Broad horizons beckon beyond Buzzard
  from: Offshore Engineer
  by: Darius Snieckus
  Wednesday, June 18, 2008

Wheels now turning on plans to boost the producing life of its 600 million barrel Buzzard field via a platform-based ‘enhancement project’, Nexen is in the front rank of independent operators advancing the cause of the UK North Sea’s Third Age. But the oil company is no one field wonder, with an ambitious drilling programme on its Scott/Telford asset, a clutch of untapped discoveries, and an FPSO-centred development scheme for its Ettrick field all testimony to a long-term belief in the region. Darius Snieckus speaks with UK operations director Ian Sharp.

Buzzard draws a lot of water in the UK sector of the North Sea. And understandably so.With recoverable reserves of over 600 million barrels – and considerable upside – the £1.5 billion ($2.5 billion) development currently flowing some 220,000boe/d in the outer Moray Firth is not only the largest discovery on the UK continental shelf for more than a decade but also core to output levels in an offshore oil and gas province now easing into maturity. Indeed, such is the relative scale of the field to the wider region that, from the outside-in, Buzzard has sometimes threatened to look like becoming synonymous with its operator, Nexen Petroleum UK. For the Canadianheadquartered independent, however, this is far from the truth, and while Buzzard may well be the centrepiece in its present asset portfolio in British waters, it is a development that is better understood as being first among equals as the operator’s identity evolves off Europe.

UK operations director Ian Sharp characterises the four years since Nexen arrived in Aberdeen on the back of a £1.3 billion ($2.1 billion) acquisition of EnCana UK as the start of an ‘incredible journey’. The 2004 buy-up, which included a 43.2% operated share in Buzzard, operated stakes in the producing Scott and Telford fields, interests in a number of satellite discoveries, and more than 700,000 net undeveloped exploration acres, overnight created a significant new regional player with concentrated acreage and assets, operated infrastructure, and solid E&D potential. From Nexen’s perspective, industrial logic of the acquisition lies in it ‘adding high-margin reserves and production, diversifying [the company’s] worldwide portfolio with strong assets in a stable jurisdiction, and complementing other longer cycle-time projects’.

By December 2004, the EnCana deal was complete; then began the real work. ‘The next year was challenging,’ acknowledges Sharp. ‘Having established ourselves in early-2005, the first priority was to consolidate safe and reliable operations at Scott/Telford. Having gone through three transitions in 18 months [the development part of a mid-2003 asset swap between Hess and EnCana], with personnel both on- and offshore moving from one company to another, it was vitally important to convince people that Nexen was here to stay and that we were serious about the culture and expectations we had of everyone involved in our operations,’ he states. ‘So 2005/06 was a period of significant investment both in terms of people but also facilities – obviously Buzzard but perhaps more significantly Scott/Telford.’

Already 11 years into production via the Scott field when Nexen took over, Scott/Telford has undergone a revival under the operator’s stewardship – a ‘field life extending turnaround’, in the company’s words. After the EnCana acquisition, the development was immediately treated to a thoroughgoing programme of facilities upgrades ‘both in terms of integrity and reliability of power generation, water injection and so on, which all received significant investment’, remarks Sharp, along with a non-stop campaign of infill drilling over the last two years that succeeded in ratcheting up output to 35,000boe/d by the end of 2007. Meanwhile, if somewhat behind the scenes, a great deal of time and money has also been spent on putting the Nexen stamp on the development.

‘The story at Scott/Telford since 2005 has been one of continuous investment – and continuous drilling through to the end of 2007,’ emphasises Sharp. ‘The result has been that 50% of production from the development is now coming from new wells. And ever since we took on the asset we have been investing in the facilities and personnel – from basic integrity to ensuring we have a motivated workforce, that we have the right people where we need them.’

‘Right from the start we placed an emphasis on making it clear to everyone how Nexen sees its place in the North Sea and that it is our desire to invest and make a success of it here,’ he continues. ‘That is why the Scott/Telford story is about facilities and people. Our relationship with our contractors over the last four years has continued this theme, making sure that people understood we’re serious about our culture and serious about doing things the right way.’ The doubling of Nexen staff over the same period, including the addition last year of some 50 technicians to core crews offshore, Sharp stresses, was its way of underlining that ‘we are the dutyholder, we are the operator, we are an offshore employer and we believe in the assets and the people’.

With production from Scott/Telford bolstered by six new producers spudded by KCA Deutag, Nexen is taking a break from further drilling on the asset for most of 2008, though it has a large number of prospects and leads in its hopper. The next campaign will kick off at the end of the year, with more development wells on the main field as part of what is expected to be a year-long batch drilling programme, along with appraisal wells on several exploration strikes, including the likes of its Bugle find. ‘We are working very aggressively to see how we might tie Bugle back – ideally to Scott/Telford – and this is in keeping with our strategy of stabilisation and improvement of the main field and then further development of Scott/Telford as a hub for satellite discoveries,’ notes Sharp. Following results of an appraisal well in February, Bugle – ‘no Buzzard but a solid small field’ – is currently in the frame as a single well tieback.

Fine feathered friend

Standing in 100m (317ft) of water astraddle licences P986 and P928 some 60 miles north east of Aberdeen, Buzzard might well prove to be the last of its species, a North Sea giant with gross recoverable reserves in excess of 600 million barrels and some 1.2 billion barrels oil in place. Discovered via an exploration spud in May 2001 that encountered a 400ft oil column and tested at 6547b/d of crude and 1mmcf/d of gas, the development was later fleshed out with an extensive appraisal programme that encompassed six additional wells and two sidetracks, along with a full 3D seismic shoot that surveyed 310km2 (120 square miles) of Buzzard’s surrounds, revealing a field ranging over four blocks. The high-profile project that followed brought Buzzard to first flow in January 2007 using a development concept centred on a trio of bridge-linked fixed platforms that is today supporting production of some 220,000boe/d (OE February 2007).

‘Buzzard has had a curiously chequered history in terms of operator, but the significant development work was managed primarily by Nexen,’ states Sharp. ‘Bringing it onstream on time and on budget without incident was a hugely important milestone for the company both in the North Sea and internationally. It must be said, bringing it onstream was one thing, but just as important to us is the continued reliability of the facilities and we have been very consistent in our production rates since we had everything established as we wanted it offshore – to the point where this year we have been producing consistently at 220,000boe/d.’

Since start-up, operations at Buzzard have been ‘very satisfactory’, he adds, ‘with everybody who is associated with the project being supremely pleased with what has been a safe and reliable ramp-up of a very big field and very complex gas plant’.

Eight predrilled production wells were available at Buzzard from first oil, but Nexen anticipates ultimately needing around 27 producers, with reservoir pressure sustained by an 11-well active waterflood programme and infill drilling later in the field’s forecast 20-year life. This year at the field the company has budgeted to spend £130 million ($255 million) drilling five production wells, two sidetracks, and one water injector to keep Buzzard’s 32°API crude flowing through an 18in, 28km (19 mile) long line in to the Forties pipeline system and then on to landfall at Cruden Bay and BP Kinneil for further processing, while gas is piped through a 10in line to the Captain ‘T’ point on the UK Frigg pipeline and on to St Fergus.

Transocean’s Galaxy III jackup and John Shaw semisub have been used in rota to this point to handle Buzzard’s 5-7 well/yr drilling programme, with the Transocean Prospect semi set to join in toward the end of 2008. Buzzard currently has 11 producers online.

Success story that Buzzard (reputedly named after Canadian microbrewery ale Buzzard Breath) has been, drilling has thrown up results exposing greater wellto- well variability in the concentration of hydrogen sulphide than previously encountered at the field. While installed processing equipment will make it possible for Nexen to manage this variability for the next year or two, post 2010 production will call for ‘specific treatment facilities’. The £230 million ($450 million) Buzzard Enhancement Project – a fourth platform outfitted with an H₂S treatment facility – is expected to provide a panacea to the problem.

‘We found there are far higher variability in the H₂S levels across the field and to ensure that we can continue to process the crude as we come to the end of plateau and indeed beyond we need additional H₂S treatment facilities,’ states Sharp. ‘It should be a simple solution to a rather straightforward problem.’

Sanctioned earlier this year, the project last month moved ahead with the award to Heerema Fabrication Group of contracts for a three-level, 6000t production sweetening deck, a 3500t jacket and eight 96in piles, and a 80m-long bridge to link the development’s new platform back to the existing three installation complex in 100m of water. Fabrication of the 60m x 36m x 42m deck kicks off this month, with load-out scheduled for March 2010, and construction of the 42m x 42m x 124m jacket and piles slated to start in August 2008 for delivery in late-2009.

Ettrick floats into view

This year sees Nexen turning its attention to start up of its latest North Sea venture – and Buzzard neighbour – Ettrick. Discovered in 1981 but long deemed uneconomic, the field is being developed under a plan approved by the UK authorities in July 2006 that involves three production wells tied back to an FPSO capable of handling 30,000b/d of oil, 35mmcf/d of gas, and 55,000b/d of treated seawater and produced water for reinjection. The production vessel, the Aoka Mizu, a 248m long, 105,000dwt Aframax tanker converted by Bluewater Energy Services via an Epic contract that includes supply of topsides and a disconnectable turret mooring system, is designed with storage capacity of 600,000 barrels and the ability to offload oil in 500,000 barrel parcels at 5200m³/h to shuttle tankers, while exporting 20mmcf/d of gas through a newbuild subsea pipeline to the Sage gas transport system.

‘Some might argue “Why do it now when you could tieback to Buzzard?’ but the fact is that we have no ullage at Buzzard,’ explains Sharp. Through the leased Aoka Mizu, Ettrick will start adding new production later this summer. And in the longer term, with most of its unexplored acreage in the waters around Scott/Telford, Buzzard or Ettrick, an FPSO on this latest field is in keeping with Nexen’s declared strategy on the UKCS of ‘growing and sustaining’ its existing North Sea production and ‘capturing new production hubs with exploration and exploitation opportunities near existing infrastructure’.

Beyond the BEP and Ettrick, Nexen is mulling development options on a goodly number of discoveries including several made during its short time on the UKCS. Near Scott, the Black Horse, Dolphin, Kildare, Perth and Yeoman finds are all in contention for exploitation, while near Buzzard, Polecat and Selkirk are being studied, and near Ettrick, Golden Eagle. ‘Selkirk and Kildare are typical North Sea satellite accumulations which we are looking to develop as tiebacks to host facilities,’ Sharp remarks. ‘Golden Eagle, which we discovered at the beginning of last year, is piquing people’s interest, either as a tieback to Buzzard or Ettrick or as a standalone development. Golden Eagle and Bugle are the finds we are working most aggressively at the moment.’

All hands to the pump as Nexen is in the UK North Sea, its aspirations are fartherreaching. The company is spending £20 million ($40 million) on seismic and geological studies on nine blocks awarded as part of Norway’s 2006 licensing round and ‘considering its options’ on another three licences won this year. Plans are afoot to spud a first well in 2009. ‘After the Americas and Yemen, Northwest Europe is a key business unit internationally now for Nexen,’ he states. ‘With the investment we have in the UK and offices and personnel now in Stavanger, clearly we are moving forward in the region.’

Tangibly, Nexen has made a good fist of its strategic entry into the North Sea – and, to all appearances, one that is sustainable in the long view. Ironically, to Sharp’s mind, much of the success wrought from the last four years is best explained by intangibles, the softer issues of work culture and corporate responsibility. He points to the company’s ‘willingness to be judged by others not just on its financial results but on other broader aspects’ through such measures as the Dow Jones sustainability index – one of only 19 oil companies to make the grade in 2008 – and its joining the UK’s Sunday Times Best Companies list this year at number 30, as clear evidence of the wisdom behind its ‘differentiating’ approach to business. ‘This sort of recognition is significant on two levels: one it is good for shareholder value because is shows what we stand for, and two, it is also a hugely important attraction and retention tool because these are independent measures of the sort of company we are.’

With the supermajors ‘high-grading’ their portfolios away from the North Sea, the future of the province rests on balance with the independents, a responsibility that Sharp relishes. ‘If as a company you show you have the technical and financial wherewithal to develop and grow a business here and the commitment to stay with it, then you become a desirable company to do business with,’ he concludes.

‘Having clarity of vision and direction and acting upon it – in our case as is demonstrated most recently by new offices in Stavanger and new projects being commissioned – shows you not only to be serious about what you are attempting but also shows the wider industry what sort of returns there are to be made in the region. The more companies that have this clarity, the less clouded perceptions will be about the North Sea’s long-term viability.’ OE

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