Visit to Oil Search Operations in Papua New Guinea OIL SEARCH LIMITED
Value Optimisation
Value Optimisation is: Getting more out of our assets Reducing our Opex relative to production Maximising production and recovery from existing fields Increased drilling giving reserve replacement and production growth…
Oil Search Licences in PNG
Total Value Chain focus Budgeting & operating cost focus Lower Drilling Costs Production Optimisation COMMUNITY CONTINUOUS SUPPORT IMPROVEMENT Gas & Oil integration Gas Developments, Extended Oil life Long Term Petroleum…
Value Optimisation Prior to taking over Operatorship OSH in conjunction with Halliburton/KBR identified 140 potential value creating opportunities in the PNG operations Ideas were prioritised and consolidated into 14 initiatives under 4…
Phased Approach to Achieving Full Value 4th Qtr 03 1st Qtr 04 2nd Qtr 04 3rd Qtr 04 4th Qtr 04 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Staying Focused Initial Budgets & KPIs Final 2004 Budget + Programme…
Asset Optimisation Initiatives VALUE OPTIMISATION STEERING COMMITTEE K. Wulff, B. Rapson, P. Caldwell, J. Speed PROJECT DRILLING FIELD OPERATIONS PRODUCTION SE MANANDA MANAGEMENT COSTS & LOGISTICS ENHANCEMENT DEVELOPMENT M.Kyrias…
Project Management & Compliance (Initiative 1) In conjunction with KBR, OSH has developed a system (OSDES) to achieve maximum value at every decision point in business development & execution System provides a disciplined approach to:…
Value Optimisation Drilling (initiatives 2-5) Drilling costs in PNG are historically high relative to similar areas due to: Discontinuous drilling programs Poorly integrated programs between the various foldbelt Operators PNG not…
Contractor Optimisation (Initiative 6) Review the number, structure & manning of contract services to improve in operational and cost efficiency on the proviso that: There shall be no reduction in the capacity of the operations to…
Maintenance Plan Review (Initiative 8) Critically review the current oil production operations maintenance plan and make any appropriate recommendations for improvements that will enhance value without any reduction in HSES performance…
24 hour operations (initiative 10) Oil production operations in PNG have undertaken well intervention operations on a daylight hours only basis. This has led to considerable inefficiencies. This initiative shall examine the current…
Production & Development
Introduction Value Optimisation Initiatives Production Update Appraisal & Development Outlook
Production Enhancement (Initiative 11) Production Enhancement System capacity reviews will be conducted on all production / injection facilities Debottlenecking study commenced at APF for Moran optimization, and SE Mananda and NW…
Production Enhancement (Initiative 11) Upgrade Gobe water handling capacity and reconfigure water injection wells to provide flexibility in pressure support and dewatering of SEG-2 block Reviewing Kutubu and Gobe well test data…
Well Intervention (Initiative 12) Well Intervention A systematic approach to all well intervention procedures and the application of production technology to be developed to provide more cost effective solutions Production…
Facility Engineering & Well Hook Up Times (Initiative 13) Well Hook Up Times Project management approach to well tie-in planning, scheduling and execution will be applied to reduce hook-up times and accelerate production…
Completion Design (Initiative 14) Focus on the types of completions to determine level of standardisation and fit for purpose application Completions previously not standardized due to periodic nature of activity Targets significant…
Production Update Summary 2003 has been a PNG production success Impact of asset team approach to focus on production is already apparent Declines have been mitigated in the fields through implementation of a range of initiatives…
Production - Kutubu Kutubu Production 2002 2003 40,000 Average Monthly Rate (BOPD) rate (bopd) YTD 35,000 30,000 Net 9,710 10,745 25,000 20,000 Gross 21,232 20,438 15,000 10,000 5,000 0 00 01 02…
Production Gobe Main Gobe Main Production 2002 2003 18,000 Average Monthly Rate (BOPD) rate (bopd) YTD 16,000 14,000 Net 2,712 2,780 12,000 10,000 Gross 5,375 4,849 8,000 6,000 4,000 2,000 0 Gobe Main field production…
Production SE Gobe SE Gobe Production 2002 2003 YTD 18,000 Average Monthly Rate (BOPD) rate (bopd) 16,000 14,000 Net 3,725 4,091 12,000 10,000 Gross 10,129 9,558 8,000 6,000 4,000 2,000 0 0 1 2 3…
Production - Moran Moran Production 2002 2003 Average Monthly Rate (BOPD) rate (bopd) YTD 18,000 16,000 Net 4,723 6,961 14,000 12,000 Gross 9,408 13,481 10,000 8,000 6,000 4,000 2,000 0 0 1 2 3…
Production Summary Production rate 2002 2003 YTD (bopd) Kutubu 21,232 20,438 Gobe Main 5,375 4,849 SE Gobe 10,129 9,558 Moran 9,408 13,481 Total Gross 46,144 48,325 Total Net 20,870 24,577
Saunders DPE resolved Landowner issues after long delays New flow line and gas lift line commissioned following various construction and testing difficulties Interference testing conducted in Aug-Sep with SEG-6 suggests communication…
NW Moran-1 NW Moran-1 Sidetracks Successful delineation of additional oil in Toro and Digimu Extended northwest and increased downdip (+130 m) extent of Toro oil, though OWC still not determined Established NW extent of Digimu oil…
NW Moran -1 Top Toro C ST4 actual OWC in ST3 block not confirmed 730270 9312712 1962mss Pressure barrier exists between ST3 and ST4 -1856m ODT 1902mSS ST5 actual 730450 9312258 1802mss Frontal fault cut-off uncertainty
Moran Map showing impact of NW Moran MORAN: TOP TORO BLOCKS A, B, J Current ODT -1902mss ST 4 ST 3 ST 5 Previous OWC assumed in Block J -1770mss PDL 5 J PPL 219 PDL 2 B PPL 219 A Volume additional to Pre-NW Moran…
SE Mananda Oil Field Development 2Q 03 - Conceptual development screening study 3Q 03 - Focus on development options & economics 3-4 wells, remotely operated Flowline route & Hegigio R. crossing APF tie-in Oct 03 JV Budget proposed…
Near Term Exploration Targets SE Moran-1 Good seismic definition showing separation from M3X block Mean reserves 80mmstb in Toro and Digimu Candidate for EWT COS 1:3 to 1:4 key risk is structural configuration Well will be…
Near Term Exploration Targets Kapul-1 Based on learning from Kimu/Koko wells Definitive foreland well Mean reserves 128mmstb COS 0.17 main risk is oil v. gas phase Well is vertical, drilling conditions straightforward To be…
Maturing Future Targets Seismic 04 Seismic program Significant program Outstanding requirements Near-field and exploration prospects Feeds into 2005 drilling schedule Targeting reduced costs
Production & Development Summary Production remains on target during 2003 2004 production range 10.8 11.2 million stb Production growth opportunities in Saunders, NW Moran, SE Mananda and Hides cycling being pursued in coming 12…
Drilling Optimisation Update John Speed Mike McGowan
Drilling Optimisation Team Guiding principles No compromise to HSE; increased activity will require increased vigilance Current drilling performance unacceptable Current PNG Contractors, while experienced, are not the only resources…
Progress Update Team established with focus on Rig and logistics optimisation Technical limit and Technology Workshop 15-19th September NAB House with focus on performance improvement. Workshop Principles: HSE is first priority…
Approach Adopted Develop understanding Plan operations with full risk description Deliver trouble free operations and no accidents Drive out invisible non productive costs Introduce cost reducing or value adding technology Value I…
Cost Reduction Opportunities Immediate opportunities exist NPT (eradicate problems) Invisible Lost Time (Technical Limit Learnings) Near term opportunities are Site construction Rig move optimisation Introduction of innovative Rig…
NPT the impacts are: Note - NPT previously under-reported NPT as percentage of total time Moran-8 : 28% (18 days) - 2.7 MM Moran-9 : 56% (66 days) - 9.9 MM NW Moran-1 : 51% (39 days) - 5.85 MM (17/8/03) 12 train wrecks account…
Drilling Practices Key Focus NW Moran-1 12 Hole Problems 35 days 4.0 MM 1st warning 3 days before stuck pipe incident - incorrect fill on wiper trip Drilling Practices Wellbore Stability GMI Built earth model using offset well data…
Implementation Plan 40% cost reduction Part 1: Four well programme / Parker Rig 226 SE Moran Moran 10 Moran 11 Juha Rig Move Offline Site Construction Drilling Practices Optimisation Casing/Conductor Slimhole Cut down 226…
Implementation Plan Part 2: JV Rig 2 Innovative Solution e.g. SE Mananda Development New Technology Reduced Reduced Logistics 40% Smaller Hole Size Consumables Cost Saving
JV Rig 2 JV Owned 750 HP Drilling Rig Previously assigned as a workover rig Similar specification to rigs currently drilling in the Cooper Basin Could be used to drill a range of prospects Foreland, Gobe, SE Mananda, Kimu, Possibly…
Chinese Mud Logging Unit
Chinese Drilling Rig
Rig 2 Mechanical Feasibility Well Design 10,650 md, 8700 tvd (rkb) 8 Hole in Reservoir 1500 horizontal 2-D trajectory
Rig 2 Mechanical Feasibility Critical Loads Max hookload (rig) 350 klbs SO 9 340 klbs PU 9 380 klbs Solutions One way trip Lighter casing (currently 53.5 ppf) Floatation Increase deviation Next Step Representative Targets…
Example 1 - Conventional v downsized 30 Casing at 50 18-5/8 Casing at 50 18-5/8 Casing at 50 18-5/8 Casing 13 3/8 Casing 13 3/8 Casing at 250 at 250 at 250 9-5/8 Casing 10.3/4 Casing 13 3/8 Casing at 4000 at 4000 at 4000…
Example 2 - Conventional Well Design, SE Mananda 30 Casing at 42 18-5/8 Casing 87.5 at 250 8 Hole Through Reservoir 13 3/8 Casing - Is this fit for purpose 61ppf at 4000 Logging Tools Testing Requirements Completion…
Example 2 - Downsized Design, SE Mananda Smaller Rig 18-5/8 Casing at 50 Location size 13 3/8 Casing Rig Mob / Demob at 250 Less Consumables Logistics 9-5/8 Casing at 4000 Casing, mud, cement Fuel Disadvantages: 7 Casing…
Cost Comparison Estimate Conventional Slim Hole Site Construction 1.68 1.0 Rig Mob / Demob 1.5 1.0 Drilling 4.5 2.5 Daily Rig Rate 30k 10k Daily Spread Rate 100k 60k Consumables 1.5 1.0 Helicopters 1.0 0.7 Well Cost 10 MM 6 MM
Conclusion and Outlook
Conclusions Oil Search has undergone a rebirth over the past two years It now has : Unprecedented identified opportunities for growth Primary control of its business Strong and growing cashflow and balance sheet Able to fund…
Financial Strength and Capital Management Very strong balance sheet Successful refinancing provides flexibility to fund growth opportunities or acquisitions Share buy back inactive during period of ChevronTexaco acquisition and minerals…
Base Case production profile Base case production profile shows growth through 2006 Does not include potential impact of value optimisation initiatives Full impact of OSHs ability to drive activity not included until programs…
Continued Reserve & Production Growth through Exploration Operatorship allows OSH to establish a balanced drilling program in PNG 2 rigs planned in PNG in 04 Balance of exploration and development OSH will participate in 5+ firm…
Outlook Active review of CT operations cost structure Preliminary budgets in place by Y/E Final 2004 budget by end 1Q Progressive introduction of value initiatives Drilling Production Operating costs Development proposal for SE…
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