Kashagan Tops Finds for the Year

Some Surprises in a Ho-Hum 2001

It wasn't the best of times.

It wasn't the worst of times.

In terms of exploration success, the year 2001 may be remembered as a politely stifled yawn.

But perception isn't always everyone's reality.

Ken White, for one, sees plenty of promise from the past 12 months.

White, London-based senior editor of the International Oil Letter, has gathered a list of candidates for most significant find of the year. He said suggestions came from the regional editors of the newsletter, published by IHS Energy Group.

And for 2001, White ended up with 10 pages of nominees for Well of the Year.

"The list is quite extensive," he said, "and certainly bigger than I thought it would be."

White's list includes wells that showed more promise than performance, however. "We're not trying to determine if a well's commercial or if it's a record-breaker," he said.

So his candidates for most important find list several wells that fell short of commercial production, but indicated the potential for future developments.

Other wells gave confirmation to previous discoveries. Even the impressive Kashagan West 1 well in Kazakhstan added validity to the scope of the earlier Kashagan East find.

What's missing from the list is an abundance of large-reservoir discoveries with immediate impact. Despite a fair number of successes, 2001 didn't produce a significant number of significant producers.

"It hasn't been one of those years," White conceded. "But it hasn't been bad, either."

Kazakhstan's Super-Giant

The International Oil Letter list of major 2001 finds excludes North American wells, because those are already widely reported and thoroughly documented, White said.

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It wasn't the best of times.

It wasn't the worst of times.

In terms of exploration success, the year 2001 may be remembered as a politely stifled yawn.

But perception isn't always everyone's reality.

Ken White, for one, sees plenty of promise from the past 12 months.

White, London-based senior editor of the International Oil Letter, has gathered a list of candidates for most significant find of the year. He said suggestions came from the regional editors of the newsletter, published by IHS Energy Group.

And for 2001, White ended up with 10 pages of nominees for Well of the Year.

"The list is quite extensive," he said, "and certainly bigger than I thought it would be."

White's list includes wells that showed more promise than performance, however. "We're not trying to determine if a well's commercial or if it's a record-breaker," he said.

So his candidates for most important find list several wells that fell short of commercial production, but indicated the potential for future developments.

Other wells gave confirmation to previous discoveries. Even the impressive Kashagan West 1 well in Kazakhstan added validity to the scope of the earlier Kashagan East find.

What's missing from the list is an abundance of large-reservoir discoveries with immediate impact. Despite a fair number of successes, 2001 didn't produce a significant number of significant producers.

"It hasn't been one of those years," White conceded. "But it hasn't been bad, either."

Kazakhstan's Super-Giant

The International Oil Letter list of major 2001 finds excludes North American wells, because those are already widely reported and thoroughly documented, White said.

And he warns that results from the former Soviet republics may not be "fully representative," for the opposite reason: reliable reporting and documentation are far from assured.

But one of the biggest stories of the year came out of Kazakhstan, where the Kashagan West well confirmed what could be a super-giant structure under the North Caspian Sea.

Offshore Kazakhstan International Operating Company (OKIOC) spudded the Kashagan West in October 2000, about 40 kilometers west of the field's discovery well.

In May 2001, OKIOC reported that the new find had reached bottom-hole depth of 16,200 feet and had tested up to 3,400 barrels of oil per day and 7.6 million cubic feet of gas per day on choke.

Kashagan oil is hosted within a late Paleozoic — late Devonian to Carboniferous — isolated carbonate platform sealed by Permian shale and evaporite, according to Willam G. Zempolich, an OKIOC geologist and a 2001-2002 AAPG Distinguished Lecturer.

The reservoir lies beneath thick and variable salt, and is located 50-100 kilometers from neighboring onshore wells.

Drilling for Caspian sub-salt, Paleozoic-carbonate reservoirs presents numerous challenges, Zempolich said. The goal is to penetrate reservoirs at depths from four-five kilometers that are sealed by shale and carbonate lithologies, and that are likely to contain karstified intervals and overpressured, H2S-rich hydrocarbons.

Ultimate recoverable reserves in Kashagan may eclipse those of Kazakhstan's Tengiz field.

"The potential there is enormous," White noted.

Extreme conditions, however, make development problematic. Limited water depths require the use of shallow-draft ships. Structures must be protected from the pressure of winter sheet-ice. Special environmental measures are needed because Kashagan overlaps a marine preserve.

ENI serves as operator in the project for industry partners BG, BP, ExxonMobil, Inpex, Phillips Petroleum, Shell, Statoil and TotalFinaElf.

The recent opening of the Caspian Pipeline Consortium (CPC) pipeline from Kazakhstan to a port on the Black Sea guarantees transportation for the region's oil.

Backers put more than $265 billion into the pipeline project, a 1,580-kilometer connection that links the Tengiz field to a loading facility in the Russian port of Anapa.

Initial pipeline capacity is 600,000 barrels per day, with a potential future capacity of 1.5 million barrels per day.

Ukraine reported the first discovery on the Ukrainian Black Sea shelf with the Olimpiyskaya-1, in waters disputed with Romania. In Russia, the Pakhancheskaya-1 wildcat in the Barents Sea found Silurian oil, but test rates were not disclosed.

UK: An 'Astonishing' Discovery

One of the year's most startling discoveries came on Block 20/6 in the United Kingdom section of the North Sea, an area long recognized for its productive capacity.

BG Group served as operator in drilling the 20/6-3 well, a 300 million-barrel discovery, on behalf of license holder PanCanadian Energy, Intrepid Energy North Sea Ltd. and Edinburgh Oil and Gas. White called the Buzzard Prospect find a company-maker for Edinburgh Oil, which has a 5 percent interest.

"To find a 300 million (barrel) discovery after all these years in the North Sea, and almost 20 years after drilling the last discovery there, is quite astonishing," he said.

In addition to reopening a mature area, the well came in larger than life-size, according to White.

"We haven't had a discovery like that in 15 years," he said. "They tend to be in the order of 15-100 million."

To the north, Amerada Hess found promise with the 6004/16a-1 well in Faeroe Islands waters. Initial reports indicated a 170-meter hydrocarbon column, and appraisal wells will be drilled in 2002. The discovery was a first in the Faeroes.

DONG E&P also holds an interest in the well, with Atlantic Petroleum a minor participant. BG is part of the Faeroes Partnership but was not involved in the discovery.

Around the World

Other notable discoveries from around the world in 2001 include:

  • The Shell-ExxonMobil company Nederlandse Aardolie Maatschappij (NAM) reported a major gas find 60 kilometers northwest of Den Helder. With a 200-meter gas column, the K/15-16 discovery may represent NAM's largest North Sea well in 15 years.

  • In Africa, two non-commercial discovery wells showed good prospects for future exploration. The Semba-1 in Angola produced a substantial oil flow in the Benguela sub-basin. And offshore Mauritania, the Chinguetti-1 established a new Miocene sands oil play.

  • Petroleum Development Oman (PDO) started the year right with the early announcement of a major gas discovery in northern Oman. The Kauther-1, at 4,200-meter depth, was regarded as PDO's biggest find in six years.

    Better still, PDO soon followed with news of an even bigger gas discovery. The Khazzan-1 found sandstone pay in an area west of the giant Saih Rawl field. At 4,500-meters depth, the well indicated potential for production from deeper layers.

    Although testing continued, early estimates put combined reserves at three-five trillion cubic feet. Both wells came as part of the kingdom's program to define its natural gas resource base.

  • Iran claimed the title for biggest new gas well in the region, however. The Daryaie-1 encountered a gas layer reportedly 560-meters thick, with recoverable reserves in the reservoir of 3.6 trillion cubic feet.

  • China National Offshore Oil Company (CNOOC) announced a 1,500-meter-depth gas discovery with its Liuhua 19-3-1 wildcat.

    CNOOC tested several intervals and reported the most prolific at 1.7 million cubic feet per day on choke.

    Liuhua 19-3 is in the eastern sector of the South China Sea, about 70 kilometers from the Liuhua 11-1 oilfield and some 220 kilometers south of Hong Kong.

    PetroChina recorded another gas discovery in the Seibei Field area of northwestern China. The Yikeyawuru structure test reportedly flowed about 1.23 million cubic feet per day.

    Seibei sits in the Qaidam Basin, believed to contain as much as 18 trillion cubic feet of gas reserves. A recently opened pipeline connects the basin's gas fields with provincial capital Xining and other cities.

    Commenting on a string of 2001 Chinese discoveries, White said, "Certainly, China has got quite a big representation. But what's missing is the foreign operators. And there may be lots of reasons for that."

  • Origin Energy added to a list of gas strikes offshore Australia in the Otway Basin. Its Thylacine-1 found a 281-meter gas column in Waarre sandstone, in a structure that could hold 600 billion to one trillion cubic feet of reserves.

  • In Argentina, the Macueta 1001 1b(1H) encountered a significant gas reservoir. The find could prove an added 2- 3 trillion cubic feet of gas reserves adjoining acreage where a possible three trillion cubic feet already has been booked.

  • A BP subsidiary found gas in Brazil's Foz do Amazonas Basin with the 1-BP-2-APS. More importantly, the well indicated oil generation might be taking place in the area. A 2,500-square-kilometer block in the basin was earlier licensed to BP, Petrobras, Esso Brasil and TotalFinaElf.

    Offshore Brazil, Petrobras discovered extra-light oil in the Campos Basin, Espirito Santo State. The 1-BRSA-18-ESS was drilled in 2,243-meters of water.

    Brazil remains a hot spot for drilling activity and will continue to be active in 2002, "which is of course a natural consequence of the licensing rounds that took place a couple of years ago," White said.

With the industry going full-bore, the year 2001 shaped up as good to very good, but not great. In an optimistic view, White sees plenty of reasons for continued capital investment in exploration.

"I think the Caspian region will yield some very good wells next year," he said. "The CPC pipeline is up now, and that's a very good thing.

"I can't see anywhere waning. When you get a discovery like our 300 million-barrel discovery in the North Sea, it's bound to make the people in the boardrooms sit up and take notice."

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