. Straight away we can see the commercial advantage of such a concept: its cost. Compare to Option 1, no majors heavy investments (platform, pipeline) have to be undertaken. Furthermore, Tantalum Field production and thus revenues with option 2 would start to flow much earlier than with option 1. However two major points have to be discussed before concluding that option 2 is really a better solution: what would be the limitations of such a project; and what equipments would need to be installed to overcome these limitations? The daily production capability of Palladium is 100,000 barrels of oil per day, but because Palladium reservoir has come off plateau, its production is or will soon be in excess of capability. Tantalum field expected production peak is 62,898 bpd so only 60% of Palladium daily production capability and assuming Palladium oil depletion will decrease by 10% each year and Tantalum field will only be available to reach its production peak after 2-3 years (pipe installation, further wells drilled), this would mean that the amount of oil unproduced compare to option 1 would be around 20-30% for only 1 or 2 years (year 3 oil production: 70% Palladium, 30% Tantalum), a rough figure indeed that could differ a lot depending on the estimation but an interesting one to visualize a plausible indication of how much revenue could be missed (we would only loose this revenue for 1 or 2 year because we roughly balanced out the early production revenue of option 2 with the later loss of 7 revenue of option 2 at year 4-5). As 30% of 22,957,770 barrels at $70 dollars a barrel equals $482,113,170.00, we can see that this option will be commercially interesting only if no other Lionel Wandfluh © |
  8. 8. FACILITIES ENGINEERING COURSEWORK Nov. 2009 expensive equipments are installed to help Palladium platform (Option 1 cost is approximately the same amount: $200 million for the pipeline, $250 million for the platform and its equipment). How measuring the oil being exported to give full value to both parties without adding new metering system due to restrictions on space and weight? We can use the “by difference” accounting system. This system allows to deduct Tentalum oil from Palladium‘s one by deducting allocation Palladium measurements from the fiscal meter. The fact that the oil has been blended during processing looks like an issue but it is not. We just apply this equation: Allocation of blend to Palladium field = volume of blend * value of production from Palladium value of total quantity of blend Then to get Tentalum field allocation we apply: Allocation of blend to Tentalum field = value of total quantity of blend – allocation of blend to Palladium field 5. Conclusion Even though option 2 seems, prima facie, the most cost-effective solution, we proved that in reality it is far from being that evident. Furthermore we have not taken into account the difficulties of processing two very different type of oil, sour and sweet; maybe the oil should be blend before being processed at a sub-sea tie for example, but then how measuring both parties oil quantities without a new metering system? We also haven’t discussed about gas & water injection Palladium capabilities. As palladium oil is depleting, further injection requirement would probably be needed but Tantalum field would also need it if we want to keep the reservoir pressure over its bubble-point. Generally speaking, it seems most unlikely that we will be able to properly develop Tantalum field without a subsidiary structure. But then the financial gap between both options would be even smaller and the advantage of pipeline system over tankers would definitely worth considering. Therefore, all things considered, I would recommend option 1. 8 Lionel Wandfluh © |
  9. 9. FACILITIES ENGINEERING COURSEWORK Nov. 2009 6. Bibliography Arulanantham, D. C. (2009). Hardware. In MSc OGEM Facilities Engineering. Aberdeen. Arulanantham, D. C. (2009). Pipelines. In MSc OGEM Facilities Engineering. Aberdeen. Arulanantham, D. C. (2009). Transportation. In MSc OGEM Facilities Engineering. Aberdeen. Francis S. Manning, R. E. (1995). Oilfield Processing of Petroleum: Crude oil. Tulsa, Oklahoma: Penn Well Publishing Company. Frank Jahn, M. C. (2008). Hydrocarbon Exploration and Production 2nd Edition. Aberdeen UK: Elsevier. National Oceanic and Atmospheric Administration. (2009, September 1). Tropical Cyclone Introduction. Retrieved Decemeber 9, 2009, from USAGov.gov logo: http://www.srh.noaa.gov/jetstream/tropics/tc.htm Noreng, Ø. (1983). The oil industry and government strategy in the North Sea. Beckenham, Kent: Biddles Ltd. Razavi, H. (1996). Financing energy projects in emerging economies. Tulsa Oklahoma: Penn Well Publishing Company. Society of Petroleum Engineers. (2009, August 20). World’s first heavy-oil, subsea-separation system headed to Petrobras field. Retrieved December 11, 2009, from JPT Online: http://www.spe.org/jpt/2009/08/worlds-first-heavy-oil-subsea-separation-system-headed-to- petrobras-field/ Stoneley, R. (1995). Introduction to Petroleum Exploration for Non- Geologists. Oxford: Oxford University Press. William L. Leffler, R. P. (2003). Deepwater petroleum exploration & production: a nontechnical guide. Penn Well Corporation: Tulsa, Oklahoma. 9 Lionel Wandfluh © |
  10. 10. FACILITIES ENGINEERING COURSEWORK Nov. 2009 Appendix 1 10 Lionel Wandfluh © |

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