RDC’s 23rd Annual Conference Presentations
Gordon Birrell, Vice President, Alaska Consolidated Team, BP
My speech today is about 3 birds. This is a bird in the hand. That’s 2 in the bush.
Thus far you’ve’ head a number of speakers talk about the potential of those, i.e. new exploration on the North Slope. And at BP, we want to do everything we can to encourage exploration by making our geologic data and lease acreage available to other companies.
New discoveries are good for the state, good for the companies that make them and good for us by helping to extend the lives of our facilities and the trans Alaska Pipeline.
But based on our own track record of exploratory disappointments and our tremendous success at transforming known resource into recoverable oil, we’ve concluded at BP that for us, a bird in the hand really does beat 2 in the bush.
And today I’d like to talk briefly about a bird in the hand, i.e. viscous oil potential in the Schrader Bluff formation which extends over Milne Point, part of Prudhoe Bay field and is similar to the West Sak formation at Kuparuk.
This is a large bird– something between 15 and 20 billion barrels of viscous oil in place. It is larger than the oil in place discovered to date in the Deep Water GOM and almost as large as the original oil in place in the main Prudhoe Bay field. But it’s also constantly teetering on the brink of extinction because of the technical and economic challenges it faces. However, given its size it is clearly worth pursuing.
Conoco first began producing viscous oil from Schrader Bluff at Milne Point more than a decade ago, but until recently, viscous oil has accounted for only a fraction of 1% of all North Slope production.
Over the past few months BP has demonstrated that this resource can be turned into real, economically viable production via its Milne Point S pad viscous oil project. The project was brought on line on the 1st of September and is currently producing around 12 mbd. This will rise to 18 mbd through 2003.
This is a $100 million project which was turned from being uneconomic into a project which could compete for funding globally, within BP, by the application of a number of new technologies – technology like long multilateral wells that are steered horizontally through the thin reservoir and tap multiple subsurface locations from a single well … new types of downhole and surface pumping equipment … new seismic techniques which allow us to see subsurface faults better.
Today, with combined Schrader Bluff and West Sak production at about 40 mbd, it accounts for nearly 5% of North Slope production, and we believe there's tremendous potential to double, triple, or even quadruple viscous oil production from current levels. It can play a pivotal role in extending the lives of North Slope facilities and TAPS, as well as ensuring the long-term health of the North Slope oil business in order to facilitate construction of a gas pipeline. It also can help to ensure long-term jobs for Alaskan workers, business opportunities for Alaskan companies and revenues for state and local governments in Alaska.
S Pad is a small beginning, and it is the easiest part of all the Schrader Bluff formation to produce. The challenges we face to turn more of this huge resource into economic projects are significant. Unlike Prudhoe Bay oil, which flows easily to the surface under its own pressure, viscous oil in Schrader Bluff and West Sak is cold & thick, and it is contained in sands that easily crumble when oil is produced. Rather than controlling the flow of soda from a can you've just shaken up, producing it is more like sucking molasses out of a sand dune.
Long-term, large-scale viscous development will only be successful if new technology can overcome the poor oil quality contained in the Schrader reservoir, regulatory costs are reduced, the fiscal regime remains stable and the industry takes steps to counter oilfield inflationary pressures which we constantly face.
To overcome these hurdles, BP with the industry has initiated a program of “self-help.” An example of this is with our local drilling contractors we have dramatically improved performance this year in terms of cost to drill a well.
We also are trying new drilling techniques, new types of wells and new reservoir management techniques. These self-help initiatives should go a long way toward making the next traunche of viscous oil projects more viable.
So what about the future? There are a number of very exciting possibilities that we can see on the horizon, such as viscosity reducers and pressure pulse technology. These new concepts need further work, research and investment. However, they hold real potential for Alaskan viscous projects.
There is more the industry can and must do. We must maintain our relentless focus on costs. We must continue to develop new technologies. We must continue to look for new ways of doing business by aligning interests between the operators and the service sector and forging strong relationships based on mutual benefit with all of the stakeholders, including the State.
There is a huge viscous oil resource on the North Slope of Alaska that today has marginal economics.
Whether this enormous opportunity flounders or flies is up to all of us. By working together, we can find ways to turn this resource into real projects and transform potential into jobs, business opportunities and revenues benefiting the industry, the state and all Alaskans.
Thank you.
