Extraction of hydrocarbons on mature fields requires special approach.
In order to increase production efficiency, Ukrgasvydobuvannya (UGV) in October 2018 has announced the involvement of experienced operators of mature fields on the terms of Production Enhancement Contracts (PECs). In June 2019, four companies were pre-qualified for further bidding. The well-known Romanian service company Expert Petroleum has also been pre-qualified.
We spoke with Michel Louboutin, Chief Operating Officer of Expert Petroleum, about the company's experience in working under PEC contracts, about expectations from cooperation with Ukrainian companies and about modern technologies that allow for increasing production on mature fields.
Expert Petroleum's specialization in developing mature fields is a pretty niche business for the oil and gas industry. Why did the company choose this way for itself?
After doing production enhancement services for many years with Schlumberger we realized that there was a need in the industry for a company that specializes and understands in-depth the challenges of the mature fields in decline from a technical, social and environmental point of view. These challenges are unique and specific and applying technologies, operating processes and management economics KPI used for the exploration and development phase did not work.
Another point is that the mature fields’ market is not a niche, at the opposite this is the biggest market in oil and gas and it will continue to grow in the years to come as exploration opportunities and discoveries are going down and the need to be more efficient with the limited resources that we have is becoming more and more important for the industry.
Our aim is to grow, extend and improve on the success of the Production Enhancement Contract we implemented in Romania.
We are now extending our footprint not only in Ukraine but we are actively looking at opportunities in India, Uzbekistan, Mexico and North Africa as the PEC’s are a growing form of contracts around the world.
What year did the company first start cooperation on PEC contracts in Romania? Now can we say that the increase in production at OMV Petrom fields affected the growth in production in the country?
Romania started to implement the PEC model more than 20 years ago, and PECs definitely contribute positively to stabilize the oil and gas production in the country. In our case on the 25 fields we are working we not only increased the production but also reduced the CO2 emission of these fields, reduced the footprint, reduced the freshwater withdrawal and increased the energy efficiency of these fields. We also started to rationalize the surface facilities and abandon and decommission the wells which were not needed anymore, and reduced our footprint by around half.
Do you assume that the conditions for developing mature fields in Romania and Ukraine are similar?
There is some similarity with Romania, but each field has its specificity. This is not a one-size-fits-all business; each field has its particular issues that need a customized work program. This cannot be engineered from an office in Houston or Aberdeen, it has to be designed locally with the people operating the fields.
Is your participation in the competition for Ukrgasvydobuvannya PEC contracts the Expert Petroleum's first experience in entering the Ukrainian market?
We have been coming to Ukraine for the past 3 years visiting fields, discussing with the field operators and reviewing subsurface data.
Were there any surprises or non-standard conditions for you among the conditions or requirements for participants in the tender for UGV PEC contracts?
Not really, the PEC concept is becoming quite standard and more and more popular around the world. 15 countries are already using it and more are considering it. The fact that in PEC contract we do not book and own reserves, which remain with the national or independent companies, and we do not own the production, makes it risk-free for our partner(s) for additional production, and extends economical life of the fields.
The tendering process is transparent and very well managed so far by UGV.
Production enhancement contracts provide long-term cooperation. Are you not afraid of the political and economic risks of work in Ukraine?
No, you can feel a strong positive commitment in Ukraine these days to do the right thing for the country. EBRD is one of our financiers and we always listen carefully to their advice, and they have been quite supportive about our interest to invest in the oil and gas industry in Ukraine.
In the work on PEC contracts with OMV Petrom, the main operational decisions are made by the Joint Management Committee. Will the same approach be chosen for Ukraine?
Each country has its different adaptation of the Production Enhancement Contract according to the local legislation. In Ukraine, the Management Committee will most likely be led by the license holder with the service contractor providing the inputs for the decisions.
Do you plan to involve Ukrainian subcontractors in your work? If so, for which services and on what conditions?
Definitely, we strongly believe in using local knowledge and more than that, we typically work as a partnership to help them develop new capabilities around new technologies related to production enhancement in mature fields. We have a long list of such technologies used in Romania with local subcontractors around new technologies in the domains of case hole logging, drilling, artificial lift, stimulation, perforation, road construction and others. We also work closely with local universities to sponsor special projects. We are getting involved in local communities where we operate. In Romania we assist in bridge re-construction, local school assistance, university sponsorship, etc.
Expert Petroleum is considered one of the leading companies operating in mature fields. What technologies allow you to achieve successful performance and even double production at such fields?
As mentioned before, there is no one-size-fits-all technology or any magic, our approach is first to understand well the field history by listening carefully to the local operators, build an integrated reservoir and field model, then study (in some cases using artificial intelligence software) the best technologies from a reservoir, completion and surface facilities point of view to increase reserves and production (this can include new well design, customized hydraulic fracturing, water shut off techniques and so on). The fact that we stay focused and specialized helped to ensure we go in detail and in-depth in all the options available. We strongly believe the knowledge is local.
About Michel Louboutin
Before co-founding Expert Petroleum in 2006, Michel spent 24 years with Schlumberger. He has broad experience in production, development and mature asset management. He managed two large integrated production enhancement projects in Norway and Venezuela for Shell as a customer and was distinguished for initiating and managing one of the largest and most successful production enhancement contract in Romania with Romgaz S.A for the Laslau Mare gas field in 2003. Michel has worked 17 years in Romania and the region. He was elected Oil Man of the Year in 2011 by the Romanian Petroleum Club, and was the President of ROPEPCA (Romanian Petroleum Exploration and Production Companies Association) between 2015 and 2016. He holds a Master Degree in Petroleum Engineering from Heriot Watt University, and a Master in Project Management.
About Expert Petroleum
Founded in 2005, Expert Petroleum represents a group of companies headquartered in Bucharest, Romania and the holding function managed in Luxembourg. The group’s main activity is enhancing mature oil & gas fields through long-term Production Enhancement Contracts (PECs), investing into maximizing the fields’ potential to make them safer, greener, more productive and more profitable for a longer time.
Expert Petroleum is specialized in mature oil and gas fields’ operations optimization, workforce development, energy efficiencies, production and reserves enhancement.
At a glance, the organization has 1,000 employees, is operating 25 mature assets, with 1,100 wells drilled, managing 8,500 boe/day.
After few years of investments typically Expert Petroleum managed to achieve the following:
* Increased the production in average by more than 70% compared to the baseline production
* Reduced the Opex/boe by 50% (therefore extending the economic life of the fields and the reserves)
* Reduced the Green House Gas Intensity (tCo2 eq/toe) by 75%
* Reduced the Freshwater Withdrawal Intensity by 60%
* Reduced the Energy Intensity by a factor of 3
Expert Petroleum’s activity in Ukraine
Expert Petroleum supports the efforts of the Government of Ukraine and Naftogaz Group to increase domestic production of oil and gas, in particular supports Ukrgazvydobuvannia’s recent open tender for Production Enhancement Contracts (PEC) for two lots of old and mature fields in Western Ukraine. Production Enhancement Contract (PEC) is a long-term 15years’ risk service contract used in several countries, with no transfer of the field owner’s rights, reserves, assets and production. The PEC instrument provides for a subsoil license holder to keep the licenses and book their reserves, while involving a technically knowledgeable and financially capable contractor to invest and operate these fields to enhance their overall performance – increase production, improve field environmental conditions and safety, extend the fields’ lifetime. While the license holder can concentrate his efforts and resources on larger and new exploration and development opportunities.