[DantesPeak]

CERA is right about one thing - oil and natural gas field development costs are soaring, and there are frequent delays. But did they also predict the deadly hydrogen sulphide hazards?

For more info on the cancelled Qatar project see earlier thread:
Major Qatar Gas to Liquid Project Cancelled

Eni's Kashagan oil field hit by delays

February 23, 2007 10:10 PM ET

Development of the world's most important new oil field will be delayed by a further three years and require almost double the investment initially anticipated, Eni, the Italian oil group operating the field, said on Friday.

Kazakhstan's giant Kashagan oil field will now produce its first oil at the end of 2010 and hit peak production by 2019, according to Paolo Scaroni, chief executive of Eni, Europe's fourth largest listed international energy group.

The field, discovered in 2000, remains the largest to have been discovered in more than 30 years. It is critical for global supplies; today only three of the world's 4,000 oil fields exceed the 1.5m-barrel-a-day production Kashagan is expected to achieve by 2019.

Announcement of the delay and escalating costs comes just two days after ExxonMobil, the world's largest international energy group, scrapped its $15bn natural gas project in Qatar because of runaway expenses.

Cambridge Energy Research Associates, the consultant, estimates costs of major oil and gas projects have risen 53 per cent across the industry because of tight labour and equipment supplies in the past two years.

Kashagan will now need $19bn to develop to the initial stage of producing 300,000 barrels a day by early 2011. That is up from the original estimate of $10.3bn and the $14-15bn guidance given to investors at last year's strategy review. However, the field's peak production would be 25 per cent higher than initially thought, Mr Scaroni said.

A third of the project’s extra cost has arisen from the need to move workers’ quarters away from deadly hydrogen sulphide hazards. The remainder covers foreign exchange, labour and equipment cost inflation and the expansion of the project.

Financial Times/MSN
free link

Chief Executive Paolo Scaroni was upbeat about Kashagan, saying the company is confident that the reserves will be greater than previously estimated, and that production will plateau at 1.5 million barrels a day in 2019, instead of the company's previous estimate of a 1.2-million-barrel-a-day plateau in 2016.

"It's a mix of bad and good news," he said in a telephone interview. "Yes, the time and the costs of the project are growing. The good news is that Kashagan is even a bigger giant than we thought. Every well we have drilled has been a success. Even the satellite areas are looking promising."

Wall Street Journal/Rigzone
free link

Developing Kashagan is painfully slow
Published: January 22 2007 23:21

Kashagan is perhaps the world’s most technically demanding oil field, making wrong decisions costly and possibly fatal.

There are no other fields like it and therefore contractors and the oil companies that employ them are breaking new ground at nearly every step. One of the consortium’s first tasks was to build artificial islands to tap the oil from beneath the shallow waters of the landlocked Caspian Sea, which is frozen almost half of every year.

To prevent shifting ice from damaging drilling rigs, artificial reefs and barriers also had to be built.

Frank Verrastro, director of the energy programme at the Centre for Strategic and International Studies, said he was not surprised about the cost overruns, which come amid steep industry-wide price inflation for anything from rigs to steel and labour.

Meanwhile, the environment remained a top priority constantly monitored by the Kazakh authorities still suffering from the legacy of Soviets, whose abandoned well-heads on the sea floor continue to spring leaks, threatening the sturgeon and the lucrative caviar they produce.

However, fish, birds and seals are not the only creatures under threat. This year, the oil companies developing Kashagan were forced to build a 150m pier and move on to it living quarters, control rooms and other facilities after simulations showed they were in danger of mass poisoning.

In fact, the risk of hydrogen sulphide, which is found in high quantities in Kashagan’s oil, escaping as it is being produced and processed is so acute that in certain areas workers must carry gas masks.

All this has delayed the development of the field, which was discovered in 2000, by up to five years, and increased costs by several billion dollars. This has led to the most recent complication, the announcement that KMG would bring in auditors to look into the spiralling costs and delays.

Financial Times
subscription may be required

Edit: links only

[cudabachi]

H2S is not only dangerous to living critters, it´s hell on equipment too.

I recall many years ago driving up to a newly drilled well to collect reservoir fluid samples during a drill stem test. This was in the Tuscaloosa trend north of Baton Rouge, Louisiana.

When I turned onto the board road, via my vehicle´s air conditioning system, I immediately got a whiff of hydrogen sulfide. I tested the producing gas at the separator and found it contained about 20 PPM H2S (which was actually typical of gas production from that zone).

The well-test crew was totally unaware of its presence as even small amounts quickly dull one´s sense of smell.

Upon informing the drilling supervisor of my findings, his response was, "well crap, that means we just bought a complete string of tubing".

[JPL]

Sorry guys, I just can't resist this (grin):

Poor Kashagan is dead & gone,
its' face we'll see no more.

For what we thought was H2O,
was H2SO4...

JPL

[I_Like_Plants]

I'd expect "vast new fields" about to come on-line say.... 5 to 10 years in the future, to make the news a lot as we make is down the downslope of the peak.

The only analogy I can think of is Hitler and his super-weapons, while Germany was getting its ass kicked, Hitler kept promising new super-weapons that were just about ready, any time now, that would save the day...... needless to say they never actually materialized. The Germans (us) did a lot, but they were never able to overcome the inexorable Allies (peak oil).

[killJOY]

Interesting news, Dante.

I'm having one of those days when I look around me and I just can't believe what I'm fucking seeing happening.

I just can't fukcing belevie it

[Starvid]

Sorry guys, I just can't resist this (grin):

Poor Kashagan is dead & gone,
its' face we'll see no more.

For what we thought was H2O,
was H2SO4...

JPL

More poetry at po.com!

Cantarell has passed it's prime
A collapsing production flow

No longer will nitrogen buy time
For the aging crown of Mexico

edit:

Matthew 25:8 and 25:9

And the foolish said unto the wise, Give us of your oil; for our
lamps are gone out.

But the wise answered, saying, Not so; lest there be not enough
for us and you: but go ye rather to them that sell, and buy for
yourselves.

[DantesPeak]

Funny rhymes!

So over the course of one year, the project has been delayed by three years - and then, it will peak out only eight years later.

Kashagan, the world’s biggest oil discovery in 30 years, won’t begin producing fuel until the third quarter of 2010, Eni said.
A year ago, the company said production at Kashagan would start in 2008.

The field will have peak output of 1.5mn bpd, 25% higher than the company’s initial target, said Stefano Cao, Eni’s general manager of exploration and production, at a presentation in Milan on Friday. Production will hit a peak no later than 2019.

Gulf Times

[Jack]

I'm having one of those days when I look around me and I just can't believe what I'm fucking seeing happening.

I know exactly what you mean. The new road construction in my area is breathtaking. In fact, new buildings of every sort are multiplying worse than coliform bacteria in...err...well, never mind. The roads are packed with cars, and the rush hours have streams of uninterrupted traffic stretching as far as the eye can see.

They all act as if the flow of oil will expand more than their dreams of avarice. The fools.

I look at the Mexican and U.S. stock markets making new highs, all based on some bizarre calculus that ignores the energy problem. Cantarell, for example. Then I notice on the news that Anna Nicole's demise is the most important story to be found. I say again, the fools.

Fortunately, since I'm a sociopath, I can look forward to their misery.

[TorrKing]

I'm having one of those days when I look around me and I just can't believe what I'm fucking seeing happening.

I know exactly what you mean. The new road construction in my area is breathtaking. In fact, new buildings of every sort are multiplying worse than coliform bacteria in...err...well, never mind. The roads are packed with cars, and the rush hours have streams of uninterrupted traffic stretching as far as the eye can see.

They all act as if the flow of oil will expand more than their dreams of avarice. The fools.

I look at the Mexican and U.S. stock markets making new highs, all based on some bizarre calculus that ignores the energy problem. Cantarell, for example. Then I notice on the news that Anna Nicole's demise is the most important story to be found. I say again, the fools.

Fortunately, since I'm a sociopath, I can look forward to their misery.

I thought the difference between sociopaths and psychopaths was that the psychopaths take pleasure in others' pain. So, maybe you have your diagnosis wrong...

[FireJack]

I'm happy when I read this because it means that hopefully when the oil is actually used it wont be sucked dry as quickly as possible so americans can drive their suv's everywhere. Once production starts to see significant drops what's left will hopefully be considered valuable.

[I_Like_Plants]

I know exactly what you mean. The new road construction in my area is breathtaking. In fact, new buildings of every sort are multiplying worse than coliform bacteria in...err...well, never mind. The roads are packed with cars, and the rush hours have streams of uninterrupted traffic stretching as far as the eye can see.
Fortunately, since I'm a sociopath, I can look forward to their misery.

Traffic is worse here, it's near-gridlock almost all the time now, what's interesting is real estate is heading down, the job market is sucko, and gas prices are heading up. Yet the traffic is showing the "tiling" effect you see when an organism is overcome with viruses, they'll overcrowd the host cell to the point that it looked like it's jammed full of tiles.

And likewise, the misery is going to be sweet to see.

[max_power29]

Its always business as usual though. Every Day....More taxes, more wiping of the collective posterior with the constitution, more brittany spears and anna nicole being the most important stories, more stock market going up and oil,gold and silver prices going back down after spiking, more war, more congestion, more suburbia being built, more nanny state, more inflation, more lawyers, more requirements of being extra pc , more thought control, more illegal immigration.....on and on and on

I'm so sick of the slow motion collapse.

[Kez]

I know exactly what you mean. The new road construction in my area is breathtaking. In fact, new buildings of every sort are multiplying worse than coliform bacteria in...err...well, never mind. The roads are packed with cars, and the rush hours have streams of uninterrupted traffic stretching as far as the eye can see.
Fortunately, since I'm a sociopath, I can look forward to their misery.

Traffic is worse here, it's near-gridlock almost all the time now, what's interesting is real estate is heading down, the job market is sucko, and gas prices are heading up. Yet the traffic is showing the "tiling" effect you see when an organism is overcome with viruses, they'll overcrowd the host cell to the point that it looked like it's jammed full of tiles.

And likewise, the misery is going to be sweet to see.

Same thing here north of Dallas. Farms have been sold for the past 15 years or so and are being replaced with big subdivisions. One near us boasts having 1,000 new houses and more on the way.

The state has been upgrading I-35 quite a bit, making it wider, along with other major highways like 380. As I expected, traffic got worse, much worse, not better. We have an influx of people from northern states constanly coming our way that never seems to end. The Dallas sprawl is becoming quite insane, powered by the evils of debt, materialism, and ignorance.

[nth]

What is interesting about this is the fact that Chevron is feeling their pain as they are having sulfur issues, too. The Tengiz field may run into production troubles due to excess sulfur piling up.

The funny thing about Kashagan is that they not only have environmental issues, but they also have labor unrest issues.

This is a big mess and I will not be surprised to find that they will have further delays, especially ramping up over 1mbpd. They will also have delivery issues as this is land lock and pipelines are already filled by oil from other projects.

[ROCKMAN]

Pstarr – Yep…something doesn’t smell right here…and it ain’t the sour gas. LOL. I was able to find some details on the reservoir. From: http://www.offshore-technology.com/projects/kashagan/

Kashagan is a carbonate platform… The reef is about 45 miles long and 20 miles across, with a narrow neck joining two broader platforms (Kashagan East and Kashagan West). The top of the reservoir is 14,700’ below sea level and the oil column extends for more than 3,200’ {huge even by global standards}.

The reservoir consists of limestone with low porosities and permeability. The oil is light, with 45° API gravity with a high gas-oil ratio and very high H2S content of 19%. The field is heavily overpressured. {that high gas/oil ratio is significant}

The figures for oil in place range between 30 billion and 50 billion barrels with a common publicly quoted figure of 38 billion barrels, but because of the reservoir's complexity the recovery factor is relatively low, about 15-25%.

First, the H2S corrosion problems make no sense at all. The oil patch became very proficient at dealing with this over A HALF CENTURY AGO. Designing pipe that can handle ain’t rocket science today…or even 30+ years ago. All that’s required is to spend huge bucks on tubulars that can resist the corrosion. Given the magnitude of the investment and the fact that they could have easily (and probably did) afford to hire the top 20 H2S corrosion inhibitor experts on the planet I can only assume the current problem is a result of fraud: someone paid the big bucks for the expensive tubulars and we’re delivered cheap crap. Given that Exxon et al we’re involved in the process I have no doubt they knew just what quality of steel they needed.

The high pressure/high GOR (gas/oil ratio) tells me that they are looking at a retrograde condensate reservoir: as the reservoir pressure drops below “geopressure” (that high reservoir pressure) the oil (condensate) yield increase and tends to reduce ultimate recovery. That’s at least one reason for their low estimate. But that's also a very good reason to re-inject the NG to help maintain the higher reservoir pressure. But that would have been a very expensive add-on to an already expensive project. But this is exactly what they did (N2 instead of NG) at Mexico's Cantarell Field to increase URR.

Unless it was TPTB doing the fraud someone is going to get badly burned in a lawsuit. Maybe even jail time/execution if they are still in Kazakhstan

[rockdoc123]

It's not the tubulars that are corroding Rock, rather it just the (55 or 300 miles?) NG collection pipelines. According to the article

I have not seen this particular article but read a number of articles back in the early winter when the leaks were discovered (they were in the onshore portion if I remember correctly). Back in November they were set to run a smart pig down the pipeline to check for integrity issues (wall thickness, structural damage etc) but I never saw the results of this. Has it been confirmed that the problem was corrosion? The gas is actually a bit higher than 20% H2S at reservoir conditions but might actually be lower at pipeline pressure but should be zero problem corrosion wise ......in Western Canada they have been dealing with high H2S gas (up to 25%) in the Foothills since the seventies with few issues. I would have been more suspect of crappy welds and the possibility of frost heaving in the subsoil putting tensional stress on weak welds.

[ROCKMAN]

pstarr - FYI in my world "tubulars" are any round steel pipe that is used for anything: drill pipe, casing, line pipe (that's what we usually call flow lines carrying oil/NG away from the wellhead). But there's also a huge amount of infrastructure involved other than the tubulars that has to be protected from the corrosive production. And over 35 years ago when I was at Mobil Oil we were producing sour gas in Miss. so rich in H2S that we were making a lot of money taking it out of the well stream and selling it to the chemical plants. Many tens of $millions of sulfur. And none of our pipelines leaked. There has been a tremendous amount of sour gas produced in Alabama and Mississippi for many decades. I meant exactly what I said: there was no reason to have any corrosion problem with the sour gas at Kashagan: we know exactly how to deal with the problem and have known for decades.

Somewhere in the process that H2S has to be removed from the NG before the NG is sold. It's usually done close to the field for the obvious reason. I haven't found any info where they had planned to remove the sulfur. Have you? Canada is the world’s largest exporter of sulfur. it looks like they are selling around $125/ton. Given the size of Kashagan field and the H2S concentration I'm guessing millions of tons of recoverable sulfur. Sulfur that has to be removed before the NG is burned. So again, I don't know what, but there is something very wrong with this whole story. H2S corrosion was known to be a significant problem from the day the tested the first discovery well so long ago. My dog knew what the H2S would do to inferior steel. And so did every engineer involved in this project.

[shortonoil]

You are right Rock; Karachaganak in Kazakstan is one of the largest condensate fields in the world. Only very limited areas in Kazakstan produce crude. The media's claims of a huge oil find aren't true, surprise, surprise!

http://en.wikipedia.org/wiki/Karachaganak_Field

Do a search for Karachaganak, and you'll find a huge number of references.

You're also correct about the H2SO4 not being the problem. These fields are running at a very high pressure, and a relatively low temperature; 7500 - 8500 psi, and with a high temp around 228 deg F. These wells are hitting the dew point very fast. They are dying of either condensate blockage, or reservoir pore throat blockage. These are below ground problems, and not above ground, as Kazakstan, and the oil partners have led everyone to believe. Of course there could be some management problems, but for $50 billion, and after seven years you would think that most of them have would been solved by now. With the reservoir modeling capabilities available today, after seven years you would also think that blockage problems would also be solved by now; if they could be. It looks like they are just going to continue to pump dry gas into the formation to keep reservoir pressure up, and hope the heavier fractions dissolve back into the fluid. They might get a few percent back that way, but 15% URR not a chance. They'll be lucky to hit 5%. Kazakstan condensate fields are not going to be the new SA everyone expected - more likely, just another money pit!


http://www.thehillsgroup.org