TRANSCRIPT: The ExxonMobil Strategy For Mature Field Life Extension
In this exclusive interview, we speak with Dominic Genetti, Operations Manager at EXXONMOBIL about the company’s strategy with regards to maximising production in one of its mature assets on the Norwegian Continental Shelf (NCS).
TH Tim Haðdar, Editor-in-Chief, Oil & Gas IQ
DG Dominic Genetti, Operations Manager, ExxonMobil
TH Hello and welcome. This is Tim Haðdar, Editor-in-Chief of Oil & Gas IQ and today I am going to be speaking with Dominic Genetti, who's an Operations Manager at ExxonMobil.
DG Yes, glad to be here, Tim. Thanks for inviting me.
TH Let's get into the Balder and Ringhorne set-up as it stands, because you're working directly in the commercial zone.
DG Yes, that's right, Tim. Balder and Ringhorne are part of an integrated asset that also includes a field called Jotun. And oil and gas from these facilities are stored on two FPSOs, floating production and storage offloading vessels, and they're called Balder and Jotun A.
The Balder reservoir was developed and the subsea wells are tied back to the Balder FPSO. And the Jotun field was developed with a wellhead platform that's called Jotun B and its production is tied back to the Jotun A FPSO for processing. Balder and Jotun production started about 15 years ago in 1999 and then later around 2003 Ringhorne, which was developed with a wellhead platform, as well, was tied back to Balder and Jotun A. So, it's a very integrated facility with the four different production assets.
Peak production from the fields was over 200,000 barrels a day. And currently we're making around 65,000 barrels a day, so quite a bit of decline over the last 15 years and most production today comes from Balder and Ringhorne. What makes it a little complicated is the fields are at different places in their lifecycles.
For example, we just tied in three new subsea wells to the Balder FPSO, adding about 25,000 barrels a day and they're still more development plans for Balder. There's also still a lot of development potential at Ringhorne. However, the Jotun field is fully developed and it's nearly depleted and we've started planning for decommissioning of Jotun B wellhead platform.
TH Okay. Now let's talk a little bit about ExxonMobil's approach to late field life and from the economic side how do you manage to deal with an evolving set of business drivers?
DG Yes I think, Tim, there's a view that end-of-field life happens when the oil and the gas is depleted from the reservoir and that really isn't quite accurate. End-of-field life happens when the profit runs out. So, when the cost to produce a barrel of oil is higher than the cost you can sell it for then you've reached your end-of-field life.
In my experience, having worked in oil and gas operations across five different continents, is that often we leave a lot of recoverable hydrocarbons in the reservoir because the cost structure is too high. I've also seen a lot of exceptions to this. Some reservoirs decline very rapidly and then the production settles at a low but relatively flat rate. And ExxonMobil has assets that have produced many years beyond the original expectations, in some cases several decades beyond the original design life.
So, our approach is relatively simple. The key to optimising end-of-field life is a good understanding of the factors that impact profitability, and where these factors are headed one, five and even ten years into the future. The three main factors are production volumes, cost and price. Of course, we can't control the price, so we focus on production and cost. And the key is to identify the trends early, because then you can take steps to control where the future is going.
TH With any oil and gas project HSE is the most critical part. How are you making sure in this Balder/Ringhorne project that your producing assets remain economically viable? As you said, end-of-field life is when the end of profit comes. And how do you address the balance between HSE and economic viability?
DG Yes, this is a very interesting area, Tim. As you said, you know, protecting people and the environment is the most important thing and protecting people and the environment is a core value for ExxonMobil that doesn't change regardless of where the asset is in its lifecycle. In fact, we just won't operate if we can't do it economically in a safe and responsible manner.
However, business drivers do change as the oil and gas assets mature. For example, during construction and commissioning, it tends to be very schedule-driven. During early production there tends to be a lot of focus on production, on equipment reliability, debottlenecking, reservoir optimisation, and so on. And then, during midlife, as your base production declines, typically you have an opportunity to do some additional drilling or enhanced recovery to redevelop the reservoir. And then, finally, during late life, the primary business focus needs to shift to managing the cost structure.
And each one of these phases, of course, requires different behaviour from the organisation and probably the most important key is communication. As a leadership team we focus on painting a clear picture of where our business challenges are and what success looks like in the future. We modify the organisation if it needs to be modified to align with the needs of the future and communicate what is needed from each one of the parts of our organisation.
My experience is that we have very, very talented people in this industry and if we paint a clear picture of what's needed and why, then the organisation will adjust to be successful. But it takes a lot of time and effort to make these changes yield results.
So, if you expect the costs are going to be higher than revenue in the next year or two then it may be too late. You really need to anticipate where these trends are going and make adjustments early.
A bit more specifically about Balder and Ringhorne and Jotun and where we're headed as it relates to end of field life and HSE issues. Safety is a core value but there is still a lot that can be done to remain economic as production declines and the asset ages. And, I'll go back to my comment about business drivers - I can't control the price, so I've got two options: I can either increase production or decrease costs to stay viable. And we have multiple opportunities to pursue and optimise production, development drilling, facility debottlenecking, artificial lift, recompletions and so on, but this is the fun part. This is the part the industry is very, very good at.
The true differentiator at end-of-field life is cost management, and at ExxonMobil, we take a very disciplined approach to operating and capital expenses. And it really boils down to risk management.
Near the end-of-field life, much of the cost is directly associated with managing safety, facility integrity and reliability risk. The key is to separate safety risk from financial or business risk. We don't compromise on safety risk, but we will take a fair bit of business risk and financial risk changes significantly in a maturing asset and the organisational culture has to change to manage that.
Now, just to give you an example, during peak production I might be willing to pay for a maintenance strategy that gives me, say, 99 per cent of uptime. However, when production is a fraction of what it was at peak production, economics may be optimised with a maintenance strategy that delivers 80 per cent or 85 per cent uptime for just a fraction of the maintenance cost.
So, there are many opportunities like this and the key is to separate safety risk and environmental risk from business risk. And that is really the main topic of my presentation at the upcoming conference: how do you separate those risks and manage them in different ways so that you can control cost during end-of-field life?
TH Dominic, thanks so much for your time. We really appreciate your insights and we look forward to meeting you and welcoming you at the conference coming up in May.
DG No problem, Tim. Looking forward to the conference and appreciate your time.
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