Deepwater Improved Oil Recovery Can Technology Overcome Economics?

1. Deepwater Improved Oil RecoveryCan Technology Overcome Economics? Gavin Longmuir – Knowledge Reservoir Gulf of Mexico Deepwater Technical Symposium – 28 Aug 2009

2. RPSEA Project 1701 – DW GoM IOR • 2005 Energy Policy Act - Set up a public-benefit research program - $50 Million/year for 10 years - Funded from Federal lease bonuses & royalties paid by industry

3. RPSEA Project 1701 – DW GoM IOR • 2005 Energy Policy Act - Set up a public-benefit research program - $50 Million/year for 10 years - Funded from Federal lease bonuses & royalties paid by industry • Research Partnership to Secure Energy for America - Non-Profit Consortium – universities, natl. labs, producers, consumers - Chosen by US Dept. of Energy to manage public-benefit research program

4. RPSEA Project 1701 – DW GoM IOR • 2005 Energy Policy Act - Set up a public-benefit research program - $50 Million/year for 10 years - Funded from Federal lease bonuses & royalties paid by industry • Research Partnership to Secure Energy for America - Non-Profit Consortium – universities, natl. labs, producers, consumers - Chosen by US Dept. of Energy to manage public-benefit research program • DeepStar Industry Consortium - Funded by 9 major companies active in DW GoM - Chosen by RPSEA to administer Ultra-Deepwater Program - $17.5 Million/yr

5. RPSEA Project 1701 – DW GoM IOR • 2005 Energy Policy Act - Set up a public-benefit research program - $50 Million/year for 10 years - Funded from Federal lease bonuses & royalties paid by industry • Research Partnership to Secure Energy for America - Non-Profit Consortium – universities, natl. labs, producers, consumers - Chosen by US Dept. of Energy to manage public-benefit research program • DeepStar Industry Consortium - Funded by 9 major companies active in DW GoM - Chosen by RPSEA to administer Ultra-Deepwater Program - $17.5 Million/yr • Knowledge Reservoir / Louisiana State Univ. / Anadarko - Successful bidders on RPSEA 1701 - IOR for DW GoM - $2 Million project – Completion 2 Aug 2010

6. RPSEA 1701 – Project Objectives • Identify IOR Processes for Deepwater GoM • - potential to add substantial incremental reserves • - relatively close to economic feasibility • Understand the “technical gaps” • - why those IOR processes are not economic today • Recommend future R&D programs • - how to bridge those technical gaps • - identify potential partners for RPSEA R&D

7. Broad Scope of IOR in Deepwater GoM EOR Artificial Lift / Infill Drilling Secondary Recovery Primary / Stimulation / Natural Water Drive Maximize URF 0% Ultimate Recovery Factor 100%

8. Broad Scope of IOR in Deepwater GoM Discovered, Undeveloped Offshore IOR EOR Artificial Lift / Infill Drilling Secondary Recovery Primary / Stimulation / Natural Water Drive Maximize URF 0% Ultimate Recovery Factor 100%

9. DW GoM – World-Scale Opportunity …

10. … But Many Reservoirs are Small …

11. … And Deep 0 5,000 7,500 10,000 12,500 15,000 17,500 20,000 22,500 25,000 27,500 MMS Data – Neogene Only 518 Oil Reservoirs 22.8 Billion Bbl OOIP 490 Smaller Reservoirs < 172 MMB OOIP 28 Larger Reservoirs > 172 MMB OOIP Future Paleogene

12. IOR Target – 39 Billion Bbl ROIP Projected 39 Billion Bbl Discovered Remaining Oil In Place

13. Limited Secondary Recovery to Date ~190 Discoveries in DW GoM (includes ~15 in Paleogene) 82 Developed Neogene Oil fields 22.8 Billion Bbl OOIP in 518 reservoirs 10 Oil Fields with Water Floods 3.4 Billion Bbl OOIP in 16 reservoirs 15% of Developed OOIP has been Water Flooded 0 Fields with Gas Injection

14. Justifying Wells in High Cost DW GoM

15. Why Oil gets Left Behind? From Literature Survey & Interviews: • Economics • Technical Challenges • Need for Local Favorable Factors • Perception of High Risk

16. Local Favorable Factors • Miscible Gas Injection project: Intisar D Field, Libya LFF – Availability of stranded produced gas • Chemical Flood project: Daqing Field, China LFF – Gov’t support; chemical manufacture on site • CO2 Flood projects: West Texas LFF – Proximity to very large natural CO2 deposits What are LFFs for Deepwater GoM fields?

17. Perception of Risk • Spotty industry track record on accurately predicting project costs & benefits • Consequent requirement for robust economics - Provide safety net for optimistic predictions • Resulting reluctance to invest in IOR

18. Perception of Risk • Spotty industry track record on accurately predicting project costs & benefits • Consequent requirement for robust economics - Provide safety net for optimistic predictions • Resulting reluctance to invest in IOR 1.Successful Demonstrations 2. Reduced Development Exposure

19. Getting “Trapped Oil” Out Capillary-Bound Residual Oil Poor Sweep - Compartments - Stacked Sands - Well Placement Limited/Absent Drive Mechanism High Abandon Press

20. Getting “Trapped Oil” Out Capillary-Bound Residual Oil Poor Sweep - Compartments - Stacked Sands - Well Placement Limited/Absent Drive Mechanism High Abandon Press Artificial Lift

21. Getting “Trapped Oil” Out Capillary-Bound Residual Oil Poor Sweep - Compartments - Stacked Sands - Well Placement Infill Drilling Limited/Absent Drive Mechanism Fluid Injection High Abandon Press Artificial Lift

22. Getting “Trapped Oil” Out Capillary-Bound Residual Oil Selective Completions Infill Drilling Poor Sweep - Compartments - Stacked Sands - Well Placement Limited/Absent Drive Mechanism Fluid Injection High Abandon Press Artificial Lift

23. Getting “Trapped Oil” Out Capillary-Bound Residual Oil Miscible Processes Selective Completions Infill Drilling Poor Sweep - Compartments - Stacked Sands - Well Placement Limited/Absent Drive Mechanism Fluid Injection High Abandon Press Artificial Lift

24. Paleogene Challenge – Low URF

25. Local Favorable Factor – Stacked Sands? Overlying Gas Sand Low Cost Artificial Lift by controlled commingling Technical Gap: Reliable Smart Well Technology

26. Local Favorable Factor – Stacked Sands? Overlying Water Sand Low Cost Water Injection by powered dump flood Technical Gaps: Pump Life/Pump Replacement

27. Building the Business Case for R&D ~ 70 Known IORProcesses + Innovative Approaches Preliminary Screening Prioritized ~ 15 Processes of Interest

28. Prioritized Processes for DW GoM IOR • Artificial Lift • Reduced Cost Reservoir Penetrations • Reduced Cost Gas Injection Processes • Reduced Cost Water Injection Processes • Single Wellbore Injection/Production Processes • Cyclic Production of Sub-Economic Fields • Higher Credibility Performance Predictions

29. Building the Business Case for R&D ~ 70 Known IORProcesses + Innovative Approaches Preliminary Screening Prioritized ~ 15 Processes of Interest Volume Upside (Analogs) Production Response Economic Analysis/Sensitivities Short List ~ 6 Processes with Potential

30. Building the Business Case for R&D ~ 70 Known IORProcesses + Innovative Approaches Preliminary Screening Prioritized ~ 15 Processes of Interest Volume Upside (Analogs) Production Response Economic Analysis Economic Sensitivities Short List ~ 6 Processes with Potential Technical Gaps How to Bridge Gaps Final List of ~ 3 Processes Recommended for R&D