MARGINAL OIL FIELDS
MARGINAL OIL FIELDS
John Conway, Doug Rogers, VECO, Canda
POSTER SUMMARY
Background - Alaska
Alaska's North Slope is a maturing oil
production basin. While it is always possible that
very large oil and gas discoveries can still be
found in northern Alaska, it is more likely that
the industry's recent success in developing
smaller fields will play a key role in the future of
Alaskan oil development.
Development of smaller fields, called
"marginal" because their economics are not as
robust as the multi-billion barrel giant fields
discovered earlier, have already made substantial
additions to the known reserves on the North
Slope. There is more to come; BP Amoco
estimates as much as five billion barrels of
recoverable oil remains to be discovered on the
North Slope, in addition to the approximately 16
billion barrels discovered so far. Much of this
will lie in smaller accumulations.
"Marginal" defined
"Marginal" oil fields are commonly
defined as smaller oil accumulations that are
economic today but would not have been a few
years ago. The existence of these accumulations
have been known since the early days on the
North Slope.
Two things have happened that now
makes them viable. First, new technologies,
engineering and construction practices, as well as
contracting procedures, have sharply reduced the
cost of developing these prospects.
Secondly, small accumulations near the
infrastructure of the existing larger fields - so-
called "satellites" - have been able to take
advantage of the extensive pipeline network, oil
and gas process facilities, roads and support
facilities built for the larger fields. As production
of these existing fields has declined, capacity
has become available in the process facilities and
pipelines allowing the development of these
small satellite accumulations at less cost.
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Quantity of "Marginal" oil
It has been estimated that there could be
as much as a billion barrels of additional oil in
these smaller satellite accumulations around the
large Prudhoe Bay and Kuparuk River fields. We
are already seeing this pattern repeated around the
Alpine field, a new field west of Prudhoe Bay.
Alpine will begin production later this year, but
smaller, adjacent accumulations are being
discovered that can be developed at lower costs
thanks to the infrastructure made available by
Alpine.
These innovations and cost-reduction
strategies are important in developing more oil in
the larger fields. New technologies like horizontal
and coiled-tubing drilling, and multi-lateral wells,
have radically reduced the cost of wells and new
reservoir penetrations. Because of that, the
producers are able to tap smaller accumulations of
oil in the reservoir that was bypassed earlier. In the
large Prudhoe Bay field, for example, the result of
innovations and new technology has allowed an
increase of the field's recoverable reserves from
the 9.6 billion barrels estimated in 1969 to about
13 billion barrels estimated today. This is about
one half of the in-place oil resource.
Cost reductions are a critical
element
Cost reductions have been most
important in allowing development of smaller
fields on the North Slope. New technologies play
an important role, but just as important is a major
rethinking among the producing companies and
major contractors as to how projects can be
developed.
VECO Corporation has played an
important role in this. VECO's construction,
engineering and operating subsidiaries have been
involved in almost every major North Slope
project since activity began on the slope 30 years
ago.
The company has been at the forefront
in developing innovative new
 MARGINAL OIL FIELDS
practices, such as fabrication in Alaska
of the small "truckable" oil process modules used
in the smaller fields, and more recently much
larger "sealift" process modules.
Northstar - An Example
A current example of how cost
reduction and innovations are making it possible
to develop an oil field previously thought
uneconomic is the Northstar oil field now under
construction. This is a project in which our
company is heavily engaged.
The Northstar oil accumulation was
discovered in the early 1980s through separate
exploration efforts by Shell and Amerada Hess.
Located six miles offshore, it was not considered
economic, given the technology and practices of
the day. A development feasibility study
commissioned at the time estimated the cost of
development at $1.2 billion. BP acquired the
prospect in the mid-1990s.
When new thinking was applied to the
project, BP was able to reduce its capital costs to
about half that estimated earlier.
Northstar's development is based on
industry's experience with smaller onshore fields
developed recently, such as Badami, an onshore
field of approximately 400 million barrels 25
miles east of Prudhoe, and Tarn, a deposit of 60
million barrels 10 miles southeast of the
Kuparuk River field.
At Badami costs were reduced through
use of extended-reach drilling, which allows
more of the subsurface reservoir to be reached
from a central location on the surface, and more
compact surface facilities, on a smaller
"footprint." Also, a permanent access road from
Prudhoe Bay to Badami was eliminated.
(Operations instead are being supported by air,
winter ice road and, during summer, ocean
barge).
At Tarn, producing companies
developed a way to process raw crude oil and gas
in the nearly Kuparuk field process facility rather
than building a stand-alone process unit in the
smaller field.
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Innovations at Northstar include placing
production facilities on one small artificial gravel
island rather than two larger production islands
envisioned earlier. This was made possible by
earlier advances in building smaller, more
compact facilities and by the new, extended-
reach drilling.
Other major savings came through
construction of a six-mile, buried subsea pipeline
connecting the production island to pipelines on
shore rather than an artificial gravel causeway,
the industry's preferred method of the 1980s.
An artificial causeway was used at
Endicott, another North Slope offshore field that
started production in 1987. The buried pipeline
was not only less expensive than a causeway
design, but government regulatory agencies had
strong objections because of environmental
concerns.
Contractors are playing an
important role in reducing costs.
q Building the small "truckable"
oilfield module units in a controlled environment
in southern Alaska, rather than the extreme
environment of the North Slope, lowers costs
and facilitates quality-control. Communication
between the constructors and the client is
improved because the Alaska producers have
offices in Anchorage.
q Large sealift modules are
being built in Anchorage by VECO. This
dramatically reduces the shipping time to the
North Slope and reduces transfer work at the site.
q Prime contractors like VECO
are now included in design and engineering, as
well as construction and operation of projects,
which has led to faster completion and more
cost-effective construction because problems are
identified earlier.
Innovation in numerous engineering,
construction and operations and maintenance
areas have resulted in increased marginal field
developments. VECO has been fortunate to
contribute in this exciting occurrence.