When international oil companies were finally allowed to operate in China not so very long ago it was touted as the biggest development in years. The industry was excited by the prospect of finding enormous reserves in a vast region that had been closed for years.
Today, the fanfare is subdued -- China doesn't get as much worldwide attention as it once did -- but the action continues.
Companies are quietly drilling away in various regions -- with considerable success.
Take, for example, a notable exploration play in the Bohai Bay of the North China Sea, about 150 miles east of Beijing, where two U.S. independent companies have made several discoveries in a virtually unexplored offshore region that may prove to be a major boost to their bottom lines.
After five years of exploration work and several successes, Phillips Petroleum announced last July its first big discovery on the 2.3 million-acre Block 11/05 in China's Bohai Bay. The PL 19-3-1 discovery well was drilled to a total depth of 5,531 feet and encountered a gross pay interval of more than 1,400 feet, with 712 feet of net pay in the Minghuazhen and Guantao formations.
Since the discovery Phillips has drilled several appraisal wells in the new field and estimates recoverable reserves at about 400 million barrels of oil.
Kerr-McGee also has been busy in Bohai Bay.
In December the Oklahoma City-based firm announced a discovery on its Block 04/36. At year-end the CFD 11-1-1 well was testing five zones with more than 280 feet of oil pay. The 4,789-foot discovery well is in about 80 feet of water on a four-way dip structure with more than 5,000 acres of closure.
Kerr-McGee officials said the discovery is analogous to Chinese fields to the northeast and Phillips' PL 19-3 field to the southeast. If test results are encouraging the company will drill an appraisal well in early 2000 about two kilometers to the north.
Kerr-McGee acquired block 04/36 in 1995 and operates with an 81.8 percent interest. In 1996 the firm contracted for Bohai Bay block 05/36 and operates with a 50 percent interest. Both blocks comprise about 838,000 gross acres.
Sparking Their Interest
This is Kerr-McGee's second discovery in Bohai Bay. In June 1996 the company drilled the CFD 2-1-1 discovery that on tests flowed about 7,000 barrels of oil a day. The well is in approximately 40 feet of water and was drilled 11,750 feet.
Three appraisal wells have been drilled:
- The CFD 2-1-2 appraisal was drilled to 13,210 feet and tested 4,100 barrels of oil.
- The CFD 2-1-3 went to about 13,000 feet but was not tested.
- The CFD 2-1-4 well went to 13,120 feet and tested around 3,000 barrels of oil daily.
No reserve figures have been released on this new field but Kerr-McGee is currently working with the Chinese national oil company and the government to pursue an economic plan for development.
So what's attracted Phillips and Kerr-McGee to this part of the world?
"We've had a presence in China for years, mainly in the South China Sea, that has allowed the company to develop a good working relationship with the Chinese National Oil Company and gain an understanding of how to work within the Chinese culture," said Brad Patton, a senior geologist and former lead geologist on the Bohai Bay project for Phillips. "It's been this knowledge that's allowed us to move into other areas of China.
"Kerr-McGee is always looking at selective basins around the world for potential to develop into core areas for the company," added company spokesperson Debbie Schramm. "This is a region we wanted to test to see if it could work into a core area.
"It's a little early to tell if that will be the case," she continued, "but we are encouraged by the results so far.
Patton called Bohai Bay "a very oil- prone basin.
"There are some very large fields onshore to the south operated by the Chinese," he said. "For example, one onshore field complex called Sheng-li has about six billion barrels of recoverable oil. To the north of our offshore block the Liahoe complex has over two billion barrels of recoverable reserves.
"That sparked our interest," he said. "While several relatively small discoveries were found in the bay prior to the 1990s, the offshore region was underexplored. Only five wells had previously been drilled on our block, which covers an area roughly the size of 460 Gulf of Mexico blocks."
The Chinese had acquired 1970s vintage 2-D seismic data over the area, which was good enough for Phillips to get a feel for the structures in the block.
"The area is structurally complex with multiple prospects and play types," Patton said. "Seismically, we could see several large structures and 20 to 30 smaller structures within this one block.
"These structures are developed on the flanks of a large sag (Bozhong sag)," he added, "and should be well-positioned to capture hydrocarbons migrating out of the sag."
Phillips acquired the block in 1995, and acquired 12,700 kilometers of new 2-D seismic data over the entire block, on which the company planned its drilling program.
The first well (1996) was a sub-commercial gas discovery -- but while unsuccessful, it did provide much needed geologic information and well data that has been valuable to exploration efforts.
Patton said "that well gave us much needed stratigraphic information that led to reprocessing of the 2-D seismic data and developing a better correlation to the entire region.
"Bohai Bay is a lacustrine basin with complex stratigraphy and high variable reservoir quality," he continued. "Our initial plans were focused on the deeper syn-rift reservoirs, analogous to the large onshore fields -- but much of this section was of poor quality within our block, due to the increased depth of burial around the Bozhong sag.
"This understanding focuses our efforts on better reservoir quality," he said, "which directed us to shallower depths and post-rift fluvial sediments."
Based on the reprocessed 2-D seismic, Phillips drilled two additional exploratory wells in 1997. Both were discoveries.
The Peng Lai 14-3-1 well, drilled in the east central sector of the block to a total depth of 12,766 feet in 79 feet of water, intersected a gross oil column of 686 feet from 7,434 feet to 8,120 feet in Miocene-age sands. Two drillstem tests flowed oil at a combined peak rate of 1,602 barrels of oil a day.
Thirty-five miles south-southwest, the Bozhong 36-2-1 discovery was drilled to 8,491 feet in 69 feet of water. Tests of a 653-foot interval within a gross hydrocarbon column of 1,909 feet flowed at a maximum rate of 2,262 barrels of oil a day.
"The geology of these two discoveries was structurally and stratigraphically complicated, and following the disappointing results of an appraisal well, we realized that to understand these areas we would need to acquire 3-D seismic."
In 1998 Phillips acquired 1,200 square kilometers of 3-D seismic in three different surveys, covering the two discoveries and an exploration prospect, the PL 19, that the firm was excited about.
Seismic acquisition over the block is complicated by a shallow gas anomaly, which can mask the image -- but in this particular exploration play Phillips was happy to see the gas anomaly on the seismic data covering the PL 19 prospect.
"The gas was encouraging," Patton said, "because it tells us that there is an active hydrocarbon system charging the prospect."
Finding What They Sought
Last year Phillips drilled the first well on the PL 19 prospect and made a discovery. The PL 19-3-1 was drilled to 5,531 feet and encountered a gross pay interval of more than 1,400 feet, with 712 feet of net pay in the Minghuazhen and Guantao formations.
The discovery was made on a large anticline that is about six miles long. Testing was deferred to the PL 19-3-2 appraisal well that was drilled immediately following the discovery.
The appraisal, 1.6 miles south-southwest of the discovery well, reached total depth of 5,325 feet and encountered a gross pay interval of about 1,700 feet with 748 feet of net pay in the Minghuazhen and Guantao formations.
Phillips ran three drillstem tests on the appraisal well to evaluate various sand packages for deliverability and hydrocarbon properties. The first two tests each flowed 700-800 barrels of oil a day of 22 degree API oil, with a similar gas-oil ratio of 250-300 cubic feet per barrel from separate intervals 650 feet apart in the well.
The third test, 390 feet above the second interval, flowed about 105 barrels of oil daily with a gas-oil ratio of 138 cubic feet per barrel.
The company said analysis of the test results indicated that the well's zones could produce at a rate of 3,000 to 5,000 barrels of oil a day with artificial lift under production conditions.
These two wells were drilled in a fault block with an area of closure of about 1,400 acres. By December the firm had drilled five wells in the PL 19-3 field and planned two more appraisal wells.
Based on the third appraisal the company estimated the field's recoverable reserves at around 400 million barrels of oil.
The PL 19-3-4 appraisal well was drilled to 6,084 feet and encountered a gross pay interval of over 886 feet, with 290 feet of net pay in the two main producing zones.
Drilled in an untested fault block 1.5 miles north of the discovery well and 1,000 feet lower on structure, the PL 19-3-4 confirmed the same pay interval with an oil-water contact 92 feet deeper than the initial well.
The third appraisal well, the PL 19-3-5, was drilled to a total depth of 6,094 feet and encountered a gross pay interval of 850 feet, with approximately 260 feet of net pay in the Minghuazhen and Guantao formations. The well was drilled in a previously untested fault block on the western flank of the PL 19-3 field, nearly two miles from the PL 19-3-1 discovery well.
"The PL 19-3-5 well results were consistent with our pre-drill interpretation and establish the presence of oil on the field's western flank fault block," said Mike Coffelt, vice president of worldwide exploration. "This will add to the 400 million-barrel reserve estimate we released earlier.
"We continue to be encouraged by the results of our appraisal program."
Jump Starting a Play
Phillips plans to drill two additional appraisal wells on the PL 19-3 field by the first quarter of this year to delineate the productive area of the southern portion of this large feature.
The firm currently is evaluating the commercial potential of the discovery and a team is pursuing various potential development scenarios.
The company is considering acquiring additional 3-D seismic over the PL 19-3 development area to better image through the shallow gas cloud. Part of the structure is masked by the gas. In addition, Phillips is even considering a 4-D seismic survey over this field.
The company isn't sitting on its laurels. Following the completion of the appraisal program, Phillips will move its two rigs and drill four new exploration wells on other unexplored features in the block.
"We have a large number of prospects -- that's one of the major reasons we continue to be attracted to the region," Patton said. "Finding a commercial foothold that will allow us to drill other prospects is what we've been striving for.
"This first commercial field is the key to jump starting the entire region."