We pick up the story on March 24, 2001, at a UK Offshore Operators Association breakfast in Aberdeen when BP’s then North Sea chief said he saw a good future for the company’s mature assets.
Steve Marshall told the UKOOA (since morphed into Oil & Gas UK) meeting that, in global terms, the UKCS was nearly bottom of the league for average discovery size; also high cost.
But it then accounted for 30% of BP’s production, so had to be nurtured.
“We see continued investment in our mature fields and assets in this area as a key to our future in the UKCS. If we don’t invest we won’t grow,” said Marshall.
He cited the huge but by then ageing Forties field as an example of increased recovery. It began production in November 1975 after an incredibly rapid development since its discovery in 1970 and was still going strong.
“Prior to drilling the first well we expected we would only be able to produce about 20% of the oil in place,” said Marshall.
“After appraisal this had grown to over 40% and this trend has continued towards our current view of 62% – an increase of recoverable reserves of an extra 800million barrels.
“We now have a target of 70% recovery factor and every 1% improvement means an extra 42million barrels. That’s higher than the average size of new discoveries.
“Ten years ago, predictions were that Forties would be shut in by 2000, but we now plan to continue producing for a further 15 years.
“Mature field management can be a growth industry and it’s driving growth in BP activity and investment.”
He said 70% of BP’s $4billion projected spend at that time on new UKCS projects over the ongoing four years would be on extending the life of mature fields and on small developments tied back to existing infrastructure.
The company would invest $450million in drilling almost 50 wells in existing fields that year alone and drilling activity would rise 35% over 1999 levels.
Marshall said BP had also begun a seismic survey of its major North Sea fields to identify additional potential. That included Forties. And the oil price at the time was $29 per barrel.
Indeed, the super-major was planning to redevelop the giant field.
Energy’s editor saw the BP plan encapsulated in a poster presentation at a share fair staged at Aberdeen’s then Treetops Hotel (now Hilton).
The project would include building a fifth main platform and downgrading facilities on one or more of the existing big-four platforms.
After that it went rather quiet, the assumption being that BP was getting on with taking Forties forward.
Then BANG! On January 2013, the super-major stated that it had sold its 96.14% stake in Forties plus a package of other assets in the US Gulf of Mexico to US independent Apache for £1.3billion (£812.5million).
Next day the Press and Journal headlined: “More job cuts feared as BP sells off Forties”.
BP didn’t explain why it had back-tracked on the Marshall plan though it has since been speculated that the then CEO, John Browne, was desperate to finance the oilco’s foray into Russia and so Forties had to go.
However, BP rejected claims that the Government’s then new, 10% additional Selective Corporation Tax on the profits of North Sea oil and gas producers was to blame for the sale. BP said this was “not a factor”.
BP had 230 staff working in the Forties field and 35 onshore. About 120 contractors were also employed on the platforms. Apache, by then one of the US’s top five oil independents, said it wanted to take on as many of the staff and contractors as possible.
Jake Molloy, general secretary of the OILC offshore union, said he had expcted the news as he said the company had been “running down” operations.
SNP Westminster leader Alex Salmond, later a First Minister of Scotland, blamed the sale on the Government’s tax increase. He said: “This is one of the most significant moves in the history of the North Sea, since the Forties field is responsible for BP becoming a world-reach company.”
Tory shadow energy minister Crispin Blunt said: “It is a vote of no confidence in the Government’s management of the North Sea taxation regime.”
Energy minister Brian Wilson, who today writes a column for this paper, retorted: “It has nothing to do with the increase in tax. It is more significant that a new major independent is coming in. The Government has been working closely with the industry to ensure fields are in the hands of an operator best suited to their size and potential.
“Apache are an important American independent who are new to the North Sea. I will be meeting the chief executives of both BP Europe and Apache in Glasgow shortly to discuss future prospects.”
By that time, about 2.5billion barrels of oil had been extracted from Forties. But production had dwindled from about 500,000bpd at peak to a mere 48,000bpd. Remaining reserves were estimated at nearly 150million barrels.
BP said of the package disposal to Apache: “The objective of our asset review is to emerge with a more streamlined, consolidated portfolio that offers improved financial returns and higher value growth in the near and long-term.
“We believe this is an excellent deal for BP and Apache for which Forties will be a highly material asset.”
Apache steals a march and grabs a jewel
Apache raised $553.7million via a New York stock offering managed by Morgan Stanley to help cover the $1.3billion paid for the BP package.
Jim House rides in; the man from Apache charged with making Forties work. The company had, in essence, bought Forties more or less sight unseen. Or at least that’s the tale.
Because of the apparent haste, the buyer had to spend a shed-load more money than anticipated on fixing up the platforms and production systems and wells and heating and ventilation systems; you name it, most things needed fixing. And that ate time too.
However, in a conversation with Energy a few months ago, House shrugged off the shaky start stating that Apache had still got a bargain in Forties.
Not always popular with the workforce, witness the company’s appearance in P&J headlines from time to time, there is no doubting the commitment House made as he dragged Forties back up the production hill.
House also engineered the deal with Exxon that, in September 2011, resulted in the sale of the Beryl field by Exxon to Apache for about $1.75billion.
However, in June this year, House was recalled to HQ in Houston and handed a new and bigger job.
And his replacement? That’s Cory Loegering, an engineer by discipline and who is a veteran of the industry, starting out in 1977 with Conoco.
Loegering told Energy that Forties appeared to have at least another 15 productive years still to run. That’s twice the guesstimate made by BP’s Steve Marshall back in 2001.
But he warned that it will take hard work, money and not a little ingenuity, technology and sheer persistence to keep this beast of a field delivering, but that among its strengths was the sheer robustness of the original four platforms, which are massively over-built.
“When we bought Forties in 2003 the purchase price was essentially $630million. We bought around 144million barrels of oil at the time, since when we have invested over $3billion in the field and that plays into our future,” said Loegering.
“Although we purchased 144million barrels we have since produced 235million barrels and, of that, 120million was from wells that Apache had drilled. Then, production was about 40,000 barrels per day; we increased that rate up to 60,000 and, today, we’re looking at approximately 50,000bpd.
“Of the $3billion investment that we’ve made, we’ve drilled up about 165 targets. That’s not just 165 wells; we’re talking about subsurface targets that we’ve drilled wells into and put on production. This includes horizontal wells and electric submersible pumps to produce low pressure reservoirs.
“There are several things that I attribute our success to; those things also play into what I consider will be our future success as well. The first is our investment in the infrastructure . . . $2billion, including putting in a fifth (main) platform.
“That plays into production efficiency; we’re realising in excess of 90% production efficiency at present. As a result of the investment we have much more reliable and current equipment. And that contributes to our up-time.”
Loegering agreed that the very robustness of the original platforms is probably the saviour of Forties . . . twice original design life and still firm.
“If the foundation of our field was not so good then the infrastructure upgrades that we have done wouldn’t have made a lot of sense. We have a lot of confidence in that infrastructure.
“We’re easily looking at another 15 years of life in this field, in our estimation,” said Loegering, who declined to provide a rough number for the remaining reserves potential, which keeps evolving.
“What I will say is that we’ve had a very aggressive and robust seismic programme over the years, having run several seismic surveys in the field. That’s allowed us to take snapshots in time with these surveys.
“As we study the subsurface we can see where oil has moved to, where areas previously depleted have recharged. We’re planning to shoot yet another Forties survey in 2016.
“We’ve even shortened the survey interval from about five years to a three-year schedule. The field is very dynamic; there’s a lot of movement of oil within the field. And in a field of this size the best place to find more oil is in a large oilfield.”
OBS has been considered, but the success of the 3D shoots coupled with gaining a nose for interpreting Forties in this way has so far meant that ocean bottom seismic has not been required.
Comparing Forties to the Permian in the US, which many had thought was played out, Loegering said what had rejuvenated the Permian was the application of technology.
“That’s exactly what we’re doing here in Forties. We’re applying new technology and science and we’re finding things that we had previously missed; accumulations that we could not previously image because of seismic quality, for example.
“We’ve been going out and drilling targets and been surprised on the upside. I’m not prepared to disclose volumes but we have found more than we anticipated.”
Aside from all of this, one of the great recent bonuses at Forties is the discovery of local gas in sufficient quantity to satisfy Forties needs for years to come.
In fact, finding this gas was considered critical as it will help contain production and fuel costs, especially diesel. The Forties field per se is basically more or less exhausted in terms of producing associated gas with the oil.
Aviat is a shallow gas field located in block 22/7A and lies just 26km from Forties. It is being developed as a subsea satellite and should be onstream about the middle of next year.
Loegering: “At present, we’re not generating as much power as we would like. Because of that deficiency in power, we have been unable to inject water into some of the reservoirs to help maintain pressure and improve overall recoveries.
“A source of natural gas is critical to our operation. It’s much more cost effective (than diesel) and much cleaner for the environment. On Aviat, we’re drilling two shallow gas wells and we’ll be able to supply the entire Forties complex with fuel gas and try to move completely away from diesel.”
The message from Loegering (and for that matter House too) is clear, Forties has a long way to go, whoever its custodian is.
Yes, these are tough times in the North Sea but when one considers that the remaining UKCS prize could be as much as 24billion or so barrels oil equivalent, then it is surely wrong for the analysts of London’s Square Mile and New York’s Wall Street to write it off. Loegering agrees.
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