Making haste slowly

24.06.2016
One of Norway’s veteran oil fields, Valhall, faces something of a mid-life crisis as high costs and low oil prices continue to dog the industry. Operator BP is working to meet the challenge.

| Bjørn Rasen and Monica Larsen (photos)

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Just before NCS went to press, it was announced that BP Norge and Det Norske are to merge.

JJan Norheim, managing director of BP Norge.

Getting more out.
Jan Norheim, managing director of BP Norge, does not think a recovery factor of 30 per cent for Valhall is satisfactory. “I’m unlikely to be involved with Valhall 30 years from now. But I’d undoubtedly be disappointed and surprised if we ultimately have to leave more than 50 per cent of the oil behind.”

 

Investment and timetables on the NCS are being reassessed and delayed. What impact does this have on field development? Is there really a standstill which could hit long-term value creation?

Valhall ranks as one of the most demanding fields in the North Sea. Oil first flowed from its chalk reservoirs on 2 October 1982, seven years after a well found them to be commercial.

The exploration drillers originally struck oil in Valhall as early as 1969 with well 2/11-1, but this discovery did not appear to be worth developing at the time.

More years were to pass before Waage Drill I encountered a thick oil zone with the eighth exploration well – 2/8-6.

The soft reservoir chalk has created major challenges over the years by causing many wells to collapse – and poses the eternal dilemma which makes the field special.

They say producing Valhall is like squeezing oil out of toothpaste, since the rock is even softer than the nearby Ekofisk chalk reservoirs.

Various parts of the field have contracted by 10-16 metres since production began, while the overlying seabed itself has subsided almost seven metres.

These problems mean daily output cannot match the levels achieved from the sandstone reservoirs further north in the Norwegian North Sea, so that recovering the oil takes longer.

To reach the main reservoir, a well must penetrate eight different layers of rock formations – and, once through these, a sidetrack is sometimes required for technical reservoir reasons.

The refrain in BP is that those who have worked on this demanding field are well qualified to participate in most offshore projects – regardless of their location.

And many of them must have had excellent qualifications, because Valhall’s estimated producing life has been extended by 40 years to 2050.

A wide range of technological measures, new installations and – not least – additional wells will make this longer life possible. Probably.

Challenges

Because Jan Norheim, managing director of BP Norge, has challenges enough. When we met in the spring, oil prices were in the USD 30s per barrel.

Last year, the drilling campaign on Valhall was suspended. “It was too expensive to proceed with and wasn’t good enough,” Norheim admits.

He is now charged with downsizing the organisation even further, in line with the rest of the industry. But great efforts are being made to give Valhall its planned life extension.

Billions of kroner have already been devoted to replacing old installations, with more than NOK 73 billion in money of the day invested up to 2015. And over NOK 12.5 billion in 2015 value is still due to be spent.

“Putting a stop to drilling in February 2015 was a dramatic decision,” Norheim says. “But we had to take a break in order to improve.”

That affected some 300 people who were left without work and perhaps jobs. Instead, 12 engineers were given a budget of NOK 250 million over 18 months to come up with solutions to ensure good production wells.

Well costs have now been cut and expertise enhanced, and BP believes that drilling can be done for half the cost. Work is due to resume in the first quarter of 2017.

Norheim and BP have acquired fresh insights. The new wells will be less prone to collapse than before, and are calculated to extend Valhall’s producing life from 15 to 24 years. That represents a lot of money saved.

The field currently has 45 producers flowing roughly 45 000 barrels per day. That compares with a peak output of almost 140 000 daily barrels. Set many years ago, this record is unlikely to be overturned.


Plugging

BP will not only be drilling new Valhall wells, but also plugging 31 redundant boreholes. That is mandatory under the licence terms and means additional expense.

Permanently plugging and abandoning a well represents a big job, which is intended leave it protected against future leakages.

The company calculated 18 months ago that its plugging programme would take 10 years. But Norheim reports that detailed studies, lessons from well work and seismic data in recent years have reduced that to five-six years – at significantly lower cost.

“Instead of isolating five of the eight zones the wells pass through, we now feel three-four may be enough,” says Norheim. He compares that with Ekofisk, where plugging isolates two zones.

 

Exceeded

Despite persisting reservoir and well challenges on Valhall since it came on stream, oil volumes delivered have far exceeded the original expectations.

The field was forecast in 1982 to stay on stream for about 20 years, and yield 247 million barrels of oil. Some 912 million barrels of oil equivalent have been produced so far, including the Hod satellite.

Valhall output will pass a billion barrels of oil equivalent towards the end of 2016 – placing it among the biggest fields on the NCS.

“We have plans for producing a further 250 million barrels from the field,” says Norheim. “In addition, projects under way for the west flank will mean 250 million more can be recovered.”

BP is looking at ways of maintaining reservoir pressure, including the possibility that “subsidence energy” could influence future production.

Another issue is how possible water injection on the flanks might improve recovery on Valhall, where a permanent seabed seismic array can help to identify new well targets.

The latter has allowed the operator to conduct repeated three-dimensional surveys – known as four-dimensional seismic – no less than 18 times over the past 13 years.

Valhall is the world’s first offshore field to benefit from an installation of this kind, which gives geologists a good picture of how water and oil are moving in the reservoirs over time.

That in turn makes it easier to determine new well targets – although use of the array has not been without its problems. A gas cloud over the reservoirs distorts the seismic images so that their interpretation becomes more demanding.

Norheim reports that this form of 4-D seismic is now outdated, and that BP adopted a new technology in 2015 based on mobile seabed signal units.

 

Recovery

Norheim identifies two main challenges faced by BP in seeking to improve recovery on Valhall when oil prices have been “too low” for Valhall to show a profit over the past two years.

So prices must improve [they have in fact since risen more than USD 15 per barrel since this interview], while BP is turning new stones in the hunt for more efficient operation.

“Even though we’re taking a long-term view on Valhall, the technology we want must be adopted in good time,” Norheim says. “The most important requirement is better drilling methods, which we all believe in and are hoping for.

“We’re also continuing work on simulation technology in order to enhance our understanding of the reservoir. Improving recovery by one-two per cent would represent substantial value.”

Asked whether Valhall will still be producing oil in 2050, Norheim admits that he does not know. “But if you could tell me the oil price ...”

While noting that Valhall is exposed to price fluctuations, he also recognises that the present recovery factor of 30 per cent is too low.

“I’m unlikely to be involved with Valhall 30 years from now. But I’d undoubtedly be disappointed and surprised if we ultimately have to leave more than 50 per cent of the oil behind.”

 

"Improving recovery by one-two per cent would represent substantial value."

 

Already a museum piece

How the Valhall field will appear when the old installations have been removed.

New look.
How the Valhall field will appear when the old installations have been removed.
(Photo: BP)

 

Exactly 33 years and two months after Valhall came on stream, the North Sea field became a slice of national industrial heritage at the Norwegian Petroleum Museum (NPM) in Stavanger. And it is expected to continue producing for at least another 35 years.

This history project took three years to complete under the museum’s leadership. The National Library of Norway and the Norwegian Oil and Gas Archive were important contributors.

So mediaeval wooden stave churches in east Norwegian valleys are not the only objects which can become part of the country’s cultural heritage.

That was emphasised by Aslak Sira Myhre, head of the National Library, when he conducted the official launch of the comprehensive Valhall industrial heritage website.

This took place during an event at the NPM on 2 December 2015. The site covers everything from technical drawings to radio and TV broadcasts about the field.

Large parts of the population lack a relationship with the Norwegian oil industry “because they don’t see it physically and most people have never been on an offshore platform,” Myhre said.

Valhall is known for its soft chalk reservoirs (often described as being like toothpaste) and the famous attempt in the 1980s to keep fractures in the rock open using glass marbles.

Jan Norheim, managing director of operator BP, notes that “everyone” in the company has to serve on Valhall. “Then they know they’ve worked with the most difficult field” and are well qualified for their next BP project.

Asked what he thinks about becoming part of a museum exhibit when so much work and production remains on the field, he says it feels “strange”.

Valhall is the fourth industrial heritage project at the NPM, following Ekofisk, Frigg and Statfjord. The fifth will be Draugen, and the process of documenting this Norwegian Sea field is in full swing.

 

Eventful past. (Photo: Guri Dahl/BP)

Eventful past.
US oil company Amoco developed and operated Valhall until BP took over in 1999.
(Photo: Guri Dahl/BP)

 

Read more about Valhall’s incredible history at the NPM:
http://www.kulturminne-valhall.no/eng/

 

On the grid

Profitable. BP has found its solution with power from shore to be more profitable than gas turbines installed offshore.

Profitable.
BP has found its solution with power from shore to be more profitable than gas turbines installed offshore.

 

Valhall turned much quieter in January 2013, when the noisy old gas turbines were switched off and the field became the first on the NCS to be powered solely via a 294-kilometre cable from land.

This link was established in connection with a general enhancement of the offshore facilities. A new production and hotel (Valhall PH) platform allowed production equipment to be modernised and upgraded for sustaining operations through to 2050.

BP had already assessed opportunities for an electricity supply network connecting certain offshore fields through the North Sea power projects in 2000.

Together with ConocoPhillips, the company and its partners looked at supplying power from shore to the Ekofisk area, Valhall, Ula and various nearby UK fields.

The different concepts were ultimately shelved, in part because existing gas turbines could be modernised and the solution proved too costly. BP resolved to go it alone on Valhall.

“We learnt from this, reviewed the project, and found it profitable,” explains Jan Norheim, managing director of BP Norge. “We’ve also seen that electricity prices have fallen more than the cost of gas.”

Including a transformer station at Lista, Norway’s southernmost point, the solution cost more than putting in new turbines. But operating costs are lower, and Norheim says that regularity has been up to expectations.