Mideast Oil Recovery Enters A New Phase

Mideast Oil Recovery Enters A New Phase

Thursday, April 28, 2011
Dow Jones Newswires
by Angus McDowall & Oliver Klaus

It has always been an axiom of world energy markets that Persian Gulf oil is both easy and cheap to produce.

The crude that gushes from the scorching desert sands of Saudi Arabia, for example, is widely thought to cost less than $5 a barrel to produce, compared to the $70 price tag on raising a barrel from deep Atlantic waters.

But many of the Persian Gulf oilfields have been producing for decades, and an increasing number of the newer fields in the region contain heavier and harder-to-extract crudes. Squeezing out the remaining reserves from some existing fields and developing new, more complicated ones will be costlier and will require more advanced technology, according to analysts and oilfield engineers.

As a result, more Gulf countries are exploring the use of enhanced oil recovery, or EOR, a collection of technologies that coaxes substantially more oil from the ground by injecting steam, gas and chemicals deep below the surface.

"The Middle East countries have varying levels of maturity in their fields," said Chris Graham, a Middle East analyst at Edinburgh-based oil consultancy Wood Mackenzie. While the major OPEC producers in the region mostly don't need to use EOR techniques, the situation is different for the smaller non-OPEC producers such as Oman and Bahrain. In those countries, "you've got maturing production profiles and each barrel becomes more difficult and more costly to extract," Graham said.

And even the large OPEC producers such as Kuwait have started to turn to EOR technology as they seek to develop new, more complex, heavy-crude reservoirs on which they will have to rely for future production growth. EOR tends to be needed most when oil is heavy--sometimes as thick as asphalt--and only flows when it is melted with steam, as is the case in some of Kuwait's yet-to-be-developed fields.

"EOR will become over the years an important component of what the industry collectively has to develop," said Jean-Luc Guizion, president of exploration and production at Total. "The luck of the Middle East countries is they have a lot of resources so they have ample time to plan the necessary EOR improvement."

According to technicians at one company with EOR operations, the methods can improve recovery rates in some fields by 40%, but at an additional cost of anywhere between $20 and $60 per barrel of oil.

In the so-called Partitioned Neutral Zone, shared between Saudi Arabia and Kuwait, Chevron is involved in an EOR scheme aimed at developing heavier crudes using steamflooding. Abu Dhabi Co. for Onshore Oil Exploration is working on an EOR project involving carbon dioxide injection. And Saudi Aramco is working on plans to implement a CO2 EOR demonstration plant in the next two years, although this project is, for now, aimed at trapping emissions rather than boosting recovery rates.

EOR techniques have been in use since the 1970s, when they mostly involved injecting seawater into reservoirs in order to maintain pressure and squeeze more oil from the porous, sponge-like rock where it is deposited. Now there's a far more diverse range of techniques on offer and experts say that each field requires its own mix of EOR techniques that can only be determined by complex analysis of field conditions and economics.

In the ancient and complex Marmul block in Oman, for instance, the oil is heavy and viscous. To improve the mix of oil and water in the field, the operating company, Petroleum Development Oman, which is 34% owned by Shell, injected polymer into the reservoir, allowing the crude to flow more freely and improving recovery by 10%.

Bahrain's energy minister Abdul Hussain bin Ali Mirza says his country's aging Bahrain field--where EOR boosted output from an average of 29,000 barrels a day to a level of 40,000 barrels a day within a year--will see output hit 100,000 barrels a day within seven years.

However, while Middle East producers are starting to take a closer look at EOR, many are handicapped by the reliance of the technology on gas, which is sometimes used as an injectant and sometimes burned to generate another common injectant, steam. Despite massive reserves in countries like Qatar, natural gas is in short supply in most other countries in the region due to its increased usage in power generation and in industries such as petrochemicals.

Accordingly, there is a new focus on alternative technology solutions, including the use of solar power to generate steam for injecting into oilfields.

One such new technology has been developed by Glasspoint, a U.S.-based company that says it can generate steam using the sun's heat at lower cost than by burning gas. It locates the solar installations inside large commercial greenhouses, which protect the delicate panels from harsh desert winds, according to Rod MacGregor, the company's chief executive.

Commodity Corner: Crude Climbs on Equities, Mideast

Commodity Corner: Crude Climbs on Equities, Mideast

Tuesday, March 29, 2011
Rigzone Staff
by  Saaniya Bangee

Crude futures advanced 0.8 percent Tuesday on stronger equities and doubts on whether Libyan rebels can resume crude exports within a week.

Tuesday's stock market rally helped oil prices snap out of a 3-day slump, settling at $104.79 a barrel. The 81-cent gain came in anticipation of increased oil demand in the U.S. As the first quarter for 2011 nears close, the Dow Jones Industrial Average and the Standard & Poor's 500 Index both gained 0.7 percent in afternoon trading.

Earlier Tuesday, prices fell to $102.70 a barrel on Libyan rebels' promise to swiftly return crude exports to markets. Traders remain weary as to how quickly and capable Libya will be in resuming exports, along with the remaining uncertainty in the Middle East.

Meanwhile, natural gas futures for April delivery fell by 3.1 percent to settle at $4.24 per thousand cubic feet. The April contract expired at Tuesday's settlement, which traders seized as an opportunity to cash out previous profits.

The Energy Information Administration reported 66.67 billion cubic feet a day, 0.5 percent lower, for U.S. natural gas production in the lower 48 states. The drop was still 6.8 percent higher from year-earlier levels.

Natural gas prices fluctuated between $4.195 and $4.37 Tuesday.
Front-month gasoline ended up Tuesday, settling at a session high of $3.05 a gallon. The session bottomed out at $3.01 a gallon.