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Declining Production in Alaska

General discussions of the systemic, societal and civilisational effects of depletion.

Re: Declining Production in Alaska

Unread postby pstarr » Sun 22 Jan 2017, 14:26:12

MD wrote:The elephant: That pipeline is approaching "paper thin" status along much of its length. Between that and declining flow rates, I am surprised it hasn't been shut down yet. How much of what flows down that pipe is now just hot water?

The declining flow rate results in a colder flow, and so paraffin wax (found in petroleum) builds up inside the pipe . . . constricting flow even more. Cooler pipe. That's one of those unfortunate/nasty positive feedback loops.
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Normally they'd run a scaper pig down the pipe. But not with think rusty walls??????

sarc on Since economics trumps geology (and demand creates supply) they will just have to helicopter the oil out. One barrel at a time. Who ever said peak oil impacts flow rate? sarc off
Haven't you heard? I'm a doomer!
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Re: Declining Production in Alaska

Unread postby rockdoc123 » Sun 22 Jan 2017, 14:53:00

For the companies in question given they would be able to recover all exploration and development costs from the State in exchange for ~18% royalties I think it would still be an economically decent project. The field had a reasonable GOR so my guess is the gas lift comes from re-injection of produced and separated gas.
Just looking at the production from 2005 through 2011 (all I could find from the Alaska gov't) the NPV10 (using WTI pricing at the time) would be in the order of $3.6 billion gross or ~$3.2 billion net. Of course this assumes all costs are recoverable (I can't remember what the exact deal was with similar concessions but I seemed to remember this was the case).
Production from 2006 onwards gradually decreased and in 2014 BP sold off the majority of it's interests in Northstar and a couple of other fields to Hilcorp (which at the time was a Houston based company concentrating in Lousiana E&P). The press from BP stated that for smaller fields like the ones they farmed down to Hilcorp it made more sense to be in the hands of a small company who could get more out of the field whereas BP was concentrating on their bigger fields elsewhere.
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Re: Declining Production in Alaska

Unread postby JimBof » Sun 22 Jan 2017, 19:39:03

ROCKMAN wrote:baha - That's why I'll tease an explorationist (if I think he can take) as to why he includes an economic analysis of his wildcat prospect: in the ernture history of the oil patch no one has ever submitted an economic analysis of an exploration project that didn't look viable.

Which is why I never look at those numbers. As your mother understood each project is given a probability of success. That times the reserves target yields the RRE...Risked Reserve Economics. Every exploration hand knows what the RRE has to look like for management to buy the idea. Even for relatively dumb managers you can't put a Ps of 80% on a risky project. But you can push the limits on reservoir size. After all if the target hasn't been drilled you don't know how big it is.

Thus comes the wonderful world of Excel spreadsheets: one can vary the Ps with reserve size using limits that are defendable. With just a few clicks the exploration hand can find that sweet spot of the reasonable risk (and a tad optimism is allowed because he knows something others have missed) and reasonable target size.

What I'll dig deepest into is target size. More then a few times I've seen targets that would represent the top 5% percentile of what has been discovered in a trend that has been explored for decades. That way even using a low Ps the RRE don't look too bad. And yes: a few times I've seen target numbers larger the anything ever discovered in the trend.

Most understand what I've described by the kind phrase: reverse engineering. Less kind: f*cking made up numbers. LOL. And if you notice a touch of bitterness in my tone there's a good reason: I've functioned as a development/reservoir geologist most of my career. You outsiders should understand that exploration hands will be forgiven for a number of dry holes. But development wells are expected to always work.

My first project at Mobil Oil in 1975: exploration drilled two wells that found a variety of different pay sands in a field with numerous fault blocks. Using seismic data projected those reserves to all those untested fault blocks. And not overly optimistic Ps...20% to 35%. Being a new development geologist fresh out of school all I did was push the paper work thru, give target coordinates to the drilling engineer and go log the wells. Wells drilled from the platform set over the site of one of the two discovery wells which had been plugged and abandoned. So started out with risked reserves of 20 million bbls and 100 bcf. And then my first 5 "very low risk" development wells were DRY HOLES. For instance the well the platform was set over found a 120' thick NG reservoir which was projected to exist in numerous offset fault blocks. Not only did that sand not contain NG in it in those fault blocks we never even saw the sand again.

So reserves went from 20 million bbls to 1 million and 100 bcf to 20. And only because we found a small fault block at the edge of the lease that the operator of that offset lease discovered. Our exploration department didn't even project reserves there originally.

And yes: I was nicknamed the "undevelopment geologist". LOL. Funny now...not then.

And that really isn't a condemnation of explorationists...without their efforts there would be no need for development geologists. LOL. But just some insight to just how difficult the process is. And that there was never been any f*cking "easy oil". If that field were analyzed today we would know what is and isn't there...seismic data has improved greatly from 40+ years ago. It is much easier to identify viable prospects today then ever before. If there is ever a time of "easy" oil/NG then it's today. The success rate today is much higher then it was decades ago...that's not the problem today. The problem is the limited number of conventional prospects left to find. IOW lots of conventional prospects decades ago that were difficult to find vs few conventional prospects today which are relatively easy to find.


You mean it is not that there aren't more needles in the haystack, it is that some barstool made the haystack bigger?
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Re: Declining Production in Alaska

Unread postby Alaska_geo » Sun 22 Jan 2017, 21:20:12

pstarr wrote:
MD wrote:The elephant: That pipeline is approaching "paper thin" status along much of its length. Between that and declining flow rates, I am surprised it hasn't been shut down yet. How much of what flows down that pipe is now just hot water?

The declining flow rate results in a colder flow, and so paraffin wax (found in petroleum) builds up inside the pipe . . . constricting flow even more. Cooler pipe. That's one of those unfortunate/nasty positive feedback loops.

Normally they'd run a scaper pig down the pipe. But not with think rusty walls??????

sarc on Since economics trumps geology (and demand creates supply) they will just have to helicopter the oil out. One barrel at a time. Who ever said peak oil impacts flow rate? sarc off

Lot of BS going down here.

While paraffin does create problems for TAPS, in can be and is removed by regular pigging. The biggest issue is with water. Pipeline grade oil still contains minute amounts of water (I seem to recall the figure of around 1% or less). At the high flow rates TAPS was designed for, this tiny amount of water remains in suspension in the oil. Note that TAPS is still full of oil, it just moves much more slowly down the pipe. At slower flow rates, that minute amount of water tends to settle out at low point along the pipeline. Another consequence of low flow rates is that the oil has more time to cool on its way South to Valdez. So that water which has settled in low spots can freeze. The ice is much more problematic to clear out than paraffin. And note that while there is some wall loss in spots due to corrosion, TAPS is no where near "paper thin".

The oil companies continue to propagandize that the minimum feasible flow for TAPS is around 300,000 bbl/day. (This is the company party line, to argue against state production taxes.) However, some years back some internal BP documents emerged during a court case regarding taxes. These documents showed that BP's own internal estimate of minimum flow for TAPS was around 100,000 bbl/day. They showed in fact that BP has been booking reserves under the assumption that TAPS could operated down to that lower rate.

It should be noted that the 100,000 bbl/day rate was assuming that modifications were made to TAPS, principally adding heat at strategic locations. The economic feasibility of that obviously depends on oil prices. My understanding is that some, but not all, of that work has been done.

To paraphrase Mark Twain, rumors of the imminent demise of TAPS are greatly exaggerated.
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Re: Declining Production in Alaska

Unread postby Alaska_geo » Sun 22 Jan 2017, 21:33:37

rockdoc123 wrote: Production from 2006 onwards gradually decreased and in 2014 BP sold off the majority of it's interests in Northstar and a couple of other fields to Hilcorp (which at the time was a Houston based company concentrating in Lousiana E&P). The press from BP stated that for smaller fields like the ones they farmed down to Hilcorp it made more sense to be in the hands of a small company who could get more out of the field whereas BP was concentrating on their bigger fields elsewhere.

Hilcorp seems to be doing fairly well with the N Slope assets they bought from BP Regarding Northstar. As is so often the case, small nimble independents like Hilcorp can operate declining fields like Northstar much more efficiently that big companies like BP. See
http://www.petroleumnews.com/pnads/571846916.shtml

"Cumulative production at the Northstar unit was 159.6 million barrels by the start of 2014, according to the AOGCC. The unit produced 3.2 million barrels that year for a total of 162.8 million by the start of 2015. Annual productions declined to 2.2 million barrels in 2015, for a total of 165 million by the start of this year. The unit produced 1 million barrels in the first six months of this year, suggestion a slowdown in the decline rate."
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Re: Declining Production in Alaska

Unread postby Alaska_geo » Sun 22 Jan 2017, 21:46:32

ROCKMAN wrote:pstarr - "have just compared never-before-attempted off-shore oil production in the stormy frigid arctic ocean with . . . Mom and Pops'" Believe it not you and I could partner up and drill some wildcats in the offshore Arctic. All it would take is a big fat check book.

With financial support I can put together a geologic, geophysical and engineering with as much (and probably more) experience then Shell Oil had working on its well. Except for upper management the vast majority of the hands doing the actual physical ops are consultants and third party contractors.
-----------snip----------------
There have been a number of small operators that have taken concessions in the Deep Water off west Africa and found nice oil fields.

So are you ready, partner? Let me know when you get that $100 million raised and I'll start pulling the bodies together.
Actually no, Rock. I don't think so. I happen to know that Shell had a rather large internal staff working the Chukchi and Beaufort plays. Very little of that work was done by consultants. And you are going to need a bigger checkbook too. At the time they pulled out, Shell had sunk about 5 Billion $$$ into their Alaska exploration project.

Years ago I worked previous rounds of both Chukchi and Beaufort exploration. I even spent time (as a major oil company employee) on a rig drilling 50 miles offshore in the Beaufort. I'm fairly familiar with what is involved in those plays. Any actual development in the Chukchi would be unlike anything ever done by industry before, anywhere. You won't see any mom and pop oil companies out there any time soon.
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Re: Declining Production in Alaska

Unread postby MD » Mon 23 Jan 2017, 08:57:20

Alaska_geo wrote:Lot of BS going down here.

And note that while there is some wall loss in spots due to corrosion, TAPS is no where near "paper thin".

The oil companies continue to propagandize that the minimum feasible flow for TAPS is around 300,000 bbl/day. (This is the company party line, to argue against state production taxes.) However, some years back some internal BP documents emerged during a court case regarding taxes. These documents showed that BP's own internal estimate of minimum flow for TAPS was around 100,000 bbl/day. They showed in fact that BP has been booking reserves under the assumption that TAPS could operated down to that lower rate.

It should be noted that the 100,000 bbl/day rate was assuming that modifications were made to TAPS, principally adding heat at strategic locations. The economic feasibility of that obviously depends on oil prices. My understanding is that some, but not all, of that work has been done.


By "paper thin" (in quotes, you'll note), I meant that it's been in service longer than it's initial book. That said, I understand capital infrastructure can be in service far past it's design, which sometimes is set more for depreciation purposes than actual viability. What will, and will continue to happen, is maintenance costs will continue to rise every year. Added heat zones to accommodate reduced flow? Sure, technically feasible, but that's a major project itself. 100,000 a day? Sounds like a pipe dream to me, but what the hell, I'm just an amateur.

I did poke around about eight years ago gathering what data I could about TAPS. My armchair conclusion then was that new flows would be required to keep it from a slow, or maybe sudden death. Slow if those extreme measures are built out. Sudden if they just give up or if there is a catastrophic failure somewhere.

Seeing that all the big players are still up there, I will bet on slow. Any announcement of its imminent demise will send up loud screams and possibly a whole pipe full of federal money on a rescue effort.

I'm also betting on slow because all you industry geeks are smart fellers and working for solutions constantly.
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Re: Declining Production in Alaska

Unread postby ROCKMAN » Mon 23 Jan 2017, 11:01:11

Geo - "...I don't think so. I happen to know that Shell had a rather large internal staff working the Chukchi and Beaufort plays." Go back up the thread: the conversation was primarily about the ability of small companies to handle field operations. You spent a lot of times on rigs: how many times when the operating company had 50% or more on the rig manned by employees? Let's ramp that way back: on a rig with 150 souls on board how often have you seen 15 (10%) of them being company employees?

Last time I was on a Deep Water GOM rig drilling a 34,000' well in 5,000' of water the operator had 4 employees onboard. Sometimes...at other times just 2. And their primary duties was monitoring the work of the consultants (like me) and the service company personnel. Yes: lots of company employees back in Houston reading the morning reports with great interest. But not one was involved in actually getting the well down. I have no doubt if you were a member of a 10 employee independent you would have no problem getting an offshore well drilled in your backyard. You probably have a go-to-list of the consultants and service companies you would use.

As well as the ones you wouldn't let walk your dog let alone drill your well. LOL.
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Re: Declining Production in Alaska

Unread postby Alaska_geo » Mon 23 Jan 2017, 13:48:20

MD wrote: By "paper thin" (in quotes, you'll note), I meant that it's been in service longer than it's initial book. That said, I understand capital infrastructure can be in service far past it's design, which sometimes is set more for depreciation purposes than actual viability. What will, and will continue to happen, is maintenance costs will continue to rise every year. Added heat zones to accommodate reduced flow? Sure, technically feasible, but that's a major project itself. 100,000 a day? Sounds like a pipe dream to me, but what the hell, I'm just an amateur.
Indeed it has been in service much longer than was anticipated. And, certainly some day TAPS will no longer be viable. But we ain't there yet. I've been hearing people claim that TAPS was in imminent danger of shutting down since the '90s.

Regarding adding heat to TAPS, that has already been done, to some extent. See http://alyeska-pipeline.com/TAPS/PipelineOperations/PumpStations "Pump Station 7 remains active and is part of Alyeska’s cold restart contingency plan, providing a means to inject heat into the pipeline during a protracted and unexpected shutdown." At present that is only used as an emergency measure to restart TAPS after an unplanned shut down in cold weather.

The biggest issue for TAPS, and N Slope production in general is, as you might expect, oil prices. If prices go back up, TAPS will continue to operate for a long time to come. Break even oil prices for N Slope production varies from field to field, but probably average somewhere around $45/bbl. I'm told by people who would know that Prudhoe is currently running in the black, though not by much. BP Alaska has stated they are currently running a negative cash flow overall in Alaska. Not sure about ConocoPhillips and Exxon. Note that Alyeska Pipeline (TAPS) is owned by BP, ConocoPhillips, and Exxon. Thus they pay themselves to transport their own oil, as well as make money by transporting oil from the smaller N Slope producers.
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Re: Declining Production in Alaska

Unread postby Alaska_geo » Mon 23 Jan 2017, 14:13:05

Rock-
I think we are talking about two different issues. Indeed, there usually aren't a lot of company people on a rig in Alaska, as elsewhere. I was talking about staff to actually figure out the geology and come up with a viable prospect.

My point was that true offshore exploration in the Chukchi and Beaufort (as opposed to shallow water nearshore like Smith Bay) is ungodly expensive. My earlier post was in error. I believe I said Shell spent 5 billion dollars in their Alaskan offshore adventure. Actually, it was more like $7,000,000,000. With one dry hole to show for it. Conoco and Statoil were also both pursuing their own plays in the Chukchi. Both also bailed out.

Nearshore shallow water stuff like Smith Bay is a lot cheaper, but still a very spendy deal. Definitely not a play for mom and pop oil companies. One of the reasons that Caelus is putting so much hype on some pretty sketchy data is that they are in way over their heads, and desperately want a partner with deep pockets to bail them out. At this point, Conoco's onshore discovery looks to be a lot more likely to actually put oil in the pipeline than Caelus' Smith Bay play.
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Re: Declining Production in Alaska

Unread postby Plantagenet » Mon 23 Jan 2017, 14:40:05

Alaska_geo wrote:Conoco's onshore discovery looks to be a lot more likely to actually put oil in the pipeline than Caelus' Smith Bay play.


Its not an "either-or" proposition. Chances are both will be developed and together will eventually be contributing ca. 300,000 bbls/day to the pipeline throughput.

Conoco's discovery is smaller but closer to existing infrastructure. Obviously it will be developed first.

The Caelus Smith Bay discovery is larger but farther from existing infrastructure. If everything Caelus's says about the discovery pans out then it is so big that it will eventually be developed as well---it might take 10 years but it will happen. Caelus appears to be looking for a partner with deep pockets to help develop it. That does't preclude development at all---in fact most projects on the North Slope today are done through joint ventures between several companies.

Cheers!

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Re: Declining Production in Alaska

Unread postby ROCKMAN » Tue 24 Jan 2017, 19:17:57

Geo - Yes, that was exactly my point. The post I was responding to was that a small operator couldn't handle drilling operations because they didn't have a big staff like a Shell Oil be it a shallow bay or open Arctic waters.

Don't be modest: I have no doubt you could put together a team redrill the Shell well. And probably do a better job of it. I was surprised by the unanticipated problems Shell had. From my experience Shell was near the top of my list of companies that over-engineer such projects with a lot of safety redundancy. Did it surprise you?
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Re: Declining Production in Alaska

Unread postby Alaska_geo » Tue 24 Jan 2017, 20:34:39

Plantagenet wrote: If everything Caelus's says about the discovery pans out then it is so big that it will eventually be developed as well
Therein lies the crux of the matter. Caelus has made some very big claims. These are based on big assumptions and extrapolations, from very skimpy and/or questionable hard data.

Given how critical oil is to Alaska's economy, our heavy dependence on oil for state funding, and fears about the long term viability of TAPS, just about everyone in the state (including me) really wants the Caelus story to come true. And Caelus has every incentive to put the best possible spin on what little data they have.

However, based on what they have shown and the data they claim to have, there are lots of reasons to question if this is a viable discovery. I've talked with many industry friends, some of whom have seen more details of the Caelus data than I have, and everyone is very skeptical.

There is little doubt there is some oil there. There are surface seeps at Cape Simpson. But the economic bar is pretty high up there. And those are very tricky reservoirs to develop, even with much better rock than Caelus has found. Take a look at the Badami story sometime, to see how wrong things can go. Like I said, I'd love for Caelus to be successful, but at the present time they are a very long way from demonstrating they have a developable discovery.

My $0.02 worth.
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Re: Declining Production in Alaska

Unread postby Plantagenet » Tue 24 Jan 2017, 21:44:34

Alaska_geo wrote:Caelus has made some very big claims. These are based on .... questionable hard data.


What part of their data do you think is "questionable"? What part of their data are you disputing?

Here's what Caelus has released so far: With an estimated 6-10 billion barrels of oil in place, Smith Bay ranks as one of the world’s largest oil discoveries in recent years, and the largest on Alaska’s North Slope in four decades......
The estimates are based on the two wells drilled last winter and existing 126 square miles of 3D seismic. Exploratory well Caelus-Tulimaniq #1 (CT-1) and step-out Caelus-Tulimaniq #2 (CT-2) targeted a large Brookian submarine fan complex in Smith Bay, spanning more than 300 square miles along the North Slope region. The fan was successfully drilled and logged in both wells, encountering an extension of the accumulation 5.25 miles northwest of the CT-1 discovery at the CT-2 location. Gross hydrocarbon columns in excess of 1,000 feet were encountered in each well, with CT-1 and CT-2 logging 183 and 223 feet of net pay respectively.

Extensive sidewall coring and subsequent lab analyses confirm the presence of reservoir-quality sandstones containing light oil ranging from 40-45° API gravity.


IMHO they are being honest in laying out the data they have in hand. They've identified a submarine fan complex in the 3D seismic. They can trace this feature over a large area in the subsurface 3D seismic. They've drilled it in two places and found hydrocarbons. Sounds good. Obviously more drilling and more work is needed, but so far so good. The estimate of 6-10 billion bbls in place seems incredible, but if thats what the numbers show then thats what the numbers show. Badami is not comparable as Badami involved heavy oil and Smith River involves light oil---they are quite different things and production of light oil is MUCH easier.

Alaska_geo wrote:However, based on what they have shown and the data they claim to have, there are lots of reasons to question if this is a viable discovery.....
My $0.02 worth.


So what are your reasons for doubting its a viable discovery?

Its not like Caelus is a "fly-by-night" operation. They are a highly successful independent oil company with a good track record on the North Slope. They discovered the nearby Ooguruk field and they are producing it right now. Again, from their website

The award-winning Oooguruk Development Project (“Oooguruk”) is located in State of Alaska waters in the Beaufort Sea, and was the first field in the history of Alaska’s North Slope to be operated by an independent company. The project was brought from exploration to development in just five short years – a time record for the North Slope. This is a testament to the team’s operational focus and strong working relations with government agencies, local communities, and other stakeholders.

And they have announced more work at Smith Bay. According to their website Caelus is currently planning an appraisal program, which includes drilling an additional appraisal well and acquiring new 3D seismic survey over outboard acreage. This is exactly what they should be doing to delineate this new discovery.

I don't get what part of this is "questionable". Do you think they shouldn't have announced their discovery at all? If so, why not? Of course it would be better if they had more data, but this is the real world and they've released the data they have in hand. They've got two wells and core samples and lab analysis and 3D seismic--thats all their work done so far and things look good---maybe VERY GOOD based on their work so far.

You seem to be implying that Caelus is running some kind of scam --- Like they are trying to sucker in some oil major to the Smith River play based on giving out "questionable" data. But I assure you people in the oil majors are far too smart for that. They aren't going to invest billions in a new project without have a very full and complete understanding of what they are buying into. So that isn't what is going on here.

IMHO what Caelus is trying to do is make their case for the money promised to them by the state of Alaska. If you are an Alaskan, then you probably know that the current tax code here allows oil companies to claim tax credits if they do new exploratory work in Alaska. Well---thats just what Caelus has done, but the state hasn't paid them they money it owes them. What better way for Caelus to make its case for getting the money its owed by the State of Alaska then to announce this new and potentially large discovery on the north slope. The oil tax credits were designed to encourage new exploration on the North Slope to find new oil. Well, Caelus has done exactly what the State of Alaska wanted when it set it up its tax system for oil companies.

Cheers!

ImageSmith River is the largest oil discovery in Alaska in four decades.
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Re: Declining Production in Alaska

Unread postby rockdoc123 » Tue 24 Jan 2017, 23:40:30

my own view on this is it is very interesting but until such time as they have tested a well it is speculation. I can't count how many tmes over the years I was involved in oil "discoveries" that showed oil saturation on wireline logs, sidewall or even full diameter cores that showed extensive oil staining and live oil in pore space but when subjected to Drill stem test including extensive long term swabbing, clean up acid and in a few cases a clean up frac......result was no flow.
It would be interesting to see the full analysis of the wells (i.e. porosity, permeability etc). Some of the Brookian turbidites I've seen were very fine grained and had permeabilities on the low side. That may not be the case here but it would be surprising to see the full stack of turbidites all being in the more "reservoir quality" facies.
I would leave it at saying....early days, more work needs to be done before getting too excited. Could be huge, too early to tell.
Note that they are a private company. A publicly traded company would have had to be more careful with their press release.
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Re: Declining Production in Alaska

Unread postby vtsnowedin » Wed 25 Jan 2017, 09:19:15

Plantagenet wrote:
ImageSmith River is the largest oil discovery in Alaska in four decades.

2.4 billion barrels at 19 mbpd USA consumption works out to a four month supply for the USA. 8O
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Re: Declining Production in Alaska

Unread postby MD » Wed 25 Jan 2017, 10:22:45

vtsnowedin wrote:
Plantagenet wrote:
Smith River is the largest oil discovery in Alaska in four decades.

2.4 billion barrels at 19 mbpd USA consumption works out to a four month supply for the USA. 8O


That's silly and meaningless math. Stated over and over here for years in varying context. What counts is the flow rate over time, and how it impacts the viability of the pipeline over years.
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Re: Declining Production in Alaska

Unread postby vtsnowedin » Wed 25 Jan 2017, 13:06:03

MD wrote:
vtsnowedin wrote:
Plantagenet wrote:
Smith River is the largest oil discovery in Alaska in four decades.

2.4 billion barrels at 19 mbpd USA consumption works out to a four month supply for the USA. 8O


That's silly and meaningless math. Stated over and over here for years in varying context. What counts is the flow rate over time, and how it impacts the viability of the pipeline over years.

I don't think is meaningless or silly. It illustrates how difficult it has become to find new oil supplies in light of the rate we are consuming reserves discovered years and decades ago. We have found about all there is to find and now must resort to reworking old fields and seeking ways to improve recovery rates.
But your point about flow rates is well taken. That 2.4 billion barrels if produced at an average rate of 400,000 bpd would keep the TAPS going for another 16 years or so all on it's own and much longer if brought on line at a rate that balances the decline of other North slope fields.
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Re: Declining Production in Alaska

Unread postby Plantagenet » Wed 25 Jan 2017, 14:10:25

vtsnowedin wrote: That 2.4 billion barrels if produced at an average rate of 400,000 bpd would keep the TAPS going for another 16 years or so all on it's own and much longer if brought on line at a rate that balances the decline of other North slope fields.


Yup. This is potentially a very big deal for Alaska even if it isn't all that significant in terms of the global peak oil problem.

Caelus itself is projecting a 200,000 bbl/day production rate. Given the current financial mess in Alaska, with state budget deficits running at about 3 billion dollars per year, every little bit of new oil production helps the state budget picture. If they can get this online and producing in five years, they way they did with their Ogookuruk play, that would be a good thing for those of us who have chosen to be frozen living here in Alaska. :)

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Re: Declining Production in Alaska

Unread postby Alaska_geo » Wed 25 Jan 2017, 18:49:00

Plantagenet wrote:
Alaska_geo wrote:Caelus has made some very big claims. These are based on .... questionable hard data.

What part of their data do you think is "questionable"? What part of their data are you disputing?

Here's what Caelus has released so far: With an estimated 6-10 billion barrels of oil in place, Smith Bay ranks as one of the world’s largest oil discoveries in recent years, and the largest on Alaska’s North Slope in four decades......
The estimates are based on the two wells drilled last winter and existing 126 square miles of 3D seismic. Exploratory well Caelus-Tulimaniq #1 (CT-1) and step-out Caelus-Tulimaniq #2 (CT-2) targeted a large Brookian submarine fan complex in Smith Bay, spanning more than 300 square miles along the North Slope region. The fan was successfully drilled and logged in both wells, encountering an extension of the accumulation 5.25 miles northwest of the CT-1 discovery at the CT-2 location. Gross hydrocarbon columns in excess of 1,000 feet were encountered in each well, with CT-1 and CT-2 logging 183 and 223 feet of net pay respectively.

Extensive sidewall coring and subsequent lab analyses confirm the presence of reservoir-quality sandstones containing light oil ranging from 40-45° API gravity.

I didn't say they don't have a discovery, or that can't be as big as they say. In fact, I said that I hope they are successful. I am saying that based on the data they've shown so far, there are lots of reasons to be cautious. First and foremost, they have projected production of 200,000 bbl/day without having run a single well test.

In the info you quote they say "reservoir quality sandstone". This is based only on log and SWC data, which is not definitive, they have also said elsewhere the rocks are very tight. "Reservoir quality" is a very elastic term.

They say 40-45 API oil, but this is not based on an actual oil sample. In the presentation I saw, they said based on chromatographic analysis of core extract it looks similar to oil in that range. Encouraging, but not definitive.

Log interpretation always requires some assumptions. Folks who have seen more details of the log data than I have expressed some reservations about how they calculated the water cut. I don't have the details, but these are knowledgeable people. Caelus may be correct, but at this stage the actual water cut is still in question.

These are turbidite sands. From the log I saw, their 183-223 ft of net pay is made up of at least 4 sand packages separated by thick shales. Each sand package appears to be an amalgamation of numerous individual turbides. Reservoir compartmentalization will be a big issue here. Note that for Badami it is compartmentalization, not oil gravity that kills them. And Badami has much better sand quality.

Their area (and hence overall volume) is based on seismic. At the presentation I saw they showed one map view of an unspecified seismic attribute. Ample North Slope history has shown that while seismic (using AVO and other attributes) is useful for showing sand prone areas such as turbidite lobes, is a very poor for prediction sand quality, sand thickness, and hydrocarbon charge. I could show you any number of areas on the slope which look great on seismic but have crap reservoir quality when drilled.

Based on their two wells, they are extrapolating sand quality, net pay, and oil saturation over the whole area of the seismic signature. Turbidites are very complex and highly variable reservoirs, and seismic is a very blunt tool for that kind of extrapolation.

Plantagenet wrote:So what are your reasons for doubting its a viable discovery?

Its not like Caelus is a "fly-by-night" operation. They are a highly successful independent oil company with a good track record on the North Slope. They discovered the nearby Ooguruk field and they are producing it right now.

Actually they didn't discover Ooguruk. The "discovery" well was drilled by ARCO years ago, but was not recognized as a commercial discovery at the time. Ooguruk was developed by Pioneer. Caelus bought it from Pioneer.
Plantagenet wrote:
And they have announced more work at Smith Bay. According to their website Caelus is currently planning an appraisal program, which includes drilling an additional appraisal well and acquiring new 3D seismic survey over outboard acreage. This is exactly what they should be doing to delineate this new discovery.

I don't get what part of this is "questionable". Do you think they shouldn't have announced their discovery at all?

You seem to be implying that Caelus is running some kind of scam --- Like they are trying to sucker in some oil major to the Smith River play based on giving out "questionable" data. But I assure you people in the oil majors are far too smart for that. They aren't going to invest billions in a new project without have a very full and complete understanding of what they are buying into. So that isn't what is going on here.

No, I don't think they are running a scam. I think they are trying to put the best spin they can with the data they have. They would very much like a big partner to help them prove up this play. My opinion is that they are spinning it a bit further than their current data really warrants, but that is just my opinion. Time will tell if one of the bigger companies takes them up on it.

Plantagenet wrote:
IMHO what Caelus is trying to do is make their case for the money promised to them by the state of Alaska. If you are an Alaskan, then you probably know that the current tax code here allows oil companies to claim tax credits if they do new exploratory work in Alaska. Well---thats just what Caelus has done, but the state hasn't paid them they money it owes them. What better way for Caelus to make its case for getting the money its owed by the State of Alaska then to announce this new and potentially large discovery on the north slope. The oil tax credits were designed to encourage new exploration on the North Slope to find new oil. Well, Caelus has done exactly what the State of Alaska wanted when it set it up its tax system for oil companies.

I totally agree that the State should pay up on the exploration tax credit. Trying to postpone those payments is a big mistake by the Walker administration, and probably won't hold up in court. However, that is a separate issue from whether or not Caelus has a big discovery. The tax credits are (supposed) to be paid just for drilling, whether or not they find anything.
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