You are on page 1of 8

SPE 64452 Achieving Low Cost Operation in Mature Oil Fields

Imelda Pasni, Ignatius T. Wibowo, BP-ARCO Indonesia

Copyright 2000, Society of Petroleum Engineers Inc. This paper was prepared for presentation at the SPE Asia Pacific Oil and Gas Conference and Exhibition held in Brisbane, Australia, 1618 October 2000. This paper was selected for presentation by an SPE Program Committee following review of information contained in an abstract submitted by the author(s). Contents of the paper, as presented, have not been reviewed by the Society of Petroleum Engineers and are subject to correction by the author(s). The material, as presented, does not necessarily reflect any position of the Society of Petroleum Engineers, its officers, or members. Papers presented at SPE meetings are subject to publication review by Editorial Committees of the Society of Petroleum Engineers. Electronic reproduction, distribution, or storage of any part of this paper for commercial purposes without the written consent of the Society of Petroleum Engineers is prohibited. Permission to reproduce in print is restricted to an abstract of not more than 300 words; illustrations may not be copied. The abstract must contain conspicuous acknowledgment of where and by whom the paper was presented. Write Librarian, SPE, P.O. Box 833836, Richardson, TX 75083-3836, U.S.A., fax 01-972-952-9435.

areas: Ardjuna, Arimbi, Bima and North West Corner. It consists of about 50 fields, most of them are oil, distributed in three productive formations, Parigi, Upper and Lower Cibulakan. Throughout its 30 years of production history, 13 flowstations, 150 production platforms, 700 production wells and more than 1,000 miles of sub-sea pipelines have been built. Gas lift is the primary artificial lift method in this area. ONWJ reached its peak crude production rate of 180,000 BOPD in 1984 but now it has declined to less than 70,000 BOPD. The continuous decline of crude production is a challenge to the company goal of being a low cost offshore operator. Although in the last five years operating cost per barrel oil equivalent (boe) was lowered and is maintained at about $3.7/boe as shown on Figure-2, it is very clear that gas production is a more significant contributor in sustaining low cost per barrel levels in this contract area. The exploitation efforts have been repositioned to capture the increasing demand for domestic gas, and rationalization efforts are focused on lowering the cost associated with crude production. The drop of oil price to $10-$12/bbl in 1998 (Figure-3) and the uncertainty of how long that low price would last added more pressure to lower the costs of this mature field even further since it significantly reduced contractor profit as illustrated in Figure-4. Under the existing Production Sharing Contract fiscal terms, at an operating cost level of $3/boe, a drop of oil price from $15/bbl to $10/bbl cuts the contractor profit by about 50%. In the low oil price environment, low cost operation became a key element for survival. Asset Rationalization In 1998, Phase 1 of ONWJ Asset Rationalization was initiated. The main purposes were to characterize the assets and to verify core and non core areas. Conclusions indicated that about 80% of reserves and production came from four flowstations and only 20% from the other nine flowstations. However, historically those nine flowstations consumed about 60% of all lifting costs (see Figure-5). Those four flowstations were then called core assets, while the remaining nine flowstations were called non core assets. Geographically, the core assets are located relatively close one to another, but the non core assets are scattered across the contract area. Since the core assets are key to the future of this contract area, the long term organization was then proposed to fit those core areas.

Abstract The most challenging problem in mature oil fields is how to continue operating in a low cost fashion as crude production continuously decreases. To survive, companies need to realistically look at ways to rationalize their assets, which include rearranging operation modes or suspending some production facilities to achieve desirable asset value. Offshore North West Java Production Sharing Contract (ONWJ PSC), is located in the Java Sea, Indonesia. It has been on production for almost 30 years and currently has about 150 production platforms, 700 production wells and more than 1,000 miles of sub-sea pipelines. Peak crude production was approximately 180,000 BOPD but currently it produces less than 70,000 BOPD. This paper describes efforts in the ONWJ PSC to reduce cost by using K-Flowstation, one out of thirteen flowstations in the contract area, as an example. This flowstation has been on production for more than 25 years and consists of three producing platforms, one process platform and one compression platform. A drastic cost reduction was achieved by restructuring the operation mode in Kilo Flowstation. This success depended on the good cooperation among Engineering, Production and Shared Technical Services Group in embracing a new operating philosophy for Kilo Flowstation. In early 1999 the team targeted a direct cost reduction of 75% by end of year 2000. In reality, 60% of the cost reduction target was realized in 1999. Introduction Offshore North West Java Production Sharing Contract (ONWJ PSC) is located in the Java Sea, Indonesia. Currently it has about 18,000 sq-km of contract area (Figure-1). The first exploration well was drilled in 1967 while the first production occurred in 1971. The ONWJ PSC is divided into four main

SPE 64452


In late 1998, Phase 2 of Asset Rationalization began, focusing on the non core assets. To concentrate the efforts, an enginering team was formed to work closely with Production and Shared Technical Services groups. The purposes of Phase 2 were (1) to determine high cost drivers and possible cost reduction plans such as rearranging operation mode, synergies between flowstations, etc. (2) to evaluate strategic value of the non core assets. (3) to optimally capture the remaining value (4) and finally to develop a field life plan. The possibility of suspending production facilities was also evaluated as the last option should a desirable cost per barrel level not be technically achievable. Kilo flowstation was one out of those nine non core assets. Kilo Flowstation Kilo structure is located approximately 60 miles northeast of Jakarta, the capital city of Indonesia. This stucture was discovered in July 1970 by the K-1 exploratory well. The first production commenced in September 1973 from 6 wells on the KA platform. Two years later another new platform, KB, was brought on production, followed by KC platform in 1979. Four infill wells on KB and KC platforms were added in 1987. In total Kilo flowstation has 19 wells and utilized gas lift as an artifical lift method. A compressor platform was built in this flowstation to deliver produced gas to the NGL plant in the Bravo flowstation located about 8 miles to the north and to supply gas lift gas for Kilo remote platforms (KA, KB and KC wells). A process platform with a small living quarter was built and connected to the compressor platform by a bridge to handle daily operation. Kilo flowstation was started-up only two years after the first crude production commenced in the ONWJ contract areas. Since there was not much existing infrastructure at that time, this flowstation was designed as a manned, self-sustaining production facility, although there are only three remote platforms associated with the flowstation. Hydrocarbon was found on the upper and lower Cibulakan formation especially in Post-Main, Main, Massive and Top Talang Akar intervals within the Ardjuna sub-basin, where the lithology is limestone and sandstone. The limestones were found in K-24/25/26/55 zones, which are gas bearing zones while the sandstones were found in the K27/28/29/30/33/36/39/40 zones which are oil zones. The largest oil resevoir is K-39, which contributes about 40% of total oil reserves. Kilo structure is divided into two blocks, Main and KC blocks. Driving mechanisms vary by zone, include pressure depletion, solution gas, gas cap, but primarily water drive. Kilo structure has 160 MMBO of original oil in place and 100 BCF of original gas in place. Cumulative production by the end of 1998 was 68 MMBO and 70 BCF. Peak production of 21,400 BOPD occurred in 1975 following the start-up of KB platform, but it then declined to less than 2,000 BOPD in 1998 (Figure 6).

Initially, three-phase production from KA, KB and KC was sent to the production separator in Kilo process platform. The gas was sent to Kilo compressor while the liquid was diverted to an atmospheric separator and then pumped to Bravo flowstation. In 1982, crude production from three new platforms in the Uniform flowstation, a newer flowstation located approximately 10 miles to the east of Kilo flowstation, was delivered to Bravo flowstation through Kilo process to optimize the usage of a water dumping facility in Kilo process. Produced gas from Kilo area was compressed and used as gas lift gas supply for Kilo wells and the excess gas was sent to the NGL plant in the B flowstation through an 8 gas pipeline (Figure-7). Analysis In the last several years, Kilo flowstation was operated at an average direct lifting cost of about $4 MM per year at an average cost of about $4/boe. Depending upon the method of indirect cost allocation, the total operating cost per barrel for this flowstation was in the range of $8/boe - $10/boe. The target of Kilo asset rationalization was to lower the direct lifting cost with a minimum impact to production, with indirect cost reduction included in a company-wide cost reduction program. In order to meet the goal of total operating cost per barrel of about $3/boe for this flowstation, a cost reduction plan of more than 50% was targeted through asset rationalization. At the same time, rate enhancement possibilities were also exercised, such as accessing behind casing reserves, low resistivity low pay candidates, etc. However, few valued leads emerged, so the teams attention was then concentrated to lower direct cost. The Kilo flowstation cost structure analysis indicated that primarily due to its low current and projected future production rate, the flowstation could not tolerate the cost of a fully dedicated compressor and a manned production operation. That meant the existing four main gas engines for electrical power generation, two auxiliary engines for two trains of gas compressor, two gas compressor trains, a water dumping facility, and so forth had to be deactivated to achieve the lower cost target. Technically, by deactivating Kilo compressor, unmanning the flowstation, but still doing a selective wellservice program, a direct lifting cost reduction of approximately 75% could be reached. Once that unique cost reduction plan has been identified, several questions then had to be answered and included in the decision making processes, such as : (1) source of gas lift supply for Kilo wells (2) where should the oil, water and gas productions flow, and what are the limitations (3) what kind of modifications are required, and how much would they cost (4) how can the production surveillance program be done, and what is the impact of possible delay in data gathering to production.

SPE 64452


Kilo Operation Mode Modification and Optimization Beginning with the concept of Kilo compressor deactivation and an unmanned production operation, some possible scenarios were developed for the Kilo operation. Those scenarios were then individually evaluated and ranked. An advantage/risk matrix and a contingency plan were developed for the most feasible options. To find an alternative gas lift source for Kilo wells, an integrated review of the nearby flowstations was conducted. Under the existing operation mode, compressed gas from Kilo compressor was delivered as gas lift gas supply to KA, KB and KC well platforms, while the excess gas was delivered to NGL plant (Figure-8). A close look at the surrounding production facilities indicated that with a minor modification, other high-pressure gas from Bravo flowstation could be diverted to Kilo flowstation by reversing gas flow from the existing Kilo compressor to the NGL plant. The incoming gas was then distributed to KA, KB and KC well platforms as gas lift gas. In the previous operation mode, three phase flow from Kilo wells along with liquid production from three Uniform well platforms was sent to Kilo Process. In Kilo Process, water was separated and disposed to the sea, while crude was pumped to Bravo flowstation. In the proposed new operation mode, three phase flow from Kilo wells would still be delivered to Kilo process. Via the production separator, the liquid would be sent to Bravo flowstation while the low pressure gas would be delivered to Uniform flowstation by reversing the existing Uniform-Kilo crude line to be combined with Uniform gas. Subsequently, since the line would be used to flow gas from Kilo, liquid production from three Uniform platforms, UVA, UWA and UXA, had to be processed either in Uniform or Bravo flowstation. The proposed operation mode is presented on Figure-8. Implementing the above modifications will suit the purpose of deactivating Kilo compressor and unmanning the flowstation. The scope of modifications prepared by the Shared Technical Services indicated that only minor modifications were needed to implement the above plan at a total cost of less than 10% of Kilo annual direct cost. This included installation of jumper lines, replacement of some instrumentation, and suspension of producing facilities. However, because of maximum pressure limitation in Kilo to Bravo pipeline, the amount of liquid that could be delivered had to be lowered by about 20%. By implementing a BS&W (water cut) optimization, the deferred production is about 200 BOPD. The last puzzle that had to be solved was the surveillance program. There are two manned flowstation nearby, Bravo to the north and Uniform to the east. Although Bravo flowstation is relatively close, Kilo flowstation was finally included as a remote platform to Uniform flowstation. That decision was

based solely on workload in those two nearby flowstations. By using Uniform personnel, there would be no additional manpower required to monitor Kilo wells. However the well test program had to be rearranged to fit manpower and boat availability. Since individual well production rate was relatively low in the Kilo area, a slight delay in the well test data gathering was expected to have minor impacts on well performance. The final plan for Kilo operation modification was completed in mid-1999. The plan projected a direct cost reduction of about 75% by year 2000. With full support from internal management, the plan was quickly executed and by the end of 1999 the flowstation was fully unmanned, although some suspension activities were still needed to be carried out in the first half of year 2000. About 60% of the targetted cost reduction was achieved in 1999. Once the full cost reduction benefit is realized, the field life extension is estimated at five years. 1999 Asset Rationalization Results Similar efforts were undertaken for the other eight flowstations in the non-core assets. Unique solution was developed for each of the flowstations depending upon the specific challenges identified, including simplifying process modifications from oil and gas to gas only, prioritizing gas delivery from the non core areas to quickly harvest the remaining gas reserves, maintenance outsourcing, offshore transportation optimization and also suspending flowstation operation. The 1999 results and the projected trend in year 2000 are presented in Figure-9 as a percentage of maximum cost or production. Although the lifting cost graph showed a continuous declining trend since 1995, the 1999 results made a leap that would have taken three years time under normal circumstances. Conclusion The success of asset rationalization efforts was due to good cooperation among Engineering, Production, and Shared Technical Services. Clear goals, strong commitment and support from internal management allowed the team to work across department boundaries and to quickly implement optimization plans. In a mature area, synergy among fields should be regularly reviewed, not only to optimize new development plans but also to seek alternative cost savings from the existing fields. Most of the ONWJ cost reductions were achieved through synergy among existing fields. Acknowledgments The authors wish to thank the respective management of ARCO Indonesia for the full support and permission to publish this paper. Acknowledgments are also given to the Exploitation Engineering Departement, Production Operation Departement and Shared Technical Services Departement for the good cooperation.

SPE 64452


















50 KM

Figure 1

Historical Production and OPEX/BOE

P ro d u c tio n R ate , B O E P D
5 .0 200

O p e ra tin g C o st, $ / B O E

4 .0 3 .0


100 2 .0 1 .0 0 .0 '9 4 '9 5

O il R a te


0 '9 6
G a s R a te

'9 7

'9 8
O p e x /b o e

Figure 2

SPE 64452


Ardjuna Crude Price*







0 D e c-9 4 D e c-9 5 D e c-9 6 D e c-9 7 D e c-9 8

*taken from ICP

Figure 3

18 16 14 12 1.25 0.95 0.57 0.20 4.80 10.75 0.68 0.38 4.62 9.05 0.01 2.49 6.32 6.93 $10/BBl $15/BBL


10 8 6 4 2 0




O p e r a tin g c o st, $ / b b l
Op. cost Govt Take CTR Profit

Figure 4


SPE 64452


Reserves, Rate and Lifting Cost Distribution



60% 40% 20%



4 Core Assets

Lifting Cost

9 Non Core Asset

Figure 5

Figure 6

SPE 64452



NGL plant B1 Compressor Bravoflowstation Uniform flowstation Bravo flowstation B1 Compressor NGL plant

Oil/ Wtr Not Needed


Uniform flowstation

Gas Comp.



Gas Comp. K F/S

UW Flow KA Unman (monitor from Uniform f/s)




3 Phase Oil Gas G/L


3 Phase Oil Gas G/L

Figure 8

SPE 64452




P e rce n t o f M a x im u m , %





95 96 97 98 99 00 P ro d u ct io n L ift in g C o st L ift in g C o st /B B L

Figure 9