Chevron’s Neutral Zone Steam Injection Project To Cost $10-15Bn

Chevron’s Neutral Zone Steam Injection Project To Cost $10-15Bn

If a pilot steam injection scheme shows it to be viable, Saudi Arabian Chevron (SAC) aims to boost onshore Neutral Zone heavy crude output by 500,000 b/d from the Wafra field under a full field development. However, the production and cost have been revised upward on results from a large scale pilot scheme that is into its second year. Nick Wilson reports.

The scheme’s capacity addition estimate in 2010 was 300,000 b/d, and the capital expenditure to start the project $10bn (MEES, 7 June 2010), which is now estimated at $10-15bn. The final investment decision (FID) is back to mid-2014, Bill Higgs, SAC’s Senior Vice-President of Operations, tells MEES. Kuwait, which shares the Zone with Saudi Arabia, had previously expected a FID this year.

Ahmad al-Omer, Managing Director of SAC, says the project will cost $30-40bn over its lifetime, according to Bloomberg News. The large scale pilot scheme, with 25 producing wells, 16 injection wells and 15 observation wells, started in 2009. It has cost $330mn, Dr Higgs says. Projections show production ramping up steeply from first steam injection in 2017 to 100,000 b/d by mid-2019 and 300,000 b/d by end-2021, reaching full output in about 2026. This would plateau for two or three years before falling to 300,000 b/d by about 2040.

Production from the Neutral Zone’s four onshore fields, South Umm Gudair, South Fuwaris, Humm and Wafra, is shared between Saudi Arabia and Kuwait. Onshore output is declining – in November it averaged 225,000 b/d of both light and heavy oil – down from 240,000 b/d in June (MEES, 20 June) and 240,000-260,000 b/d the year before. It is split 50:50 between the two countries. Chevron – on behalf of Saudi Aramco – jointly operates onshore fields with state-owned Kuwait Gulf Oil Company, and markets the Saudi share of the output under a 30-year concession that started in 2009.

Offshore, in 2010 Kuwait and Saudi Arabia produced around 270,000‐280,000 b/d from the Hout, Lulu and Khafji fields, around 240,000 b/d of which is from Khafji, an extension of Saudi Arabia’s 1.5mn b/d Safaniyah field – the world’s largest offshore field. They aim to boost offshore output to 350,000 b/d at an estimated cost of $1.5bn.

Steam Flood Potential

Although the steam injection is more challenging, Chevron says Wafra Eocene has the potential to be the world’s largest ever steam flood development. Steam is used to heat oil, lowering its viscosity and increasing its mobility and reservoir production. In Chevron’s sandstone steam injection project in Kern River field, California, the primary recovery rate has been lifted to 50-80% from 5-10%. But Wafra is carbonate, which is more difficult. Chevron hopes it can boost the current 5-6% recovery rate of heavy oil – reversing its 6-8% decline rate – to 15-50%. Wafra has 25bn barrels of gross heavy oil in place, of which Chevron is targeting 13bn barrels of net oil in place. Each 1% increase in production rate will yield 100mn barrels plus over the life of the project – translating into 700mn – 4.4bn barrels from Wafra.

The heterogeneity of Wafra’s target reservoir, the First Eocene, may cause varied steam heating performance – it has variable permeability, location of barriers to steam, complex mixed wettability (the tendency of oil to stick to rock) and fluid property variations. Furthermore, the oil has 4.5% hydrogen sulfide content, and the carbonate – which is dissolved by steam forming carbonic acid, leading to scaling – also adds to corrosion problems. The water is hard, with total dissolved solids (TDS) of 16,000-68,000 ppm – compounding scaling issues. Dr Higgs says: “The aggressive oil and rock chemistry are significant challenges that impact well reliability.”

Wafra has two Eocene reservoirs, one under the other at 1,000-2,000ft, but they are offset. First Eocene has an estimated 18bn barrels of gross crude, both light and heavy, in place and 9bn barrels of net target oil. Second Eocene has gross 7bn barrels in place of all grades and 4bn barrels of net target oil. Heavy Eocene crude’s quality is permeability of 250-580 millidarcys, gravity of 14-20° API and viscosity of 50-1,000 centipoises. Chevron started a four production well, small scale, pilot scheme in First Eocene in 2006 to establish the injectivity of steam into carbonate, and scale and corrosion effects – and then selected corrosion resistant metals and anti-scaling chemicals.

The large scale pilot scheme aims to reduce cost uncertainties for full field development, tackle operational challenges of steam flooding, and provide information about production response and recovery. The pilot scheme helps calibrate a full field development and test for operational uncertainties. Much of the preliminary engineering design work aims at reducing cost and risk. The second pilot scheme has established a strong correlation between injection and production and has not yet seen any major impact due to corrosion or scaling. The steam injection into the primary reservoir layer met projections and no steam breakthrough was seen. It achieved a very strong production response. The results analysis is expected at the end of 2012, followed by an 18-month front end engineering design (FEED), with a final investment decision in mid-2014.

Full field development will include 10,800 wells, (6,400 production, 2,900 injection and 1,500 observation), a 1.5mn b/d water treatment plant and a 550,000 b/d processing plant for expected peak output of 500,000 b/d of crude. It may be operational by the end of 2017.

Wafra’s Main Challenges

Chevron says it faces four main challenges – proving that steam technology works in carbonate reservoirs; finding 1.5mn b/d of water and 650bn BTU/d of energy (equivalent to 650mn cfd of gas); and getting a skilled employee and contractor work force. The project will compete with other big Middle East energy projects, tightening labor, service company and equipment markets and pressuring costs. Chevron plans to train Saudis and Kuwaitis in California to build a highly trained cadre of professionals who can transfer the knowledge to those around them.

GCC mega-projects potentially under construction at the time of Chevron’s start-up include: BP’s tight gas project in Khazzan-Makarem, Oman; Kuwait Petroleum Corporation’s (KPC’s) 270,000 b/d heavy oil program; Bahrain’s Sitra refinery expansion; Kuwait’s new 530,000 b/d al-Zour refinery and clean fuels projects at Mina 'Abd Allah and Mina al-Ahmadi refineries; and Saudi Arabia’s Petro Rabigh and Jubail II petrochemical/refinery complexes. Iraq’s planned oil production projects are probably twice as large, in total, as the rest of the Gulf’s combined projects, although some may not get off the ground.

The project’s options for heating the steam include burning crude or Neutral Zone natural gas, solar-to-steam or the politically challenging options of importing pipeline gas or LNG. Crude and LNG are high cost, and pipeline gas deals are “notoriously difficult,” Dr Higgs says. Furthermore, the only neighboring country that could supply Kuwait with excess gas is Iraq, but relations between the two countries are tense. Kuwait already imports LNG in the summer, but importing more all year round would draw attention to state-owned KPC’s failure to develop its own gas reserves. Chevron has an exploration program for onshore gas but has not found any significant fields yet. If it uses electricity to produce steam, the project will need a 300-500mw power station. Solar-to-steam cost effective technology assurance has yet to be demonstrated. All of these options are being tested and technology selection will take place early next year.

Dr Higgs says: “Finding enough water in the desert has proved to be a massive challenge.” The options are water produced from oil extraction – current onshore Neutral Zone operations produce 1mn b/d water – or seawater. The hardness and dissolved solids of recovered water allow lower cost reverse osmosis to clean the water, compared to higher cost desalination of seawater.

If the project is successful it will impact global output – carbonate rocks contain about 90-180bn barrels of oil, mostly located in Canada and the Middle East – and establish Chevron as the leader in steam injection technology.

Copyright MEES 2011.