Edgar Rangel Germán
View from the Top

Getting it RIght in Chicontepec

Wed, 01/25/2012 - 16:50

Q: After the CNH was created in 2008, the first full scale field assessment it worked on was at Chicontepec. How did this come about?

A: The bill to create the CNH was passed into law by Congress on November 28, 2008, and consists of a package of new laws, one of which dealt with the creation of a National Hydrocarbon Commission and gave precise details about the agency’s composition. In May 2009, the commissioners in charge of the CNH received their presidential appointments. Soon afterwards, in June and July, we had our first board meeting. We already had offcial letters from the Senate, the Energy Ministry and the new independent advisors of Pemex requesting the CNH’s opinion on the situation at Chicontepec. We discussed the matter, and I was given the honour of preparing the Chicontepec analysis. I visited the field on several occasions, interviewed the people in charge, such as the Director of Pemex E&P and the Vice-President in charge of the northern region. Additionally, we had several meetings at Pemex headquarters. I gathered all the information I could, which was sizeable. We spent a few months analysing all the information in terms of geology, geophysics, drilling engineering, reservoir engineering, production engineering, surface facilities, economic evaluation, safety, and gas flaring, and prepared an integral analysis. We came to the conclusion that there was a major problem in terms of project management. In our opinion, the approach that had been implemented was incorrect.

Q: Why has Chicontepec posed so many challenges?

A: At that time, Pemex believed that it had about 137 billion Boe of original volume in place in the region. The CNH believed that this number was too high for many reasons. Technologically speaking, Chicontepec has no analogues, even though many people have claimed that it does. When you find this kind of rare deposit, you need to be very careful about what project management strategy to implement. Pemex followed a strategy that was more focused on the operations side, developing very strong drilling and completion capabilities. Indeed, they mastered the drilling part, reducing the total drilling time to nine days. After two years, they had drilled 2,000 wells, but more than half of those wells had very low levels of production. Nonetheless, they kept drilling, adding more and more new wells.

The biggest factor for the accelerated development of Chicontepec was Cantarell reaching its production peak. Since Cantarell was declining rapidly, Pemex put extreme pressure on replacing its production as quickly as possible. If you have a declining supergiant, then you have to substitute it with either another supergiant, a few giants, or multiple smaller fields. When you look around and ask yourself where you have an oilfield of that size, it has to be Chicontepec.

Geologically speaking, Chicontepec is unique, because it has a very particular geological history. Our first priority was to understand the composition of the subsurface, which was done by obtaining and integrating seismic data, and analysing depositional models. We gathered knowledge with the help of the National Autonomous University of Mexico (UNAM), which has very good geologists and geophysicists. One of the main conclusions was that the project management had to re-focus on research and technology development.

With production per well below 30 bbl/day due to Chicontepec’s complex geology, the production enhancement strategy had to be simultaneously focused on optimizing production per well, minimizing the number of non-producing wells, and drilling additional wells to drive the desired production increase to counterbalance faster than the forecasted production decline in Cantarell. The average daily production per well in the US is around 10 bbl/day, but the production situation is different to Mexico. In the US, many of these wells are owned by small companies that not only have owned the wells for decades, but also can turn production on and off according to the oil price. In contrast, Pemex cannot rely on a vast number of producing wells that can simply be turned on and therefore embarked on a programme to drill thousands of wells in a short time span. In the process the company had to master the craft, hence the diffculty at Chicontepec.

While preparing the Chicontepec analysis, the CNH received the development plan for the region. It included the cost for 20,000 vertical wells in perfectly equal spacing. When you have something that is perfectly homogenous on the subsurface, this strategy will work. If you have something like Chicontepec, it is clear that one well is going to hit the sweet spot, but the next well might not, and the one after that will be dry. You don’t need to be an expert in geology to know this.

However, since our analysis of Chicontepec, Pemex’s development solution has changed, and the company acknowledges that some areas will need to be drilled using vertical wells, while other areas will need to be drilled using horizontal wells, slanted wells, or multilaterals, and Pemex is now concentrating on that.

Q: What are the other challenges that Pemex is facing at Chicontepec, and how is their development plan progressing?

A: There are no real analogues to a deposit like Chicontepec. No major companies operate this type of field independently anywhere around the world. Fields of this size and complexity are run by dozens of companies, and this is also the case for fields that are substantially smaller. Here, Pemex is trying to do the whole thing on its own, but Chicontepec is too large. It is impossible for one company to drill thousands of wells per year and at the same time take care of each of these wells every day region, but we want to get there sooner rather than later.

Q: What are the main production solutions that Pemex has already introduced?

A: Fracking is a technique that has gained exposure in recent years because of the rise of shale gas. However, Chicontepec contains tight oil, which also requires hydraulic fracturing to release the oil from the subsurface. Pemex is currently in the process of developing fracking technology, and to a large degree, success hinges on learning the correct drilling techniques. Pemex has succeeded at some wells in Chicontepec, having drilled wells that have produced over one million barrels following the use of the correct drilling technique for the location. This is certainly something that Pemex needs to analyse, because the results from these wells could very easily be applied to other wells in the region.

The next issue is related to learning to adapt to a new operating environment. For many years, Pemex was used to easy oil. Pemex has wells at Cantarell that produced over 30,000 bbl/day in the early 1980s. You didn’t have to do much, because the well was there and it was producing, even if there wasn’t the right valve or pipe or administration. If a well produces 30,000 bbl/day, it pays for everything. This is not the case with Chicontepec. Pemex has to be meticulous and very careful with what it does with these This is the reason that Pemex established its five field labs at Chicontepec, and so far the strategy is working. Each field lab is assigned to a relatively small area, and tasked with performing tests on different options for drilling paths, different methods of fracturing and so on. If Pemex wants to take the Chicontepec project to the next level, they have to allow many companies to participate, whether they are international, national or regional companies. The integrated service contract model could work as another tool for Pemex to succeed at Chicontepec. Eventually, it might be a mix of methods, a hybrid model where for some areas, Pemex works in partnership with other companies and in others these companies work on their own. The potential is there in the wells. Productivity is very important. Chicontepec now has a “productivity group” of engineers who are making sure that all the wells are producing every day, and that’s why Chicontepec production is picking up. Now at Chicontepec, drilling has decreased but production has continued to rise. The last issue, but not in importance, is improved oil recovery. The geology at Chicontepec features very tight rock. If Pemex does not maintain well pressure, or increased production through injection of fluids or infill drilling, production will become increasingly diffcult.

These are the issues that the CNH has identified as its major challenges at Chicontepec, and at the CNH we are pleased that Pemex is moving in the right direction in terms of reorienting the project.