Angolas Kuito Deepwater Development Phased, Fast and First

Don Streu, Kuito Development Mgr, ChevronTexaco Overseas Petroleum, Angola Ruben M. Costa, Head of Production Department, Sonangol DPP, Angola Abstract
By implementing a phased development approach, Angolas Kuito field achieved first oil just 30 months after discovery, making Kuito this countrys first deepwater production. Equally impressive was the continuous emphasis on project safety. Although greater than five (5) million construction hours have accumulated, the corresponding lost workday incident rate is less than one per million hours worked. Kuitos phased development strategy has minimized cycle time while mitigating numerous subsurface uncertainties associated with complex, deepwater turbidite channel systems. This approach was especially beneficial, as there were no analogous, offset reservoirs in the region. It has also provided valuable production and operability information for subsequent subsea well location and facilities enhancement decisions. In addition, phased development has minimized initial capital requirements while accelerating production, helping to fund further developments within Block 14. The Kuito development consists of a Floating Production, Storage and Offloading (FPSO) vessel, a dedicated export buoy, two separate subsea production centers, a separate subsea water injection center, and a remote gas injection well. This paper reviews the unique aspects of progressing Kuito since its April 1997 discovery, discussing how phased development and contracting strategies mitigated project risks for this fast-track project.

Introduction
Block 14 is situated within the Lower Congo Basin, offshore Angola. It covers 4000 square kilometers, in water depths extending from 200 to 2000 meters. The Kuito field is located in the northeastern portion of Block 14 in water depths of over 400 meters. Cabinda Gulf Oil Company (a ChevronTexaco subsidiary) operates this block on behalf of the Block 14 Contractor Group, which consists of Cabinda Gulf (31%), Sonangol P&P (20%), TotalFinaElf (20%), Agip (20%) and Petrogal (9%). Kuito represents the first of nine prolific Block 14 oil discoveries to date. Implementing a phased development strategy has yielded many tangible benefits, including the production of almost 55 million barrels of oil since field discovery, while providing critical reservoir performance information useful to progress subsequent Block 14 developments. Three phases of Kuito development have already been executed (Phase 1A, 1B and 1C), whose scope has included the installation of facilities to process up to 100,000 barrels of oil per day and inject 135,000 barrels of water per day. There have also been 19 producing wells, 9 water injection wells and 1 gas injection well drilled. Production flows from two separate subsea centers to the Kuito FPSO, which can store up to 1.4 million barrels of processed oil. The FPSO is connected to an export buoy, designed to berth VLCC (very large crude carrier) size conventional tankers. Offloading 920,000 barrel parcels takes less than 36 hours. What follows is a review of this development, including the geologic setting, an overview of the Kuito phases and a discussion on the phased approach and contracting strategies that contributed to this deepwater projects economic success.

Kuitos Geologic Setting

Block 14 reservoirs are complex, high quality turbidite sand systems associated with an ancient deepwater channel deposition of the Congo River canyon. Structural traps (fault truncations, channel drape over structural highs, and salt domes) dominate the trapping mechanism. Source rocks are located in three separate intervals (Cretaceous Bucomazi and Iabe, and Tertiary Malembo

formations). The Kuito oil accumulation occurs within an Upper Miocene system and consists of vertically stacked, laterally migrating, sinuous events that are up to 700 feet thick. Major sand depositions are primarily associated with the channel axis facies and minor sands occur in overbank or non-channel areas. Sands are also found in vertical injection features that serve to create pressure communication across intervening shales. Reservoir quality in the turbidite channels is excellent with high porosity (25% to 30%) and permeability (3-4 Darcies). Kuitos oil gravity ranges from 18o to 24o API.

Kuito Development Overview

The Kuito field was discovered in April 1997. Three delineation wells were drilled and evaluated that same year to appraise the complex reservoir system. This information, in conjunction with 2-D seismic data formed the basis for reservoir characterization efforts and the resulting multi-phase field development plan. The first phase of Kuito (Phase 1A) initiated field production. The second phase (Phase 1B) provided the necessary water injection pressure support and the third phase (Phase 1C) provided additional production and water injection wells to optimize reservoir performance and recoveries. A fourth phase (Phase 2A) is currently being implemented to enhance the Kuito FPSO fluid handling capacities and operability. Kuito Phase 1A involved the conversion and installation of a 1.4 million barrel oil capacity Floating Production, Storage and Offloading (FPSO) system, the installation of a twelve (12) well subsea production system, and the installation of a dedicated Catenary Anchor Leg Mooring (CALM) export buoy. Pre-drilling of eleven (11) Central Kuito production wells and one (1) gas injection well was initiated in September 1998 and completed in July 2000. One of the Kuito appraisal wells was converted to the twelfth (12) production well. Facility fabrication and installation activities were completed in late 1999, and first oil was achieved on December 15, 1999. The observed reservoir and well performance from Phase 1A has been as was predicted. The reservoir is demonstrating excellent vertical and lateral conductivity and drainage. Kuito Phase 1B involved the installation of a separate eight (8) well subsea water injection system and the drilling of five (5) water injection wells. Concurrent installation of the Phase 1B subsea injection system with the Phase 1A subsea production system yielded a Phase 1B project cost saving of more than 10%, while accelerating field water injection. Phase 1B was originally planned to be totally separate from Phase 1A, allowing additional time to position the injection wells and subsea injection manifold. Fortunately, it was possible to resolve the associated technical issues in time to take advantage of the Phase 1A / 1B subsea equipment installation synergies. Drilling the water injectors commenced in May 2000 with first injection in June 2000. All five (5) wells were functioning by December 2000. As expected, injection response was quickly observed in nearby producing wells in terms of increased flow rates and reservoir pressure. Kuito Phase 1C involved the installation of a third subsea center, along with a dedicated FPSO tie-in module and minor increases in water injection and water handling capacities. This production center was located at the Kuito discovery well, allowing it to also be incorporated as a producer. The Phase 1C drilling program included seven (7) producing wells and three (3) water injection wells, which were completed in February 2002. Daily production rates peaked at over 105,000 barrels per day in October 2001, when the initial Phase 1C wells were commissioned. Kuito Phase 2A is currently being executed and includes an on station upgrade of the FPSOs gas compression and water-handling systems to increase the reservoir processing rate and enhance operability. Gas compression and water-handling capacities will both be tripled. The scope of Kuito Phase 2A was initially considered as part of the Phase 1C project, but was deferred to allow for design optimization by obtaining additional reservoir performance and facility operability data. Phase 2A enhancements are expected to be commissioned in 1Q 2003. Additional Phases - Besides delineation and infill drilling candidates, deeper opportunities within the Kuito Development Area are currently being assessed, with the intent to continue to maximize the use of the Kuito FPSO throughput capacities.

Unique Aspects of Kuito Development

Producing almost 55 million barrels from a deepwater environment in only 5 years from field discovery is a remarkable achievement, largely attained because of Kuitos phased development strategy. The short cycle time from discovery to first oil (only 30 months) was unprecedented in the industry for a development of Kuitos magnitude. This accomplishment is also commendable because there were no analogous, deepwater fields producing in this West African region to help assess expected reservoir performance, required well spacing and optimal facilities designs. Also unique to the Kuito development were the contracting strategies, designed to protect against disappointing reservoir performance results while providing the contractors incentive to achieve Kuitos first quartile project execution performance.

Phased Development Approach

The initial phase of Kuito development carried far greater risk than more conventional developments. The conventional approach would have been to drill additional appraisal wells and perform further reservoir characterization, while expending more resources to identify an optimum full-field development scenario. Although drilling additional appraisal wells would have reduced geologic uncertainty, it would have provided little insight to reservoir performance the key uncertainty at Kuito. Hence a phased development was selected, with the objective to minimize project cycle time while mitigating the associated increase in project risk. Phasing the Kuito field successfully managed the subsurface risks associated with complex turbidite formations. Obtaining the early Phase 1A production data: validated the reservoir permeability model and demonstrated the positive impact frac pack completion techniques have on increasing well productivity (Kuito was the first use of frac packs in deepwater Angola) improved the understanding of reservoir fluid modelling (API gravity and gas-oil ratio) confirmed lateral and vertical connectivity assumptions confirmed the effectiveness of the well designs (gas lift and frac pack completions) This valuable information was incorporated into ongoing reservoir characterization efforts, allowing optimum placement of subsequent wells and refinements to the completion designs. Phasing Kuito also allowed time for lessons learned and facilities performance data collected from Phase 1A to be incorporated into Phase 1C design and installation procedures. This yielded significant cost reductions in Phase 1C subsea equipment (flowlines, manifold, and trees) and well completion costs Phase 1C frac pack completion costs realized a 45% cost reduction when compared to Phase 1A. Phasing also minimized the initial capital expenditures and generated an early cash stream to recover exploration and appraisal expenses, while providing a mechanism to fund future Block 14 developments. As well, it allowed maximum utilization of the 25 year production period, which commenced in July 1998.

Kuito Contracting Strategies

Taking just 30 months to delineate a complex reservoir, formulate and obtain endorsement of a development plan, and construct and commission a large-scale subsea and production system required a tremendous worldwide effort. Kuitos contracting strategies, which brought the numerous services together, were a key component to achieving a first quartile project cycle time. Four of these strategies are reviewed below. Forming a consortium to construct Kuitos facilities - While appraisal well drilling and reservoir characterization activities were ongoing in 4Q 1997, a Solicitation of Interest was circulated to multiple FPSO contractors. The intent was to determine whether a compatible processing vessel was readily available. By late 1997, the responses confirmed that a fit-for-purpose system did not exist for Kuito. Since no fit-for-purpose vessel was available, a competitive bidding process was initiated to identify the best-qualified consortium for an evolving set of design requirements. The contracts were then negotiated in parallel with the maturing Field Development Plan. The final contractor consortium

consisted of Single Buoy Moorings (SBM) for the FPSO, Coflexip Stena Offshore International (CSOI) for risers and flowlines, and ABB Offshore Technology (ABBOT) for the subsea manifolds/trees/control systems. The consortium approach was an effective way to rapidly integrate the work activities of numerous worldwide locations (Angola, Singapore, Malaysia, Indonesia, Norway, UK, USA, and France), paramount to achieving the projects reduced cycle time goals. Once contracts were executed, the responsibility for resolving all interface issues was given to this contractor consortium. No payment to the consortium until system acceptance Kuitos subsea facilities (export buoy, risers, flowlines, manifolds, and trees) were all paid in fixed, lump sums. The Kuito FPSO is leased from Sonasing, a joint venture between SBM and Sonangol (the Angolan National Oil Company). However, no payments were made to the consortium members until all the facilities were proven operational (systems acceptance). In effect, the consortium carried the project expenses through to Kuito first oil. The cost of the consortium carry was minimal because of a compressed execution schedule. The combination of zero payment until system acceptance along with liquidated damages for late delivery was instrumental in providing the contractor consortium with a very strong motivation to minimize project cycle time while achieving the required equipment quality and performance specifications. Contracting strategy designed to mitigate reservoir-related risks A combination of phasing Kuito and its leased FPSO contract strategy served to mitigate subsurface uncertainties. The contracting plan committed to only a short-term FPSO lease with the following options: upgrade the FPSO at a later date if the expected reservoir performance was observed during Phase 1A purchase a new-build vessel with higher capacity if up-side reservoir performance was observed during Phase 1A terminate the FPSO contract if the downside reservoir performance was observed during Phase 1A, relocating the vessel to another development As the Kuito reservoir has performed as originally characterized, Phase 2A plans are currently being executed to increase water handling and gas compression capacities. However, had either of the other two reservoir outcomes evolved, the contracting strategy provided acceptable contingencies. Production System Performance incentives and penalties Operating charter payments are proportional to the performance of the system in terms of percent of available production realized. This is achieved through a set of performance-related incentives and penalties: liquidated damage and bonus for production throughput, processing quality, gas utilization, gas flaring and environmental compliance. The breadth and composition of these performance incentives and penalties were quite unique when they were instituted.

Kuito Development Insights Gained

Kuitos contracting philosophy and phased development strategy mitigated the risks that are inherent to fast-track projects. Many insights have been gained during the execution of the Kuito phases. A few are discussed below.

Using integrated multifunctional teams

An experienced and integrated project, drilling and asset development team, with low turnover and localized levels of authority have been key to Kuito project success. The asset development team structure was used for each of the development phases, and allowed various aspects of project development and planning to proceed in parallel (technical work, contracting, Partner approvals, etc). The project team followed the same strategy, incorporating key personnel from initial Kuito phases into subsequent phases. Drilling personnel (company and contractors) involved in the execution of Phase 1A and Phase 1B were also used for Phase 1C.

Application of new technologies

The use of new technologies should be limited on fast track, remotely located operations like Kuito. At a minimum, incremental contingencies should be made available. Kuito Phase 1A paid a penalty for pursuing changes in the completion design part way through execution, implementing an innovative

shunt tube technology that resulted in a lost wellbore. A rigorous review process for introducing new technology, involving the industry experts, identifying alternatives, and defining the downside is key to successful outcomes.

Contracting Plans
A well developed contracting plan, utilizing a contractor consortium to manage complex technical and schedule interfaces, is an effective way to reduce overall project risks and execution costs. With the proper contract terms and provisions, this approach places most of the execution risk responsibilities with the Contractors. Obviously the Contractor will incorporate these execution risks in the contract price. Therefore, this approach should only be used when there are clear cost versus risk benefits and tradeoffs, as was the case with Kuito.

Making full use of the Decision & Risk Analysis (D&RA) processes
Applying D&RA processes throughout Kuito development was a useful technique to help build and share a common team member / stakeholder understanding of the project risks, uncertainties, ranges, rewards, and trade-offs between various decision options.

Concluding Remarks
Phased development is an effective means to minimize reservoir risks in a fast-track project environment. It also limits initial capital requirements and generates early cash flows. Combining this approach with prudent contracting strategies has produced almost 55 million barrels of oil in only 5 years from Kuito field discovery. Kuito is clearly a successful deepwater development, whose experiences have yielded a much better understanding of deepwater Angolan tertiary reservoirs while enhancing the development potential of future deepwater fields.