Drilling optimization offshore Sarawak

July 16, 2014

The Doo Sung rig was contracted in and brought to Shell standards to deliver the campaign. Doo Sung is Korea’s only semi- submersible drilling unit, built in 1984 by Daewoo Shipbuilding Co., and owned by KNOC. Photo from KNOC.

Shell reduced its Malaysian exploration well costs by 50% to make smaller and more distributed deposits of oil and gas more economic. Elaine Maslin found out more.

In 2012, Shell Malaysia E&P signed a new production sharing contract (PSC) with PETRONAS to explore for oil and gas off Sarawak, Borneo Island, in the South China Sea.

The SK319 PSC was the trigger for an initial three-year exploration program to explore 2727sq km within block SK319, in Central Luconia, offshore Sarawak.

The challenge in the area was to exploit smaller and more distributed volumes of oil and gas, mostly stored in carbonate pinnacles in Central Luconia, in the Sarawak basin, affordably and fast, says operator, Shell, via its subsidiary Sarawak Shell Berhad (with 50% stake in SK319, alongside PETRONAS Carigali and SapuraKencana, each with 25% interest).

Shell started exploring in the region in the 1960s, building infrastructure and hubs, into which new smaller finds could be tied. But to successfully find the smaller deposits, Shell decided to use statistics-based drilling, as employed in land drilling, which meant reduc- ing well costs. The firm also used new technologies, including pressurized mud cap drilling, developed for carbonates in Malaysia, and casing while drilling technology. Additionally, it found better ways to collaborate internally and with contractors under a campaign approach.

The company is now about halfway through the campaign, which will be comprised of, in total, about 15 wells. The first five wells were drilled over five months, starting December 2012, using Korea National Oil Company’s Doo Sung semi- submersible drilling rig. The second, five-well campaign started in March this year, using a jackup drilling rig.

“Essentially, we had to drill low-cost exploration wells,” says Ivan Tan, who until recently was general man- ager, well operations for Shell Malaysia. “Shell has been oper- ating in Malaysia for more than 100 years. In this exploration campaign, we were targeting the remaining reserves that existed in smaller deposits in our carbonate fields. To do this, we had to find novel and innovative ways to drill the wells at a lower cost.”

The Central Luconia reservoirs are mostly carbonate and what is left are smaller and more distributed volumes.

About 15-20 targets were identified, but by conventional methods were deemed uneconomic or, as with seismic, not worth the cost due to their sizes.

“The strategy was to drill as many wells into these distributed pinnacles,” Tan says. “But to do that we had to reduce costs. The target was simple: to cut the well costs by 50%.”

The concept was initiated in about 2010, and, after signing the PSC agree- ment in 2012, the first tranche of exploration wells was drilled in late 2012.

“There were a number of things that underpinned the whole process,” Tan said. “Good prospect selection and well design, contracting, and procurement strategies, and taking a campaign approach to the program were important elements in the campaign. Critical success factors included a lot of early integration, especially between the subsurface and the wells teams, and sitting everyone around the same table, drawing on experience together.”

Contractors were brought in early and integrated into the team. In addition, the specialist teams were tasked with making operations simpler. The subsurface team, for example, only asked the wells team to acquire data that was necessary for the evaluation of the well.

This campaign approach allowed the teams to narrow their scope and follow fit-for- purpose standardized well designs, while questioning conventional drilling approaches. “We allowed the wells team to design a well that was fit for purpose,” Tan says. “Everything was challenged and we did not accept the norm. Every conventional drilling approach was challenged and novel well designs devised.”

Two key technologies were deployed— pressurized mud cap drilling, which had been developed for carbonates in Malaysia, and casing while drilling technology (CWD).

“While both have been around in the industry for a while, we combined the two and made it work for us,” Tan said.

The CWD is used first, using a 9-5/8” casing size, which enabled Shell to drill and case at the same time. The well concepts on the campaign were designed around Shell’s CWD concept.

During the campaign that began in 2012, the team set a record for the longest casing while drilling job. In May 2013, the 9-5/8” casing was drilled to 6255ft measured depth, or 6170ft true vertical depth subsea.

“It may not be now, but at the time we knew we were leading the pack in casing while drilling,” Tan said.

1Q 2014 results. Photo from Shell. 

Once the casing was in place, Shell then used pressurized mud cap drilling. This is a variation of managed pressurized drilling, that involves drilling with no returns to surface and where an annulus fluid column, assisted by surface pressure, is maintained above a formation that is capable of accepting fluid and cuttings.

Tan explains that in some formations Karst losses can be encountered—a risk associated with carbonate reservoirs. This can result in drilling fluids dropping out into the reservoir, creating a risk that hydrocarbons will escape. In the past, as soon as drilling teams suspect they have encountered Karst losses, they have to abandon the well and try to drill another nearby. Using a mud cap enables the drilling team to keep a cap of mud in place so hydrocarbons don’t escape during drilling. Getting the right balance of pressure is key.

The program’s campaign approach, with a minimum of 5-6 wells in each campaign, also meant learnings could be incorporated. “We saw the learn- ing come through in 2-3 wells, which meant we could build on success after success, using the same team and same contractors and equipment,” Tan said. “So we had economies of scale and practice makes perfect.”

There was also a “boots on the ground” ethos, to safely manage the operation and a risk-sharing ethos to contracts, so goals were aligned.

Tan says the 50% cost reduction was achieved in the first campaign. The firm has assessed its costs by comparing benchmark data held by Rushmore Reviews. This data was highlighted by Shell at its management team day (see graphic). This put Shell Malaysia in the best in class category (top 5%), based on the first six wells drilled in the campaign.

“These are probably the cheapest subsea exploration wells ever drilled by an operator worldwide on a normalized basis, according to Rushmore data,” Tan said.

As the PSC operator to PETRONAS, Shell is the largest gas producer in Malaysia, accounting for 60% of the country’s gas production. Some 90% of the gas produced is earmarked for the PETRONAS LNG complex in Bintulu.