words on Oil & Gas issues has emboldened me to return to a few of my
favorite offshore issues.
There
will be two articles – the first on our most neglected sector, offshore natural
gas development; the second on oil issues.
The
natural gas aspect seems to be largely absent from the recent “Town Hall”
efforts in support of the oil & gas industry’s continued presence and vigor
in our offshore area.
These
comments are meant to “complement those efforts” in the old days I would have
said “demonstrate they are missing the boat” – but that was then and this is
now.
Indeed,
the first draft of this piece included a long list of unfortunate aspects of
the natural gas debate – but in the interest of the common cause it ended up on
the cutting room floor.
we seem to have arrived at a curious point of inflection, one where our
provincial interests, those of the industry and those of the Planet plainly
coincide.
So,
let’s get the main proposition on the table right away:
Developing
the Natural Gas resources of the Grand Banks now is in the best interests of
the world community as it would make a significant contribution to the fight
against climate change by helping to back China and India off coal at the most important time – ie over the next 30 years before Temperature
Liftoff is irreversible.
Of
course, there are some (maybe many) who will still say “Let’s talk first about
making money; I’m running a business ?”
Turns
out natural gas is a winner economically as well, particularly if, in foregoing
some of our royalties, we see increased benefits in terms of climate change,
employment, local R&D, a strengthened energy sector and an enhanced
offshore service sector.
The
natural gas strategy I propose follows, in some respect, Norway’s recent
informal, industry led, re-orientation of its offshore oil & gas sector, as
succinctly stated last fall by Rystad Energy’s senior exploration analyst
Palzor Shenga as quoted in Offshore Engineer on November 29,2019:
“The
most popular drilling strategy for energy companies in Norway continues to
center on infrastructure-led exploration in mature areas of the North Sea and
the Norwegian Sea. This approach has been delivering consistent results and
generating a gradual increase in discovered resources from year to year,
whereas frontier drilling campaigns in waters north of the Arctic Circle have
largely led to disappointment in recent years.”
This
is not to say that the current Equinor led efforts to open up the deep water
Flemish Pass Basin for oil is ill advised – I’ll get to that in my second
article – just to say that it is always best not to put all one’s eggs in the
one basket.
As
you will see, Natural Gas in the shallow water Jean d’Arc Basin can likewise
stand on it’s own two feet.
Now,
I am going to make a number of assumptions, some of which in “the old days”
may, no, would, have sounded naïve but which in these troubled times may
actually be seen as plausible.
In
the management of publicly owned oil and gas resources, there has always been a
tension between how government saw certain things and how the risk-taking
investor oil companies saw the same issue. It was true in Texas starting off;
it was true in Alberta right up to Lougheed’s days; and it was certainly true
here in Moores’ and Peckford’s days.
Apart
from the division of the revenue pie, the public goal of preventing “waste” is
probably the next big point of contention – governments don’t like to see their
resources, to use a mining industry term, “high graded” (the reservoir poorly
managed; the natural gas left behind, etc); companies on the other hand want
to maximize the rate of return on their investment – it’s an arm wrestle.
A
mutually beneficial and public saleable compromise will require each side to
articulate a concrete set of objectives – a broad subsidies or royalty
reductions ask from industry without the corresponding achievement of a set of
concrete public benefits obvious to the public is a formula for short term gain
for long term pain.
For
me, the most concrete public benefit I’d like to see come out of the current
debate is the creation of an offshore natural gas industry.
I’m
going to start off by showing some CNLOPB numbers for gas “resources” already
discovered in the Jeanne d’Arc Basin.
Gas
Resources are a physical concept not an economic concept you can take to the
bank. Depending on a number of factors, especially the expected price to be
received per cubic foot of gas and the estimated cost of development on a unit
basis, some part of “Resources” can be skidded over into the bankable
“Reserves” column, unlocking the funds to developed them.
it is obvious that to get an offshore natural gas industry going, we’ll
probably need the development of a fair amount of new technology, new ways of
co-operating between companies, new flexible fiscal regimes, new, new, new.
Such
requirements have never stopped the progressive development of Norway’s
industry starting with their famous insistence back in the 1970’s, that it was
possible to extend current pipelaying technology to allow the construction of
an oil pipeline from their first big find (Ekofisk) east across the deep Norwegian Trench to land in Norway
(rather than the company’s preferred and shallower route west to England).
Norway
was not intimidated, but rather galvanized, by the challenge.
Accepting
an English landing for Ekofisk oil in return for the operator providing
petroleum products to Norwegian industry without transport cost, it set to
work.
And
while it took years of research, in 1993 a pipeline across the Trench landed
liquid hydrocarbons from the Sleipner field in Karsto, Norway to help sustain
and expand a local petrochemical facility.
This
sort of determination (and success) has been the hallmark of the Norwegian
offshore industry ever since.
What
I am calling for is a similar concerted effort on everyone’s part to convert
our natural gas “resources” to “reserves”, so that industry can justify a
massive offshore natural gas development – now – or next year – or shortly
after that – not at some always receding “not now I’m busy with oil” time.
Our
economy and the world’s climate problems can’t wait. The window of opportunity
will close leaving us with a very large “energy asset” that will stranded –
perhaps permanently.
So
what have we got by way of gas resources to put on the table so far ?
These are the 11 discovered Jeanne d’Arc Basin
fields with natural gas resources – sometimes in conjunction with oil
accumulations. They are ranked in descending size which may change with
delineation.
FIELD RESOURCES (BCF) (billion
cubic feet)
White
Rose 3,018
Hibernia 2,353
Ballicatters 1,143 *
North
Dana 472
*
Hebron 451
Springdale 239 *
South
Mara 144 *
North
Ben Nevis 116
Terra
Nova 64
North
Amethyst 35
Trave 30 *
Total 8,344 Bcf or 8.344 Tcf (trillion cubic
feet)
*
No Delineation Well
The
fact that there are 5 fields on which no delineation wells have been drilled is
probably significant; resource/reserve numbers generally go up with a step out
well.
Of
course, much of the debate about gas has referred to the resources at our four
producing fields; As I will try to demonstrate below, it is symptomatic that 70
% of our offshore gas resources are associated with the 4 producing fields.
GAS
RESOURCES ASSOCIATED WITH THE 4 PRODUCING FIELDS
White
Rose 3,018
bcf
Hibernia 2,353 bcf
Hebron 451 bcf
Terra
Nova 64
bcf
Total 5,886 bcf
(5.886 Tcf) (70%)
In
fact, all the natural gas found so far has been found “accidentally’ in the
search for oil. Gas has never been a primary target.
A
classic example of an “accidental gas find” was the significant 2010/2011 gas
discovery at Ballicatters roughly half way between Hibernia and White Rose.
As
noted above, the CNLOPB puts the gas resources discovered at the Ballicatters
M-96Z exploration well at 1 Tcf ; this field is owned by Suncor (operator) and
Equinor on a 50:50 basis ; CNLOPB records show that the discovery well reached
a total depth of 4212 m and that it
flowed 1,092,635 M3 / day and 111 m3/day of 43 API oil on Drill Stem Test in
the Avalon Formation.
But
this “surprise” should be of no big surprise when one looks at the burial depth
of the main hydrocarbon source rock in the Jeanne d’ Arc Basin (the Egret
Formation). The bulk of it (especially as you move north) is in the gas window,
not the oil window, meaning – that there could be more energy ready to come out
of the basin in the form of gas than in the form of oil – if we can make the
natural gas production cost and other economic numbers line up.
So
let’s go back to basics.
In
oil & gas exploration, in any given area, the volume, quality and degree of
cooking of your source rocks is all important – and I do mean all.
It
sets the upper limit on what you can expect to find – other factors may cut
that back -like poor porosity or permeability, lack of a trapping mechanism or
no seal – but your source rock and it’s burial history is king.
Basic
point for our purposes is that if you take a shale with a high TOC (total
organic content) and cook at a relatively low temperature, you get oil.
Increase
the temperature and you get wet gas (with lots of heavier ends like propane and
butane).
Increase
the temperature even higher and things really break down and you get near pure
methane.
Really
neglect the BBQ and you end up with a steak too black to eat (graphite – source
rock over-cooked – pack your bags).
And
by and large, the cooking comes mainly from the weight of over lying sediments combined with the increasing geothermal gradient with depth that
has lots of organically rich shale (but not burnt to a crisp).
The
real good news in the Jeanne d’ Arc Basin – we have tremendous quantities of a
rich world class source rock that is in the Goldilocks slot – cooked just right
for gas (and some of it cooked right for oil as well – as per the oil reserves
at Hibernia , Terra Nova, Hebron and White Rose).
The lowly organically rich gas prone
shale – can’t get no respect (this is a core from the Barnett Shale
that turned the gas industry on it’s ear- yes, they get gas out of
this “hard” rock).
Let’s
not skip over these geological basics – in the oil & gas Exploration and
Development business, geology is key.
First
that marvelous oil & gas “kitchen”, the Jeanne d’Arc Basin- home to the
giant Hibernia field et al.
Beneath
a relatively flat seabed in less than 600 feet of water, lies the Jeanne d’ Arc
Basin, the deepest of the many geological basins that dot the Grand Banks – not
all of which have been adequately explored by any means.
It
has a funnel shape deepening to the North and contains more than 20 km of
Mesozoic and Cenozoic sedimentary fill. Down at the bottom, it’s as hot as
hell.
It
covers an area of 4,000 sq miles and extends roughly 150 miles in a N-S
direction and about 50 miles in an EW direction (Enachescu and Fagan, 2004) –
that’s roughly the size of the Avalon peninsula and the presently producing
area can fit in a triangle the size of one with points at Placentia/Carbonear/St Mary’s.
So
stand up folks and salute that geological marvel – the Egret Formation – the
source of our modern day bread and butter – and the Jean d’ Arc Basin
“petroleum system” associated with it.
The
Egret is a 60 million year old Kimmeridgian (Jurassic) aged organically rich
shale dominated unit and is the only proven Hydrocarbon source rock in the Jeanne d’ Arc Basin.
I
am using the big word “Kimmeridgian” because I think we should pay our respects
to the little coastal village of Kimmeridge on the coast of Dorset in England – after the easily accessible “type section” exposed in seaside cliffs; that’s where our Egret shale gets its geologic time name; similar
Kimmeridgian aged source rocks also underpin the massive North Sea oil &
gas play.
Oil
rich rocks on the Jurassic Coast near Kimmeridge, Purbeck, Dorset
Photo
credit: Jurassic Coast Trust
Depending
how deep the Egret was locally buried and cooked and the effectiveness of local
fractures and faults providing local “migration routes”, sometimes it has
produced deposits of:
— oil and almost no gas (Terra Nova)
— massive oil and lots of gas (Hibernia)
— massive gas and some condensate
(Ballicatters)
And
it is expected in the deepest parts of the basin; sometimes it produced deposits
of nothing but dry gas comprised of nearly pure methane – great stuff for
converting to LNG (Liquified Natural Gas).
The
Egret Member occurs all over the Jeanne d’Arc Basin and is buried to a depth
which varies from 3300 m and 5000 m. The quality of the Egret source rock in
industry terms is very high, contain oil-prone type I and II Kerogen. The TOC ranges
from 2% to 12%.
The northern parts of the basin are over mature for oil, giving rise to
gas-prone plays in these areas (eg
perhaps Ballicatters half way between Hibernia and White Rose).
Yes,
we do have a good place to go look for natural gas.
The
Grand Banks natural gas debate over the last 40 years (yes it’s really been
that long) has been dominated by the issue of iceberg scour and it’s potential
impact on gas pipelines to shore. Suffice to say that our failure to solve this
“problem” has effectively “stranded” (destroyed the economic value of) our
massive d’Arc natural gas resources.
As
noted below, there is new technology that might work around that issue. However,
tackling Grand Banks iceberg scour anew should be at the top of the “To Do”
list as part of any new concerted natural gas initiative. Memorial Engineering
Professor Dr. Stephen Bruneau’s long standing concept of “going north to get
down off the Banks and coming in deep through Trinity Bay” in particular
deserves renewed study.
Interestingly
enough, Exxon Mobil has since 2016 been successfully operating it’s GBOOC
(Grand Banks Offshore Optical Cable) system consisting of a vital fiber optic
cable system in a loop from Logy Bay out to the Hibernia and Hebron platforms
and back to Cape Broyle – apparently without interruption by iceberg scour;
these route roughly mimic potential shorter direct gas pipeline routes.
Do
the risk assessments associated with the emplacement of this critical
infrastructure contain new insights re the danger of iceberg scour that can be
applied to natural gas pipelines?
The
broader point is that in the sort of “all out” focus I am advocating, no stone
should be left unturned.
In
particular, we should look carefully at the new kid on the block – FLNG.
FLNG
stands for Floating Liquified Natural Gas and it is, as advertised – a fully
independent combined natural gas treatment and liquification plant in a ship
that negates the need for a pipeline to shore altogether.
This
concept is being increasingly used in SE Asia – calmer waters to be sure but
it’s adaption to our conditions would not be unlike the process whereby US Gulf
of Mexico offshore technology was beefed up for the North Sea and that of the
North Sea beefed up for here.
As
you can see in the sketch below, subsea gas wells feed into a seabed manifold
with a riser feeding the produced gas up to the FLNG for treatment and liquefaction
from where the LNG is fed in turn into an LNG carrier for transport to market –
in our case in say Europe, India or China.
The
Queen of the FLNG fleet is the Shell operated “Prelude” pictured below with a
LNG transfer tanker alongside. Prelude is located in the Browse Basin offshore
northern Australia in 250 m of water 120
miles from shore.
The
Prelude is truly a monster ship (488 m (1600 feet) long) with a 3.6 million
tonne per annum LNG output (plus 1.7 million tonnes of associated Liquified
Petroleum Gas (LPG) and 1.3 million tonnes of condensate).
As
it takes about 1 Tcf of gas in reserves to produce a million tonnes of LNG per
annum for 20 years, Prelude will process
3.6 Tcf of gas into LNG alone, never mind it’s additional liquids
components.
Fortunately,
the FLNG concept is scalable.
Before
exploring the implications of that aspect, let’s look at Shell’s rationale for
making such a move and the issues they faced (in their own press release to
celebrate the cutting of first steel October 18,2012):
“FLNG
will enable the development of gas resources ranging from clusters of smaller
more remote fields to potentially larger fields via multiple facilities where,
for a range of reasons, an onshore development is not viable. This can mean
faster, cheaper, more flexible development and deployment strategies for
resources that were previously uneconomic, or constrained by technical or other
risks.
Many
of the technologies used on the FLNG facility are ones that Shell has used
successfully onshore, but some have been extended or modified for
offshore. The new technologies that
Shell developed for FLNG include:
managing sloshing in LNG tanks; systems for managing the close coupling
between the producing wells and the LNG processing facility; LNG offloading
arms; water intake risers; mooring
systems; and the marinisation of processing equipment such as absorption
columns and the main cryogenic heat exchangers.
All of these technologies have been extensively modelled and tested to
ensure they can operate safely and efficiently under marine conditions.”
Sounds
like something to be explored !
Indeed,
less ambitious SE Asian projects are increasingly focusing on FLNG systems that
are backed by say 1.5 Tcf of gas giving a production of around 1.2 million
tonnes of LNG per year which is at the lower end of your common garden variety
of onshore LNG plants – but still massive, covering hundreds of acres – the
engineering feat of building an LNG plant in a box is not to be underestimated.
So
a good notional target project in our offshore might be the development of one
or more somewhat scaled back Prelude
FLNG’s, each backed by 3 – 4 Tcf in reserves and each producing about 3
million tonnes of LNG per annum (plus some other petroleum liquids depending on
gas richness).
I
dare to go that far; and farther – for what might the long term look like ?
I
have to stop here and admit that this sort of idea poses not just a daring
technical challenge, although it certainly is that. Pulling this off would,
just as critically, depend on an unprecedented degree of co-operation between
the present industry operators and permit holders – that’s absolutely key and
amazingly, not so implausible given the existential threats the oil & gas
industry feel it’s under.
So
let us indulge ourselves with the notion that all Grand Banks operators will
agree to cast their various gas lots in together ! Normally not their pattern
but hey, it’s Covid/Climate Change time and oil prices could be under siege for
some time.
And
we do have a strong and experienced group of internationally based
operators/permit holders, who are used to working together at least on the
local operating level, plus a strong internationally focused offshore service
sector and finally some significant engineering resources at Memorial.
Taking
just the 13 Grand Banks gas deposits we already have, what would a truly joint
development look like in a best of all worlds ?
Certain
constraints are obvious – the four oil producing consortia won’t be ready to
“blow down” their gas caps for some time – so put them last. There’s some pure
or non-associated gas finds like Ballicatters (from 2010/2011, already at 1 Tcf
and dying for a delineation well) put them first and get a couple of rigs going
focusing solely on gas targets to strengthen up the start group and the middle.
Then there’s some smaller ones like Springdale, North Dana and even Trave that
should be delineated plus numerous untested structures in the gas prone parts
of the basin – they go in the middle group.
And
for all of this, no new exploration permits need be issued and with a sensible
approach, no additional long involved environmental reviews need take place prior
to a full fledged Development Plan being filed.
It
might over time look like this:
EXAMPLE OF WHAT A CO-ORDINATED GRAND BANKS
GAS DEVELOPMENT MIGHT LOOK LIKE
FIELD NAME RESOURCES (BCF)
GROUNDBREAKERS
North Dana 472
White Rose
(Non-Assoc) 1,509
Sub-total 3,124
(3.124 Tcf)
(Susceptible to
increase
by Delineation
Drilling at Ballicaters & White Rose
and near term new gas
discoveries)
MIDLIFE
Springdale 239
South Mara 144
North Ben Nevis 116
North Amethyst 35
Trave 30
Sub-total 564 (0.564 Tcf)
( Susceptible to
increase by delineation and new Gas Discoveries
over life
of the project)
GOLDEN
YEARS
White Rose
(Associated) 1,509
Hebron 451
4,377 (4.377 Tcf)
All 3 Categories Present
Total 8,344 (8.344 Tcf)
Of
course there will be the naysayers and such things do tend to be complicated.
On the other hand, I do remember well the fight to get the Hibernia Consortium
to look seriously at using a GBS at Hibernia – there were serious divisions
even within Mobil, let alone within the Consortium ! But with a little nudge
here and a little nudge there, the concept did finally get a full and proper
review and turned out to be the best solution.
Maybe,
just maybe , it can happen again – this time without too much persuasion by the
Province – self-interest being what it is.
