CAPEX Vs OPEX

Over the lifetime of a project OPEX exceeds the initial capital expenditure (CAPEX). The project is such developed which satisfies-

a)      Quality

b)      Cost

c)       Safety

d)      Environmental issues

Generally when a company starts an  oil and gas project, it has following objectives-

1.       Maximizing economic recovery of the hydrocarbon

2.       Ensuring that agreed quantity and quality of hydrocarbon reaches the customer

3.       Ensure maximum uptime for facilities

4.       Minimizing man power specially offshore

5.       Maximizing automation in order to have better control over operations

6.       Providing safe environment for working

7.       Incorporating environment and social responsibilities.

8.       Knowing the legal, fiscal system of the region.

The company keeping in mind these objectives draws a plan of work which may include outsourcing. The decision of outsourcing is based on following facts-

1.       The service offered by contractor can be availed with less cost and more efficiency

2.       The service required are specialist in nature and is unavailable within the company

3.       Services are required for short duration only rather than permanent staffing.

The environmental laws for the region where the company is operating is very important. For example flaring and venting of gas is allowed in some place but prohibited in others. Venting is much more dangerous as it releases CH4 which is 20 times worse  green house gas than carbon dioxide. Thus, it is prudent to adapt high safety and environment measures in the beginning of the project itself so as to save oneself from future stricter laws.

For maintaining the technical integrity of the plant, the company has to decide on maintenance strategy for the equipment. Its Repair Vs Replacement strategy. This is actually a tradeoff between OPEX  and CAPEX. If the company wants they can spend high on CAPEX and buy machines which require low maintenance or a company can buy a cheap machine and decide to spend high OPEX. Either way the criticality of the equipment is very important. Where the machine is placed in your supply chain is very important. The location of certain machine (bottle necks) is more important than others 

SURFACE FACILITY

Most projects can be sub divided into 4 parts: wells, gathering system, processing plant and export facilities. The consequences of a badly designed process can be for example, reduced throughput of expensive plant modification after production. Production profiles are required for oil, water and gas in order to size the facilities.

Description of wellhead fluids for constructing the facility-

1.       PVT characteristics which describes liquids.

2.       Composition of fluids

3.       Emission behavior

4.       Viscosity and Density.

For various fluids a particular properties are required by the customers. The surface facility have to designed so as to cater these required specifications-

Oil- True Vapour Pressure, Base sediments and water content, temperature, salinity, hydrogen sulphide content

Gas- Water and hydrocarbon dew point, hydrocarbon composition, heating value

Water- Oil and solid content

For oil processing separator are installed to separate gas , water and hydrocarbon from oil.

The separator temperature is set so as to maintain equilibrium between oil and gas.

K=Y/X;     X= mol fraction of each component in vapour phase

Y= Mol fraction of each component in liquid phase.

A water content of less than 1% for sales of crude at refinery is required

For LNG the gas is cooled at -163 C at atmospheric pressure.

WELL DYNAMICS

Once the field has been appraised, a field development plan is drawn. Number of wells to be drilled depends of the field plan. Thus, a proper knowledge of reservoir conditions is important.

Generally radial flow is assumed for liquids in the reservoir. For gases the flow is generally turbulent. The flow is restricted by skin effect. Skin effect is the hindrance in the flow caused by inflow of solids by mud or perforation against liner or casing.

Coning occurs in the vertical plane when water is pulled up towards the well bore. Cusping occurs in horizontal plane when water is pulled up towards the well bore.

The tendency for coning and cusping increases if-

a.       The flowrate in the well increases.

b.      The distance between stabilized OWC and the perforation reduces.

c.       The vertical permeability increases

d.      The density differences the oil and water reduces.

To reduce the tendency the well should be produced at low rate and perforation should be far away from the OWC is possible. Gas reservoir also has gas coning or cusping.

For horizontal well it is very important consider the vertical permeability also. If vertical permeability is less than production will be lower than normal well.       

Artificial Lift

The objective of any artificial lift system is to add energy to the produced fluid. The planning of artificial lift has to be pre planned.

The following types artificial lift are –

1.       Beam Pump

2.       Progressive cavity pump

3.       Electrical submersible pump

4.       Hydraulic submersible pump

5.       Jet pump

6.       Continuous flow gas lift                               

RESERVOIR DYNAMICS-III

Fluid Displacement in the Reservoir

The macroscopic sweep efficiency is the fraction of total reservoir which is swept by water or by gas. The microscopic displacement efficiency is the fraction of the oil which is recovered in the swept of the reservoir.

Recovery factor= macroscopic sweep  X  microscopic displacement

At higher rates the macroscopic efficiency will be reduced thus optimum rate is often imposed to limit by passed oil and increase macroscopic sweep efficiency.

For microscopic efficiency the main thing is Darcy’s law. For clastic oil reservoir a good permeability is 100 mD while poor permeability in 10 mD. For gas reservoir reasonable permeability is 1 mD.

Production profile

Economic criteria are used which profile to use.

For depletion drive, the plateau of the production can only be done by drilling more wells.

Enhanced Oil Recovery

There are 3 types of techniques used for EOR.

  1.  Thermal Technique

  2. Chemical Technique

  3. Miscible Process

Thermal technique such as steam injection, in situ combustion is used where there is a thick oil.

Polymer flooding aims at reducing the amount of by passed oil by increasing the viscosity of the displacing fluid say water thereby improving the mobility ratio. Chemicals like poly saccharides are used for this purpose.

Surfactant flooding is targeted at reducing the amount of residual oil left in the pore spaces by reducing the interfacial tension between oil and water and allowing the oil droplets to break down into small enough droplets to be displaced through pore throats.

Miscible process is aimed at recovering oil which would normally be left behind as residual oil, by using a displacing fluid which actually mixes with oil. Hydrocarbon solvents, CO2, N2 and hydrocarbon gases are used for this purpose

RESERVOIR DYNAMICS-II

Difference between oil and gas field development.

Major difference between oil and gas field development are-  

11.The economics of transporting gas

22.  Market for gas

33. Product specification

44. Efficiency of turning gas into energy.

On a calorific basis approximately 6000scf of gas is equivalent to 1 bbl of oil. The compression of gas costs add to the transportation cost. Transportation of gas is much costlier than oil. For offshore facility there should be at least 0.5 tcf to be economical. If there is already an existing infrastructure than at least 50 bcf gas is required. For this reason a local market is a must for gas production. If there is 5 tcf of recoverable gas than case for building a LN terminal is justified.

Unlike a spot market for oil, for gas there is contract. Unlike oil prices, the gas prices vary from place to place. Thus producer, customer contract is an important thing in gas business. The contract generally has 2 main clauses-

1.       Guarantee minimum quantity of gas for long duration.

2.       Peak production when required.

Unlike oil, the gas has long plateau period of 8-10 years (compared to oil 2-5 years).

Sub surface development of gas reservoir.

Mobility= k/u   (1) it determines which fluid will rush towards well bore.

K=permeability

U= viscosity

Typical viscosity of Gas= 0.01 cp

Oil=0.5 cp

Water=0.3cp

It is for this reason that in a gas well, gas rushes (1) to the well bore with almost zero water cut. Also due to high compressibility of gas it is very uncommon to attempt to support the reservoir pressure by injecting of water and the reservoir is simply depleted with time. In a gas field, the wells are generally located at the crest of the reservoir so that they are far away from rising gas-water contact.

If the mobility greater than 1 then water will preferably move if it is less than 1 then there is stable displacement. The mobility ratio can be altered by changing the viscosity of fluids by EOR.

 The gas which comes out of the well contains water vapor, H2S, nitrogen etc. Water vapor is removed by passing the gas through molecular sieve or passing through glycol. Hydrate inhibition can be obtained by glycol injection.

RESERVOIR DYNAMICS-I

The reservoir development is key to hydrocarbon exploration.

Primary & Secondary recovery

Primary recovery uses the using natural energy stored in the reservoir. Secondary recovery would imply adding some energy to the reservoir by injecting fluids such as water, gas etc so as to impart energy to the reservoir.

1.       Solution gas drive (Depletion drive)

Solution gas drive is the drive which occurs in a reservoir which contains no initial gas cap or underlying active aquifer to support pressure. The driving force is the expansion of oil and connate water plus any compaction drive. Once bubble point is reached the dissolved gas forms a secondary gas cap. This can be encouraged by reducing pressure at producing wells. The producing wells should be located as low dip possible so that gas can accumulate at the crest of the reservoir and assist further recovery.

The facilities are designed for plateau period for an oil field. A plateau period is period when optimum balance between producing oil and avoiding unfavorable displacement in the reservoir is reached.

The production rate is maintained until abandonment rate is reached. Abandonment rate is referred to as when cost of production is greater than the revenues from production. For depletion drive plateau period is short and decline is rapid. Water cut is low in depleting drive as there is little or no support from the aquifer. A typical RF from depleting drive is 5-30%. Secondary recovery techniques have to be adopted in order to boost production.

2.       Gas Cap drive

The initial condition required for gas cap drive is an initial gas cap. The high compressibility of gas provides drive energy for production. Well are initially positioned away from gas cap so that gas can accumulate. Also well are placed not too close to OWC in order to prevent water coning.

A typical RF for gas drive is in range 20-60%. The producing GOR increases as expanding gas cap approaches producing well.

Natural gas cap drive may be supplemented by reinjection of produced gas or any other source into the crest of the reservoir.

3.       Water Drive

Natural water drive occurs when underlying aquifer is large and water is able to flow into oil column. To identify the type of drive in a reservoir remains a major uncertainty during reservoir development. Hence it is necessary to see the response of the well over a period of time such as reservoir pressure, fluid contact and material balance techniques.

Wells are drilled up dip and water is injected low dip in the aquifers. This drive has a long plateau period and increase in water cut over period of time. Water cut may reach 90% in final part of the field life. Process engineers have to accordingly plan surface facility so as to handle large quantity of fluid. The RF is between 30-70%.

There may also be a case where there is combination of drives.

RESERVOIR ESTIMATION

If there is one word that describes the oil and gas business is Uncertainty. Oil and gas business is full of risk. Therefore once exploration starts there is lot of stakes involved especially in early stages of the project. When the project starts one of the major questions is how much oil and gas is present? The answer to this question is a billion dollar answer.

Let us look at some of the estimating techniques-

There are 2 techniques used for estimation a) Deterministic b) Probabilistic. We will discuss only deterministic method.

Estimate= Area X Thickness x N*q*S*Rf/G*B   (1)

The variables are

q=Porosity

S=oil saturation in pore space

B=the formation volume factor of the oil

Rf= recovery factor

Every variable in the equation comes with level of uncertainty. Geologist try to eliminate the uncertainty by rightly guessing the values, this done by on ground results obtained from reservoir  and mathematical modeling.

Ground data from wild cat wells include log data, core data, geochemistry of rocks etc. From these measurement a set of values are obtained and fed into mathematical model such as Monte Carlo, Decision trees etc. These software then give estimates for worst, best and high outcome.

Depending upon the drive mechanism and production strategy the recovery factor is general

For Oil- 25-60%

For Gas- 50-80%

If there is very high level of uncertainty with certain parameter then an appraisal well is drilled to reduce the uncertainty. The purpose of an appraisal well is not to find oil and gas but to reduce uncertainty of parameters in equation (1). An appraisal well is terminated as soon as the desired parameters have been obtained. No further drilling and testing of an appraisal well is done once the desired parameter has been obtained.

The main aim of estimation technique is not to find oil and gas but to estimate probability of finding minimum quantity of hydrocarbon.