Formation Evaluation Challenge Final

7/28/2019 Formation Evaluation Challenge Final

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OMV Exploration & Production

Move & More.

Meeting the Formation Evaluation ChallengeA View From Down UnderPetrom, 2007


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OMV-A, Colin Higgins, April 10, 2013

The Challenge lower well cost

OMV is entering a new era of reserves growth through both exploration and acquisition.

OMV has layed down a challenge to the drilling division to make dramatic strides forward in time/cost

efficiency and especially to reduce the real cost of drill bit led growth.

Evaluation is an integral part of the drilling process and some of the greatest gains can be made in this

area.

Drilling and Evaluation 1 goal 1 solution!


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So what has been happening down under?

Australia lies at the forefront of drilling and evaluation technology - despite its location at the end of theEarth!

Reasons include:

Very large projects.

Expensive! >300,000per day to operate and support a single MODU. A spend money to save time

economic environment.

One very long term operation 8 years drilling 25-35 wells a year the regional benchmark.

Implemented many new technologies and methods with all the major service companies.


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Appropriate technology!


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Finding an appropriate formula

US independent Apache Energy found an appropriate formula and became the regional benchmark. In 2003 were able to move onto location, drill to 2400 m, evaluate, P&A and move off in 5 days for 1.22

MM.

Wells were operated for Woodside for 50% of their technical limit!

Highly effective drilled a well a week for weeks on end.

This changed the face of offshore exploration in the region.

Much of the success came from evaluation strategies that fit seamlessly with the drilling objectives.


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OMV Floater Operations


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OMV moves close to the D&E benchmark

OMV Australia has adopted much of the philosophy and applied it on Audacious 3 and 4, Katandra-1A,Ponderosa-1A, Maier-1, Lauda-1 and Lauda-2 with great success over the last 2 years.

Audacious-4 was sidetracked from Audacious-3 for an incremental cost of only 1MM and tested a

completely separate fault block.

Katandra-1A was drilled in December 2004 for 2.57MM 35% below the previous benchmark (Capricious-

1).

Maier-1 was drilled in April 2005 for 3.67MM including >3 days downtime due to a cyclone evacuation

eclipsing the previous best offset well by 25%.


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Principle 1 - Plan for exploration failure with contingency for success!

The offset wells in a basin tell us the probability of success of any additional well.

Planning for exploration success builds in cost and risk through coring and testing provision, wireline

runs etc.

Basin wide geological success statistic is rarely above 25% and commercial success is rarely above 10%!

In a success case, contingencies include Gucci runs such as wireline formation tester, rotary sidewall

coring, image log acquisition, sidetracking to core.

Collect an exhaustive data set in appraisal wells.


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DSTs should be to prove commerciality only


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Principal 2 - Drill em and Fill em

Offshore exploration wells should almost always be plugged and abandoned even if a discovery seemscommercial.

P&A of suspended wells costs close to the original well cost.

Suspended exploration wells are invariably sub-optimally located with respect to development drilling and

have to be P&Ad later.

DSTs offshore are cased hole and with an entire boatload of deck equipment and 20 to 30 personnel.

They take 4 to 10 days and cost 1.53-3MM with high HSEQ risk.

Oil (and often gas) development wells are mostly horizontal and the value of a DST in a vertical

exploration well is very limited.


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Dont even retain a DST option in exploration wells

Retaining DST capability costs .75 MM per well to have production casing, a test package and personnel

on standby.

Once we leave the DST and suspend/produce options behind, we start to capture real savings.

Exploration wells should never be assigned capital value.

Concentrate on limiting the liability!

Rather than attempting to prove reserves we can work to systematically prove no commerciality.

Obtain the answers we NEED rather than the answers we WANT.


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DWL - We are not constructing wells butacquiring log data along lines in 3D space!


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Principle 3 DWL - Drilling While Logging

The primary activity is logging with drilling a secondary process to facilitate this.

The well itself has no value or real significance.

Basic GR-RES-NEUT-DENS-SONIC-CAL made whilst drilling.

LWD data can more than adequately replace wireline. We have learned to understand and celebrate the

differences in the measurements.

Used on over 150 high profile wells over 9 years with NO significant data issues. JV partners prefer LWD!

This approach fits with a minimalist well design, further reducing well cost.


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This old oblate spheroid can still seem big!


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Principle 4 Real time data all around the planet

In DWL type wells, quad combo LWD, gas, shows and drilling data are all available within minutes.

This data is made available to all stakeholders all over the globe in real time via a secure website.

Petrophysical analysis is available to all before reaching TD.

The forward evaluation programme including a request for permission to P&A is forwarded to the

stakeholders for their approval.


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Principle 5 - Coring not on the way down

High rig cost means we core only the rock we need.

Coring on the way down is not considered in exploration wells.

Rotary sidewall cores offer an alternative for rock properties.

Coring contingency is retained.

High resolution image logging tools are used extensively.

When we do take whole core, it requires planning as a non-standard operation to ensure safety and

quality rock at the lab.


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On site analysis can add value

The high cost environment means we sometimes need instant answers on board.

Palynological preparation and analysis.

Onsite core analysis.

Pump through tester samples are verified and have field analysis to ensure valid samples have been

obtained prior to abandonment. Onsite analysis is avoided wherever possible as we try to minimise headcount, non-standard operations

and personnel movements for HSEQ reasons.


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Principle-6 Win-win service contracts

The right services performed well save us time, money and reduce risk.

Incentivate contractors to add value in a number of innovative and highly effective ways.

Works for evaluation services and all the drilling services.

Genuine and open bonus system is one of the most powerful tools we have.

Pay a bonus - as it means our contractor saved us money.

Providers should not benefit from their mistakes (sharing the pain).

Contractors goals become aligned with our own.

Bonus increased by introducing new technologies.


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How should these incentives work?

KPIs are limited for evaluation services TIME/DATA DELIVERY.

Safety cannot be included as a KPI at it is NOT NEGOTIABLE.

Develop Agreed Time benchmarking from offset data.

Data Delivery can be assessed upon quality and timeliness.

Gains are substantial and ongoing as revised procedures are adopted

We continue to pay bonus and not move the goalposts (a common mistake).

Once we have incentivated aligned contractors - keep them!


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So how can we keep our contractors?

Put long term programmes together continuous improvement.

Evergreen contracts that do not have to be re-tendered or re-negotiated frequently.

Value the relationship and be sympathetic to their needs.

Consider our requirements - demand only what we need.

Provide additional training to contractors personnel.

Try to understand their business and encourage them to understand ours.

Dont forget that relationships should be fun!


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Principle 7 Celebrate the outcome

Leave no residual doubt about the outcome then gain abandonment approvals.

Set abandonment plugs and move off the location.

A highly efficient, safe, cheap unambiguous dryhole should be highly valued from a drilling and

evaluation standpoint and celebrated within the company/joint venture.

Celebrations for commercial successes tend to take care of themselves.

Capture and adopt best practices as well as the lessons learned and use continuous improvement

wherever possible.


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Is planning important?

Planning is an unnatural process;it is much more fun to do something.The nicest thing about not planningIs that failure comes as a completesurprise, rather than being precededby a period of worry and depression.Sir John Harvey-Jones


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What might be appropriate elsewhere? Slimhole coring log the core rather than the hole and actually measure rock properties! An effective

approach in harder rocks. Air drilling/under balanced drilling the perfect evaluation tool!

Logging whilst tripping (recorded mode).

Through the bit logging.

Specialist sidetrack coring tools.

Minimalist mudlogging service eg no chromatograph in development wells where the gas composition is

known.

Multiple geological sidetracks to new targets may be cost effective, have a small footprint and low HSEQ

risk.

Consider options that support early field development.

Optimise programmes to fit local logistical constraints.


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LWD $ Vs Wireline $The financial equation is not simply as often stated:

Wireline supercombo time (6-12 hours) < additional cost for LWD =WL

The real gains of an LWD based evaluation are much greater:

Early quick informed decisions

Planning rest of the evaluation from a position of knowledge

Unambiguous saturation measurements in uninvaded rock

Repeat passes for invasion/perm, helps pump through sampling

Near realtime petrophysics

Near realtime synthetic seismogram for bit on seismic

Improved mudlog interpretation (all answers no questions)

Inter-well correlations become easy and obvious.

In a dryhole case, the well can be abandoned immediately.

These savings tend to be in $ millions!

Formation Evaluation Challenge Final

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