Media publications

Who is Affected by the Issue of the Poor Quality of Field Development Plans and Why?

by Alena Lipyavko | Oct 03, 2013

Oil. Gas. Innovations. No.1 2013

Discussion on the topic of
Who is affected by the issue of the poor quality of field development plans and why?

"This will come to no good!.. Management should not learn about it… and in the end I will have to resign...". These words by a Chekhov character are well known. These simple and rather commonsense words reflect many of the problems and troubles and many flawed situations existing in our society. Why should we discuss acute problems? What sense does it make if everyone expresses their own opinion or dissatisfaction, which is even worse?  Anyway, nothing will change. It's better to remain silent, because silence is gold. Otherwise, it will all come to no good. Unfortunately, if not the majority but a great many Russians think this way, especially those on a "soft and warm chair" and with the power to impact the resolution of most of our problems, then, there will be no chance of a change for the better. Still it makes sense to discuss problems at least because you will be heard and supported, even if not at once! If you really attract supporters there will be chances of success and with an increasing number of such supporters your chances will increase. It will morph into a common cause.

Today, to discuss the problems faced in field development planning, we invited experts from different sectors of the oil and gas industry: field operators and designing contractors, modelers and geologists, and staff training experts. We were not limited on inviting only representatives of the Central Development Commission of the Federal Agency for Subsoil Use. We consider this a mistake on our part. Nobody denied us access to information. They only postponed the meeting, labeling our questions “not quite appropriate” (this is an understatement), though the questions were developed based on interviews with experts. Ok, we will mend our ways. What do experts think about the current situation in field development planning? The following information was provided in the report Condition of Resource Base of High-Viscous Oil and Bitumen in Russia and Ways to Implement an Innovation Policy for the Development of Technologies and Reservoir Management developed by E.B. Grunis, S.L. Barkov (Institute of Geology and Development of Fossil Fuels). Since 1992, the level of enhanced oil recovery activities has dropped sharply. EOR activities were curtailed by economic conditions and oil prices. As a result of the liberalization in the field of subsoil use, the field development plans reviewed by the CDC have a recommendation character, and this is why active reserves are selectively extracted (currently, their share stands at 29.5%) with misalignment of the reservoir management system and interruption of their integrity. Primarily, inflow stimulation methods are employed: fracturing, sidetracking (the widest scope due to economic considerations) and horizontal drilling. These technologies are implemented in selective parts of the field (deposit). If this situation remains unchanged, active reserves at current production rates will be depleted by 2018. All proven oil reserves in Russia amount to 10.8 bn. t. – Do you agree with experts? What are your thoughts about the consequences of inefficient development of oilfields? What should be done to completely change the situation?

V.V. Kalinin, First Deputy General Director, CJSC VolgogradNIPIneft.

 – I can only agree with the opinion of experts. Currently, it is so true and I see nothing that would bring a change in the situation. Small Russian oilfield service companies currently strive to offer EOR, but the results are either non-transparent (due to under-financing) or the interests of foreign companies are lobbied. Field operators practically offer nothing until there is easy oil or they follow the path of least resistance using the expensive services of foreign companies passing the buck on them. The government, unfortunately, is unwilling to think about this. On the one hand, this may be good, because usually the introduction of new laws just adds an extra barrier, while the main problems remain unresolved. On the other hand, we have reached a stalemate. Nobody dares to move. I do not really agree that field development planning is non-regulatory. In principle, today they try to abide by field development plans approved by the CDC. The poor quality of such plans is a different issue. These documents are approved with the silent assent of experts, because of administrative resources. What’s most scandalous is that most often such field development plans are prepared under pressure from subsoil users.

A.N. Lopukhov, OJSC Samotlorneftegaz, Nizhnevartovsk:

 – Generally I agree with this opinion. But I cannot fully support the statement about the misalignment of reservoir management. Most of the major and currently developed fields in Russia were commissioned in 1948-1990. Therefore, they are drilled by planned wells and have infrastructure. They are mainly at the fourth development stage (watercut 90%); i.e., there are problems of fluid disposal. When we speak about reservoir management systems, we primarily imply waterflooding, which can be also considered as an enhanced oil recovery method (EOR). Every year, the cost of drilling and fracturing projects increases, while efficiency drops, and it is possible to conclude that waterflooding with existing infrastructure is the cheapest EOR option. This explains the interest of subsoil users in the implementation of field development plans. I disagree with the statement that fracturing and drilling are performed on selective areas (large fields). If a field operator is interested in the long-term efficiency of drilling and fracturing projects, it is necessary to provide compensation, and, in this case, it is easier to use a designed grid, particularly, injection wells. Samotlor can be considered as an example. Let’s use the period of 1998-2010 as an example. 1. The active production well stock increased from 5,759 to 8,491 (2,732); the idle production well stock went down from 3,912 to 1,882 (2110). It is clear that the active well stock was expanded mainly through the re-activation of idle wells. The active injection well stock increased from 1,372 to 3,239 (1867); the idle injection well stock dropped from 1,209 to 601 (608). The situation is similar with the production well stock. In this period, annual production grew by 5,2 MM and injection increased by 118,3 MM m3. 2. The AV1(12) development system was changed by infilling the well spacing. The block system, with three-five lines of development wells, was utilized before 2005; after 2005, a reversed seven-spot system was deployed in accordance with updated field development plans. 3. Water shutoff methods have widely been applied in the last several years. This all is a result of the implementation of field development plans. How can the consequences be avoided? This is a tricky question. If we consider a significant time period, it is impossible to avoid the consequences; if we mean a short time period, it is necessary to prepare an updated field development plan that is implemented under the control of state authorities. Only the government has the means to completely change the situation by introducing the appropriate amendments in the Subsoil Law and strengthening supervision authority.

R.R. Rakhmatulin, Senior Vice President, Marketing and Sales, GEOTECH Holding, Moscow:

 – Due to economic efficiency considerations, a business develops only the economically profitable part of hydrocarbon reserves, which is not related to reserves recoverability. We can only agree with the need to strengthen supervision over compliance of the actual development of field with the field development plan and ORF approved by the CDC of the Ministry of Natural Resources of Russia. Russia has enough state supervisory authorities; maybe it is necessary to improve the legal framework.

– Who should evaluate the quality of a field development plan and how? Why is it that during a FDP review in the U.S. the average ORF accepted as the main criterion of plan quality is 65 % and in Russia only 45 %? Experts believe that ORF with maximum oil recovery should be the main quality criterion. Apparently, in Russia state authorities are less interested in maximum oil recovery that in the U.S.?

V.V. Kalinin:

 – Expert review should be independent. Experts should not be morally or financially dependent on commercial entities. They have to work for the government. The difference in the average ORF in Russia and in the U.S. is quite clear. There is just nothing to offer. We have the same situation with oil refineries: old refineries are outdated, but no one has either the resources or the time to invest in modernization. That is why everybody adopts the path of least resistance. Even if a minimum ORF is mandated by law that will change little in general.

S.V. Sidorov, Deputy Head of Geological Modeling Sector, TGT Prime, Kazan:

 – The main problem is that the quality of field development plans is not the most important parameter for all parties. Field development permission documents such as GKZ and CDC protocols are much more important. It is no secret that reliable input data are needed for proper planning. Where can these data be taken from if the report do not match the reality? No smart solutions and 3D modeling will help here. In this situation no expert can really evaluate a field development plan. Presently, many plans are often evaluated from the point of view of compliance with GOST formatting requirements, instructions, and regulations. However, that has nothing to do with real field development. The government will have to make a choice: to establish strict state control over hydrocarbon production or to delegate all reporting functions to production joint stock companies. Currently, there is a two-sided approach: the government tries to interfere in production processes, while joint stock companies pursue a two-prong policy – within the limits of the Russian legislation they report to the government, while the main reserves, production and activity reports are provided outside Russia; production and financing activities are also agreed there. In this situation, nobody cares about the quality of the Russian field development plans. A.N. Lopukhov: – First of all it is necessary to provide a definition of the quality of a field development plan. The main quality criterion is the period of its validity. If a field development plan allows only to close deviation in production for 12 months this is a poor document: the longer the term of the document, the higher its quality. There is almost always a conflict of interests during preparation and approval. On the one hand the government represented by regulatory authorities is interested in the maximization of production and taxes; on the other hand, the field operator is interested in efficiency in field development. That is why demonstration of the objectivity of the proposed field development option (actual efficiency of the activities aimed at incremental production, base activities, application of new technology, etc.) plays a key role in the approval of field development plans. The quality of planning activities for subsequent years should also play an important role. It is impossible to achieve this without close interaction between the designing institute and the subsoil user. Such relations will help in further approval of field development plans in convincing experts of the appropriateness of the proposed solutions and will improve the quality of the reviewed documents. A field development expert review is mandatory. It is conducted in accordance with applicable legislation not only at CDC Rosnedra, but also at the Ministry of Fuel and Energy.

– Why do you think the introduction of a tax holiday is not considered for operators of challenging fields? Experts believe that this is a step that will push subsoil users to introduce new technologies that will result in the development of Russian oilfield services and better ORF, which means growth in gross crude exports, which will increase income from crude export duties, generate extra profits for the government, and lead to the development of new production facilities and new jobs.

V.V. Kalinin:

– Unfortunately, with a tax holiday being a bonus many will be happy to use, it will not provide significant results. What should be considered as challenging reserves? There will be many who will want to use tax holidays. In my understanding there is one way out: it is necessary to toss the Soviet business model and to build business (any - designing, production, research business...) in a more efficient way. It is necessary to increase labor productivity, to allocate time and funds for innovations (including legislative novelties) and to approach the training of engineers much more seriously.

– Experts believe that reliability of the used geological and field data is very important in ensuring high quality of a field development plan. They see serious problems in its insufficient accuracy and non-reliability and also in the absence of the required 3D modeling of wells and reservoir. For this reason hydrodynamic 3D models of oil and gas formations are unreliable.

R.R. Rakhmatulin:

 Why is there a problem with the poor quality of hydrocarbon field development plans? We believe that this problem is mainly caused by the insufficient completeness and quality of the input data used at preliminary stages of the study and analysis of a geological and geophysical information. This problem is also caused by the existing segregated, conflicting operations that have an integral character and require continuous interaction between internal stages. Usually, geological field models require multiple updating and sometimes they need significant revision as new wells are drilled at the exploration and development stages. The main reason that causes the need for adjustment is the significant difference between the expected and actual results of drilling. Even in the case of successful testing of target productive horizons intersected at designed depths, the values of real reservoir properties can significantly differ from the values defined in the existing field model that were used for reserves calculation. The only way to improve the accuracy and reliability of the results of a seismic and geological model and efficiency in reservoir management is by improving the quality and amount of the information used for the analysis of the geological structure and definition of the relations between remote scanning data (seismic acquisition) and direct measurements of the physical and filtration properties of reservoirs in boreholes (logging, core studies, post-perforation tests, etc.). It is necessary to note that in addition to objective difficulties with financing and the performance of exploration, there are also organizational problems that make it hard to obtain the required results in minimum time with the maximum possible quality. For example, seismic exploration in license areas is divided by customers into three stages: field acquisition – digital processing of field materials - geological interpretation of processed materials, and geological modeling. Subsoil users at all these stages conclude agreements with different companies based on tenders. It can be expected that all contractors at different stages of the seismic exploration process will seek to consistently implement input geophysical data quality control. As practical experience shows application of this technology based on the experience of western companies has not led to improvement in the quality of services. The structural division of seismic exploration companies capable of applying a logically consistent integrated approach to data processing and interpretation has mainly collapsed, or a significant part of skilled staff has been lost. They have been replaced by smaller specialized companied that are ready to undertake any number of projects under any conditions. Actually, the geophysical companies engaged at different stages of seismic exploration have a good excuse for the poor quality of their services. For example, interpreting contractor claims that poor geological results are caused by poor processing, processing contractors view the poor quality of field data as  the main reason for the low informational content of the processed seismic data, while the field contractor believes that the poor results of the seismic acquisition are caused by unprofessional processing and interpretation of data. The inevitable increase in the length of time from the beginning of field seismic work to completion of the final stages of interpretation and submission of a report to the customer is also an important factor. For example, if when it is necessary to correct the parameters of processing procedures, the company that was awarded the interpretation contract should first agree on the necessity for re-processing with the customer, then it should agree with the processing contractor and then wait for an indefinite time until it receives the new data after re-processing. However, really high-quality processing of seismic data is possible only with additional prior information obtained from well tests and preliminary geological modeling. The absence of full accountability on the part of the contractor for the entire seismic exploration cycle can result in poor quality at some of the stages, which will affect the final results of the work. It is also very difficult to detect hidden defects at the acceptance stage. Therefore, each contractor can blame other contractors for the low information content of the final results. Input geological and physical models of hydrocarbon deposits built based on seismic acquisition data, together with well data, are a base for the development of the concept of a field development plan. We believe that at least digital processing, geological interpretation, and geological modeling should be performed by geophysical companies that have extensive experience and deep knowledge of the geological relationships and settings of the productive horizons in the specific region.

V.V. Kalinin:

– There is a problem here that should be addressed. Firstly, it is necessary to compel subsoil users to conduct studies using different methods. Secondly, the designing contractor should keep in mind two simple things: geology is not a precise science; everybody tells lies! That is why when analyzing primary data one should be a bit suspicious. There is the opinion that the price and quality of a field development plan are interrelated but the price does not guarantee quality. What prevents designing contractors from preparing high quality documents? The quality and capabilities of the applied software and computers? The Skills of the authors of the plan? Or something else?

R.R. Rakhmatulin:

– Insufficient experience in modeling fields in specific regions has a greater impact on the poor quality of field development plans than the limited capabilities of the software used by designing contractors (it is no problem to purchase software today). The complexity of geological conditions at discovered deposits continues to increase and the number of specialists with extensive experience and knowledge is falling because the level of training of exploration and field development planning staff leaves a lot to be desired. This is especially relevant for small regional companies that suffer from a shortage of materiel and technical resources to use powerful modern software and lack experienced staff. V.V. Kalinin: – The situation with computers and software is not that bad. All tasks can be performed if the will is there. The problem is somewhere else: most often models and other engineering software are handled by people who can execute a certain cycle and obtain a result but cannot analyze and correct it, bringing it closer to reality based on accumulated field development experience. We sometimes forget that software is just a tool that helps perform mathematical calculations more quickly and we accept results calculated by a machine as a dogma. In the training of staff not everything depends on universities. Simply students currently are not willing to study. They want to take money not to earn it. But for a really smart guy, it is rather hard to make it without people in the right places!

– Do you agree with the opinion of those specialists who consider innovational planning as the development of plans that include new technological and technical solutions in the recommended development option that ensure a significant increase in oil recovery in comparison with options without such technologies?

V.V. Kalinin:

– It is necessary to understand this: there are relatively few real innovations in the world. Many things have already been invented, developed and implemented, simply not in our country. No need to reinvent the wheel, it is necessary to learn how to use products that have already been proven around the world. The only problem is the almost complete absence on the part of subsoil users of a desire to change things, with the full complicity  of CDC experts, who also work in designing institutes. An expert should be independent both financially and morally. I believe this is the only option.

– There is a view that Russian subsoil users have no need for good field development plans; field development plans costs should be reduced to a minimum and in order to achieve high-quality documents subsoil user should want them themselves. Why do subsoil users in Russia have no need for high quality field development plans?

R.R. Rakhmatulin: – It is necessary to note that despite the huge profits in the oil and gas business hydrocarbon field exploration and the pre-development stage are very capital-intensive. This is why it is possible to understand businesses’ desire to optimize and reduce exploration, field setup and development costs. However, oilmen’s focus on excessive costs saving at the geophysical data collection, processing, and interpretation stages often leads to a pre-determined degradation of the final results. Already today there are new modern exploration methods and technologies that are much more productive and provide much more information on subsoil resources. They are more expensive and quite often that constitutes a barrier for their wide application. It has been known for a long time that activities that do not provide the desired outcomes are often the most expensive. Nevertheless, very often "past experience" is used in the evaluation of the required techniques and evaluation of their potential efficiency, while the ever-growing complexity of geological tasks is not taken into account. As a result it is possible to carry out these expensive activities while their costs are evaluated as optimum. For example, modern seismic exploration abroad for a long time has followed the path of increasing density of recorded data with simultaneous improvement in performance: Nowadays, it is better to perform 200,000 physical observations of relatively lower quality in one project than to conduct 20,000 higher quality physical observations. Together with the application of modern mathematical methods and software for the processing and subsequent interpretation of data this allows to achieve positive results (high quality seismic records) and significantly reduce the probability of drilling errors. It also addresses the problems related to the processing of signals in the upper part of a section. Currently, such methodologies and technologies are also offered by Russian companies, such as GEOTECH Holding. But their wider application is hindered by the financial capabilities of customers. However, the cost of any number of geophysical observations is significantly lower than the cost of a dry exploration well. In addition, they improve the reliability of the geological model of the field and quality of the field development plan.

V.V. Kalinin:

– There are several reasons. Using the well construction plan, I will name two. Firstly, there is cost saving that sometimes becoming absurd. Design is much cheaper than well construction, and there is no need to twist a contractor’s arms. You can never make seven big hats from one mutton! Secondly, it is our legacy. In the past the fields were operated by people who could manage operations without plans and designs. In the end, the field development plan became far from ideal, and it is common that drillers do not read drilling design. With time, the situation with personnel worsened while the style of work and preparation of documents that developed in the past remained unchanged. That caused numerous problems. It is necessary to change the mindset of subsoil users and contractors. Designing contractors should shift to engineering and move closer to the field and reality while subsoil users should listen more to experts. Eventually, new legislation and new field development plan templates will automatically emerge around these tandems.