Southern exposure warms RWE-Dea growth plan
  from: Offshore Engineer
  by: Darius Snieckus
  Monday, April 07, 2008

Development of the southern North Sea Cavendish field by RWE-Dea UK – its first operatorship off Britain – has been instrumental in moving forward the German oil and gas company’s wider plans for doubling its global hydrocarbon production levels by 2013. As Darius Snieckus hears from managing director Christoph Schlichter, the project has also proved ‘an important step’ in refocusing corporate thinking on natural gas E&P in the longer term.

Small in stature it may be, but the minimum facilities platform at the heart of RWE-Dea’s £135 million Cavendish development in the UK southern North Sea is already playing a key part in bigger plans being hatched by the German company to build its global production levels toward a target 14 million m³ oe/d over the next five years. Brought onstream in July on block 43/19a via a six-slot, normally unmanned installation and 47km-long 10in pipeline connected to the ConocoPhillips-operated Caister Murdoch System, the Carboniferous gas field is now flowing some 1.6 million m³/d from a first well to the Theddlethorpe gas terminal on the UK’s east coast.

Gas from the 3.7bcm Cavendish development, RWE-Dea’s first operatorship on the UK continental shelf, represents some 20% of company’s total daily output in the region and, as such, is characterised as a ‘building block’ in its designs to reach annual production of 1.5 billion m3 oe from UK waters, where it has stakes in the producing Anglia, Markham, Mimas, Minke, Saturn, Tethys, Victor, and Windermere fields. According to RWE-Dea UK managing director Christoph Schlichter, Cavendish is also providing ‘important expertise that will be useful for forthcoming projects’ – not least on the project management level.

‘Cavendish, as our first operated development, was really a challenge for the whole team, which had been built up since we opened our offices here [in London] in 2002,’ he states. ‘Coming from an environment of high oil prices, activity on the whole of the UKCS is at a high level and this was true too when we were developing Cavendish, so the contractor market was extremely tight. On a small gas field development with gas prices nowhere near those for oil, this made life difficult.’

Construction of the 600t minimum facilities platform at the Heerema Vlissingen yard in the Netherlands had kicked off in October 2005. By the time the project reached the installation phase, soaring crude prices were translating into severe constraints in the offshore supply chain. Faced with a situation where ‘economics can deteriorate quite quickly’ if a project schedule slips its gears, RWE-Dea reasoned the best strategy would be to make use of contractors on short lead-time assignments.

‘We contracted Seaway’s Stanislav Yudin heavylift vessel when a window of opportunity opened up very quickly and we had the platform ready and waiting at Vlissingen and it was then installed inside a week under very favourable terms,’ recounts Schlichter. ‘Likewise we hired Technip’s Apache reel-lay vessel through the winter season of 2006/07 at good dayrates and, again, the assignment [installing the field pipeline] went smoothly.’

In June 2006 the Cavendish topsides, jacket, subsea-cooler – needed to deal with the 4% CO₂ content in Cavendish gas – and piles were transported out to the field by transport barge. Offshore installation in 18.5m of water and subsequent hook-up and commissioning were complete before the month was out. The main export pipelay operation started in December 2006 with the Apache arriving at Technip’s Evanton fabrication facility, spooling up, and mobilising by mid-month. Fair weather meant the line linking Cavendish to Murdoch was laid by year-end.

Reaching first gas on Cavendish in ‘such a timely fashion’, Schlichter offers, was most of all a testimony to the high level of collaboration on the project: ‘Our development team has worked closely with the UK Department for Trade & Industry [now Department for Business, Enterprise & Regulatory Reform], joint venture partner Dana Petroleum, host operator ConocoPhillips, and our contractors in successfully achieving this milestone.’

This autumn the jack-up Noble Al White wrapped up drilling of two further wells at Cavendish, the second a step-out to determine ‘the fullest dimensions’ of the field.

Phase value

2007 is shaping up as one likely to be looked back on by RWE-Dea as a banner year on the UKCS.With first flow from nonoperated assets including ConocoPhillips’ ‘twin’ Mimas and Tethys platforms and Gaz de France’s Minke subsea field, along with RWE-Dea’s own Cavendish development, the company’s UK production has better than doubled to around 3.8 million m³/d of gas. RWE-Dea’s capital expenditure in the province had climbed from £44 million in 2005 to £105 million in 2006, and is expected to come it at around £43 million in 2007.

Money well spent it would seem. Development plans for RWE-Dea’s SNS Orca and Topaz discoveries are currently being worked up, with a well to be drilled on the latter next year and expectations that both can be brought onstream in 2009, while Cavendish-satellite Kepler will be treated to an appraisal well in 2008 in keeping with a timeline that foresees production start-up in 2010.

‘If you were to characterise our activity in the southern North Sea is would be as a company churning remaining opportunities,’ underlines Schlichter. ‘The current licensing regime in the area encourages very quick turnaround. You have to work the licences you have, you have to find the remaining value – or indeed to hand them back to the authorities if you find them unattractive. It all means a very fast turnaround of acreage and opportunities.

‘The largest undeveloped reserves in our portfolio are in Orca, which is sitting right next to Minke, but comes with the additional complication that it straddles the UK-Dutch maritime median line and so a treaty of some sort will be needed to move the development further forward,’ he outlines. ‘Kepler being right next to Cavendish makes it a candidate to be tied back to the pipeline there, though here we have the issue of CO₂ levels even higher than at Cavendish.’

Higher gas prices, Schlichter acknowledges, would be a help in advancing these various field developments, but he feels the lessons learned at Cavendish are of more material advantage to RWE-Dea as it maps its way forward on the UKCS. ‘Cavendish has taught us a great deal about efficiencies in offshore gas developments and we believe there is still room to do more in this very mature area of the North Sea.’

Since moving into the UKCS’ southern gas basin in 2002, RWE-Dea has been hard at work building an asset portfolio in the central and northern North Sea, having ‘participated successfully’ in each licensing round since setting up offices in London. The company has been involved in wells spudded on Maersk’s Muness prospect in 2005, and, last year, on Shell Quasimodo. Further north, RWE-Dea is waiting on partner BP to move ahead with its development plans for the Devenick discovery.

Six blocks awarded to the company in the 23rd and 24th UKCS licensing rounds are also bedding into its portfolio as a ‘strategic gas-condensate play’. Most recently RWE-Dea set the seal on a farm-in deal with Elixir Petroleum on block 211/18b, with a view to drilling up the ‘highly interesting’ Leopard prospect in 2008 or 2009.

‘This activity should make clear our ambition of expanding our portfolio to include new plays,’ states Schlichter. ‘The UKCS still offers the full range of opportunities and as we develop our skills internally to evaluate these plays you will see us pushing into more new areas. Jaguar is hopefully the first of many.’

RWE-Dea’s ‘organic’ growth strategy in the UK mirrors its international plans insofar as the company continues to angle at ‘investing in gas discoveries already made, without buying production in significant quantities’.With phase one of this campaign now largely finished, RWE-Dea’s attention is now turning to working its current portfolio, investing selectively in new field developments – an exercise ‘getting more difficult’ – and continuing its participation in UK licensing rounds.

‘As we have done in the past, we will also continue to evaluate single well farm-in opportunities – there are quite a number of opportunities coming across our desks but this is an expensive way to grow your position,’ states Schlichter. ‘With many of the majors in harvest mode on the UKCS we are beginning to see some divesting interesting portfolio packages and that could potentially help us along a phase two growth path.’

Hamburg-based parent RWE Dea AG is counting on its UK E&P efforts to be a booster for plans to double its global hydrocarbon production to 13-14 million m³ oe by 2013. Success will hinge on a strategy of ‘active field development of the proven resources’ centred on its core regions of Europe and former Soviet Union, the Middle East, and North Africa.

‘It was particularly due to strikes encountered in Egypt and Algeria that we have managed to increase the level of verified resources in these countries to 84.5 million m³ oe out of 170 million m³ oe for the whole company at the end of 2006,’ underlines RWE Dea chief of operations Thomas Rappuhn. The successful exploration work in Libya already achieved by the company with its first wells drilled is also reported to be a significant growth factor. Rappuhn points to Russia and the Caspian region as ‘focuses of interest’. He notes that the share of gas production is expected to rise sharply, while oil production is maintained ‘at least at the same level’ in the coming years.

Capital spending on development activities is to rise to around Euro800 million/yr over the next five years to support set production targets, with a further Euro200 million/yr earmarked for exploration efforts that aim to build on the programme of 73 wells drilled by RWE Dea worldwide in 2007. OE

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