KUWAIT - Development.

The three groups competing for Project Kuwait are led by the following majors: ExxonMobil (37.5%) with Shell (32.5%) as second operator, and non-operating ConocoPhillips (20%) and Maersk (10%); BP (65%) with non-operating Occidental Petroleum (25%) and Indian Oil Corp. (10%); and ChevronTexaco (50%), with Total (20%) as second operator, and non-operating PetroCanada (10%), Sibneft (10%) and Sinopec (10%).

KPC has made major changes in the oil sector since the summer of 2004. The group has awarded or tendered a number of contracts to modernise the upstream sector, sold off non-core activities and assets. MEED on May 27, 2005, quoted KOC's CEO Farouq al-Zanki as saying: "The era of 'easy oil' is coming to an end, and we are shifting from primary recovery to an era of enhanced oil recovery (EOR). Water injection is increasing and production rates are in decline. We must find ways and means of extending these fields' production life".

Rising water cuts are particularly worrying. Low reservoir pressures and water injection programmes are likely to see water cut rates increase from less than 10% today to 70% by 2020, while oil output diminishes. Zanki said: "We are producing 300,000 b/d of water. We project a 20-fold increase in water production to 6m b/d by 2020. Water management is a growing concern" (see omt22KuwtFieldsMay30-05).

Apart from Project Kuwait, KOC has its own programme. By adding to proven reservoirs, implementing best practice to reservoir management and reducing gas-flaring and effluent water disposal, KOC believes it can significantly increase capacity. Zanki estimates that $26,0000m will be spent over the next 13 years on the upstream, in addition to $7,200m worth of projects already under way. The search for natural gas is a priority. Kuwait needs 1,000 MCF/day of natural gas to meet its requirements, and now has no non-associated gas.

Current production, including Kuwait's share of output in the Divided Zone, is averaging a bit below a country 2.7m b/d, up from 2.4m b/d in early 2005. Before Iraq's August 1990 invasion of Kuwait, the emirate had 26 oil GCs capable of handling 4m b/d of production. The sustainable capacity within Kuwait then was 2.25m b/d and its share of capacity in the Divided Zone (DZ) was 200,000 b/d. In the early 1970s, Kuwait's sustainable capacity was 4m b/d, including its DZ share. There were about 1,100 wells by August 1990. In the final phase of the land war to liberate Kuwait, in late February 1991, Iraqi forces under Saddam's Sunni/Ba'thist dictatorship torched most of them - damaging about 800 wells. Of the 26 GCs, three were destroyed, three were seriously damaged, six were damaged but not beyond repair and 11 had slight damage. Immediately after liberation in late February 1991, the government set in motion a programme for the oil sector in parallel with programmes for the other sectors.

Phase I, called Awdah (return), was managed by Bechtel under a two-year contract and included a big number of contractors from the US, Europe and other parts of the world. It included fire-fights by several teams, drilling new wells, and repairing GCs and various other installations. Completed by early 1992, Phase-1 cost more than $2 bn. Phase-2, Ta'meer (reconstruction), mostly managed by Bechtel and involving re-construction of both upstream and downstream facilities under a $6.5 bn budget, was completed in 1994. Phase-3, completed in 1995, involved reconstruction, development and expansions for both the upstream and downstream sectors. The manager for this was Parsons Engineering Corp.

In March 2004, KOC appointed Amec of the UK as project manager for its southern oil-fields, a post previously held by Bechtel and Parsons. In August 2004 KOC renewed a 1997 contract with Total under which the French major provided technical assistance in the DZ (shared equally by Kuwait and Saudi Arabia) as well as in onshore oil exploration in Kuwait itself.

SK Engineering & Construction in 2005 won the second package on KOC's facilities upgrade and replacement programme, under a KD357m ($1,231m) EPC contract. This covered replacement of existing underground crude oil and gas flowlines in the south and south-east and the upgrade and rehabilitation of nine GCs and one booster station (BS). In late April 2005, UAE-based Petrofac Int'l was awarded the KD199m ($686m) first package covering seven GCs and two BSs. These were part of a $2,150m programme, for which KOC received funds from KPC (see omt22KuwtFieldsMay30-05).

The following are profiles of the producing fields in Kuwait and in the Divided Zone (see also Gas Market Trends):

Ahmadi: Found in 1952, Ahmadi went on stream in 1953 as a small field but part of the Greater Burgan structure. It has produced from the Middle Cretaceous Wara and Nahr Umr sandstones, mostly 31.7 deg. API oil, through 11 production wells at 4,800 feet. Ahmadi's capacity in July 1990 was 50,000 b/d and was expanded to 80,000 b/d by 2000. It was one of the first fields to be rehabilitated after the liberation of Kuwait in 1991. Its partial rehabilitation in July 1991 helped supply crude oil to the nearby oil refinery at Mina Ahmadi (see Downstream Trends of this week).

Burgan & Magwa: The first oil discovery in Kuwait, in 1938, Burgan is a high pressure field and one of the biggest in the world. It proved more prolific during the well fires in March-July 1991 than KOC experts had thought as the amount of oil that came out at times was more than 3m b/d (i.e., double the field's pre-invasion capacity). As its well-fires were being extinguished, the field's pressure proved to be higher than before the Iraqi invasion.

Development of Burgan was delayed by World War II. It went on stream in 1946. Before Iraq's invasion, Burgan, excluding Ahmadi and Magwa, had a total of about 395 wells (393 in 1988), of which more than 210 were producers. Most of these wells have a depth of 4,800 feet. To extinguish the fires, Red Adair and other US firms had to drill into the side of each major wellhead and then pump concrete, or mud, into the bottom of the well. The first owners of KOC that found Burgan, BP and Gulf Oil, had since the 1950s established that the structure extended to Magwa and Ahmadi, further north. Burgan is structurally a subsurface dome with oil-impregnated Miocene surface sandstones. Production comes from the Middle Cretaceous Wara sandstone, Mauddud limestone, and Burgan B and D sandstones. Burgan has a Lower Cretaceous Oolite formation (Fm), of the Minagish/Ratawi type. Its oil gravity, combining crudes from these layers, has a range of 28.5-36 deg. API.

The Marrat, a Lower Jurassic Fm of 37-38 deg. API oil with 1.6% sulphur, is beneath Burgan, Magwa, Minagish and Umm Gudair. The reservoir was found by KOC in the western desert in the 1980s. It first went into production in March 1990. The current capacity is 200,000 b/d. Its output is mixed with heavier crudes to produce a lighter export blend of 31.5 deg. API. Capacity was doubled in 1998 from 100,000 b/d.

BP and Chevron have worked on Greater Burgan under contracts with KOC. By end-January 1995, their Burgan reservoir studies had raised proven reserves by 250m barrels. The two majors helped KOC in re-exploration and development of the deep Najma and Sarjelu Fms, said to be rich in 37-40 deg. API oils with a high gas ratio as in the case of Marrat.

By March 1996 Greater Burgan had three more oil GCs rehabilitated: GC-5 (200,000 b/d), GC-12 (250,000 b/d) and GC-14 (200,000 b/d). They allow KOC more flexibility, with Greater Burgan's capacity kept stable at 1.58m b/d. But this zone can produce 2.5m b/d for short periods. Its capacity will reach 3m b/d by 2020.

In April 1995 KOC got a study of Burgan Fms from Scientific Software Intercomp of the US. This was part of effort to re-assess Kuwait's reserves and potentials of deeper Fms. KOC had in early 1993 commissioned a series of reservoir simulation studies of Burgan, Magwa, Ahmadi, Minagish, Rawdhatain and Sabriya. They were mostly done before end-1994, with the rest made ready in 1995. In early 1994 it launched a plan to evaluate deep structures in Kuwait, with Chevron and BP helping in this.

Western Geophysical and Geco-Prakla were tasked in 1995 to do seismic, including 7,500 km of 2-D and 2,225 km of 3-D surveys, and 1,200 km of 2-D transition zone studies. Later it ordered two 16,000 ft drilling rigs in addition to one used by Santa Fe. The aim was to develop the deep reservoirs with light/sweet oil to the maximum, to improve Kuwait's mix of crudes for export. Now KOC has technical alliances with Schlumberger, Halliburton and Microsoft. A fire broke out at Burgan on Nov. 24, 2002 and four people were injured. This was caused by a leak in an oil feeder line for GC 3. The fire was put out in a few hours.

Among projects for Greater Burgan is a KD61.9m ($207m) EPC contract won in 2003 by Daelim of South Korea to supply and install two water plants and related facilities at Burgan and Magwa within 22 months. The consultant was Parsons which did the FEED.

Magwa, a culmination of Burgan, lies north-west of Burgan and is in part separated from Burgan by a graben with 31-33 deg. API oils coming mainly from Wara and Burgan sands. It has a deeper Minagish Oolite Fm producing heavy oil, and a Lower Jurassic Marrat Fm with big reserves of light oil. Magwa, found in 1951, went on stream in 1953. Before the Iraqi invasion, it had more than 115 wells, with almost 75 were producing in July 1990. Like Ahmadi and Burgan, most wells have a depth of 4,800 ft, with Marrat's of 16,000 ft.

After KOC became owned by the state in late 1975, it drilled a big number of development wells in the Greater Burgan area, including Magwa. In 1984, KOC found South Magwa in a Middle Cretaceous Fm producing 36-40 deg. API oils. In 1987 KOC said its finds up to 1985 helped boost Kuwait's oil reserves by 25 bn barrels to 92.7 bn. Another find by KOC in 1986 at Abdali near the Iraqi border raised its reserves.

Minagish, found in 1959 by BP/Gulf Oil in western Kuwait, is of 20 deg. API high sulphur oil, from the Mishrif, Mauddud, Wara and Burgan - with 35 deg. API oil with toxic gas from Lower Cretaceous Minagish Oolite and Yamama-Ratawi Fms. It went on stream in 1961 and reserves were put at 2.1 bn barrels. In the 1980s the Marrat was found beneath Minagish and Umm Gudair and under the rest of Greater Burgan.

Minagish has had 21 wells, mostly at 10,000 ft, and can produce up to 220,000 b/d but for a short period. This excludes Marrat oil which is part of Greater Burgan's output. Minagish's GCs are linked to those of Umm Gudair.

Umm Gudair, found in 1962, lies to the south of Minagish. The structural trend extends south across the boundary of the DZ. Production comes from the Lower Cretaceous Minagish Oolite formation with 25o API oil and 3.8% sulphur.Umm Gudair went on stream in 1962. Oil reserves were estimated at 4 bn barrels. But the recovery factor is low. The field had a total of 33 wells in July 1990. With the wells of Minagish having an average depth of 10,000 ft, Umm Gudair's have a depth of 9,000 ft.

Retreating Iraqi troops in February 1991 set Minagish wells and some of Umm Gudair's ablaze and toxic hydrogen sulphide made fire-fighting and repair work at the two fields extremely difficult. Technip Geoproduction had begun development of Minagish and Umm Gudair before Iraq's invasion. Work included construction of oil and gas gathering facilities and a pipeline at the two fields. Four of the GCs for Minagish and Umm Gudair were to be rebuilt totally. After Kuwait's liberation, KOC and contractors rehabilitated the field and had some of its installations rebuilt totally as in the case of Minagish. Umm Gudair can produce up to 190,000 b/d of heavy 22-26 deg. API oils but for a short period.

The repaired GC-18 went into operation at these two fields in August 1994 with a capacity of 50,000 b/d. Four new GCs, to cost over $850m, should boost the two fields' capacity to 530,000 b/d eventually. The contract for GC-27 and 28 were to be awarded in July 1994. But the award, delayed because of budget cuts, was in late 1995 given to China Petroleum Engineering & Construction Corp. (CPECC). The Supreme Petroleum Council (SPC) chose the Chinese for political reasons and KOC got CPECC to lower its price to $390m, because Mitsubishi Heavy Industries had bid $391m. The completion date was set for November 1998. But CPECC's work was way behind schedule. Parsons, in charge of KOC's projects, was opposed to the choice of CPECC yet Kuwait had to please Beijing in view of their bilateral defence pact.

KOC has issued tender documents for a contract to provide gas compression services for GC 16 and gas reinjection services at Minagish. The project aims to reduce gas flaring, raise the amount of gas available for industrial use and power generation, and maintain reservoir stability by reinjecting the gas into wells. Nine contractors have been invited to bid by July 8 for the KD145m ($500m) contract, to be carried out on a design, build, operate and maintain basis. The gas compression services portion covers provision of services for tank vapour, and low and high-pressure compression packages to double the plant's capacity to more than 60 MCF/d. The gas reinjection element involves installation and operation of gas reinjection facilities at reinjection wells MN-129 and MN-140. Each compression train will have a predicted flow rate of 15 MCF/d.

Minagish and Umm Gudair are to be developed by a foreign consortium under an IBBC. Their target capacity of 530,000 b/d should become sustainable for up to 20-25 years, the duration of the IBBC. The foreign group should raise the recovery rate of the two fields' reserves, with KOC having estimated proven reserves at 3.3 bn barrels in Minagish and 3.2 bn barrels in Umm Gudair.