JPT: China Oil and Gas Conference: Conference Highlights China's Energy Growth, Technology Opportunities Feb07

Vol. 59 No. 2

February 2007

China Oil and Gas Conference: Conference Highlights China's Energy Growth, Technology Opportunities

John Donnelly, JPT Editor

Recent advances in global upstream technology and the development of China’s oil and gas industry headlined the International Oil and Gas Conference and Exhibition in China, held 5-7 December in Beijing. The event, jointly organized by SPE and the Chinese Petroleum Society, attracted more than 2,000 attendees from 39 countries. It was the eighth edition of the conference; the first was held in 1982.

Zhou Jiping of CNPC and 2007 SPE President
Abdul-Jaleel Al-Khalifa tour the exhibit on
the opening day of the conference.

The conference shows the deepening interest in the region’s upstream and “will bring new opportunities and new technology to China,” said Liu Baohe, Vice Chairman of the Chinese Petroleum Society, former Vice President of PetroChina, and a conference Executive Committee Cochairperson at the event’s opening ceremony. During the opening, 2007 SPE President Abdul Jaleel Al-Khalifa described his “people first” initiative. Excellence in the industry is achieved when both a company and individuals at that company possess high character and competency, he said, because commercial interests and employee interests are complementary, not contradictory. The oil and gas industry needs to develop a “people key-performance indicator” that measures how happy employees are and whether their jobs tap their full potential. “This is the right thing to do and the only way our industry can survive in the future,” he said.

Zhou Jiping, Vice President of
CNPC, said technology has been
critical to his company's success.

The opening keynote panel session featured top executives from major Chinese firms as well as perspectives from outside the region. Zhou Jiping, Vice President of China National Petroleum Corp. (CNPC), spoke of how key technological breakthroughs have led to the industry’s, as well as his company’s, success. World oil production has experienced three major stages, each propelled by advances in technology. “Technology has created numerous miracles in the past,” he said. In the 1920s and 1930s, the industry saw the first applications of seismic, reflected-wave method, and cone-bit technology, he said. Several decades later, in the 1960s and 1970s, E&P took another huge leap forward, with key advances marked in 3D seismic, directional-well drilling, offshore seismic, simulation, and horizontal drilling. Better drilling and production equipment opened up new areas for E&P. Now, the industry has entered a third stage, he added, with exploration shifting to deeper waters, more remote developments, and more complicated formations while having to deal with more stringent environmental requirements. Recent advances in E&P technology have ushered in a new era of success at CNPC, he added, including oversea upstream ventures in places such as Sudan.

Wang Zhigang, Vice President of
Sinopec, described his company’s
E&P growth over the past several years.

An executive at another one of China’s major oil and gas concerns, Wang Zhigang, Senior Vice President of China Petroleum and Chemical Corp. (SINOPEC), described his company’s E&P growth over the past 5 years. His company’s goals have been to stabilize existing output, explore new areas in the region, and develop its overseas business, he said. The firm’s oil output grew to 39.2 million tonnes in 2006 and is expected to top 40 million tonnes in 2007, and its gas production is growing at a 10% annual clip. Its current upstream priority is to develop its existing reserve base, he said, which calls for enhanced-oil recovery (EOR) projects in mature fields and upgrading its technological prowess in EOR, fracturing, and shallow water. The company has made significant progress in applying these technologies in the past few years and now is concentrating on applying new reservoir-management methods, he added. “SINOPEC will continue to apply the latest technologies upstream to improve our operations and improve profitability,” Wang said. The company also is encouraging its employees to develop proprietary up-stream technologies, and will be working to improve its intellectual property rights protection, he added.

Offshore resources and liquefied natural gas (LNG) are the top concerns of China National Offshore Oil Corp. (CNOOC), the third-largest oil and gas concern in China behind CNPC and Sinopec. Liu Jian, Executive Vice President of CNOOC Ltd., told the audience that his company’s E&P strategy will remain focused on offshore China. The company, which operates 45 offshore fields, is China’s largest offshore producer and accounts for 15% of total China oil output.

A gap has been growing between gas supply and demand in China, which presents opportunities for more gas production, Liu added. CNOOC plans to participate in the development of China’s LNG market, with a concentration on southeast China. Liu sees two major E&P challenges for offshore China production—how to develop heavy oil more efficiently, and how to increase production in deep water. About 70% of oil in place offshore China is high-viscosity heavy oil and recovery rates to date have been low. Great potential exists for new technology applications that would increase output of heavy oil as well as increase oil and gas production in the deep South China Sea, he said. China has suffered from lack of experience in design, construction, and development in deep water but is poised to make great strides in that area.

Offering a truly international perspective, Joe Leone, Vice President of Drilling and Production for ConocoPhillips, reviewed some of his company’s advances in drilling and completions technology in Venezuela, Indonesia, China, the North Sea, and the U.S., and described how that technology is improving productivity and efficiency and lowering costs and environmental impact.

At the Petrozuata heavy oil development in Venezuela, conventional wells were inadequate so “fishbone” wells were developed that improved production rates 100-200 times.
At an offshore carbonate field in Indonesia, three state-of-the-art technologies—big-bore well design, managed-pressure drilling, and the use of downhole development valves—increased productivity and allowed field development to proceed with just two wells instead of the originally planned five
At Bohai Bay in China, ConocoPhillips and CNOOC confronted the challenge of controlling sand production by using screen-only completions after gravel packing was deemed inefficient.
In south Texas, the firm is drilling entire wells with casing instead of well pipe to reduce costs, and is now applying this technology in Norway.
At the Vulcan Field in the North Sea, coiled-tubing drilling helped revive gas production from this field that was considered for abandonment.
In Canada’s harsh winter conditions, the firm is combining casing drilling with coiled-tubing drilling to try to cut drilling costs in half and meet formation-evaluation requirements. If this is successful, the approach will be tried in other remote areas.

Technology Transfer

A critical issue for advancing technology, not only in China but around the globe, is how to improve technology exchange and knowledge sharing. A panel session at the conference examined some of the successes, failures, and best practices in technology and information transfer. Knowledge sharing is critical to the oil and gas industry and, therefore, critical to developing societies, said session co-moderator, Liu Yuzhang, Vice President of the Research Institute of Petroleum Exploration and Development for PetroChina. Companies must think about how to improve information sharing, evaluating traditional, more formal, approaches as well as new ways that technology makes available, he said.

Panelists Saif Al-Hinai, Director-Northern Asset, Petroleum Development Oman, stressed that operators also should evaluate how they use technology. Often they do not employ the right technologies or do not develop proactive strategies for using technology. Technology often is left just to engineers, he said, but management should be more involved in its development and deployment.

An issue greatly affecting knowledge and technology development is the shortage of technical staff in the industry, said Jaizan Hardi Mohamed Jais, Senior Manager, Data Management and Capability Development for the Petroleum Management Unit of Petronas. His company has a significant requirement for trained technical staff to support the firm’s growth.

Petronas’ practice of knowledge sharing involves both formal and informal approaches. Training programs encourage knowledge sharing from junior hires up to management. In addition, online discussion forums and online information storage promotes sharing, as does a project “lessons learned review” program. For knowledge not written down, the company conducts “expert interviews” to try to capture that information. Interviews are conducted with key people involved in a project and the sessions are taped and transcribed and then posted on the company’s intranet site. The company started doing this to capture information from soon-to-be retirees but now does it with a variety of personnel to ensure that critical practices and information are retained. There will be challenges associated with the coming “big crew change,” he added, but the industry “needs to allow the young workers to make mistakes.”

Other sessions examined the technical, financial, and environmental challenges of unconventional oil and gas production and improved oil and gas recovery techniques. In the latter, Jenn-Tai Liang, an Associate Professor at the Chemical and Petroleum Engineering Tertiary Oil Recovery Project at the U. of Kansas, spoke of the challenges of improving sweep efficiency. Overall recovery is low for most improved oil recovery processes, he said. Fractures usually have a negative effect on sweep efficiency, but blocking a fracture could damage productivity. Some operators have had field success using a formed gel as a blocking agent for fractures, and the most successful involved injection of large volumes of gels into naturally fractured reservoirs. But the practice needs additional research and new technology application, he said.

Service, Operator Perspectives

Topical lunches at the conference featured operators and service company perspectives. Khaled Al-Buraik, Chief Petroleum Engineer with Saudi Aramco, outlined the national oil company’s plans for production growth. Saudi Arabia’s current production capacity is 10.8 million BOPD but will expand to 12 million BOPD by the end of 2009. That increase is critical to the global supply/demand balance because growth rates for emerging economies are expected to continue at a strong pace and OPEC member countries are expected to supply a growing percentage of the world’s oil needs in the future.

Khaled Al-Buraik spoke of
Saudi Aramco's upstream
development plans.

Saudi Aramco plans to increase capacity, expand its E&P efforts, enlarge its gas system, and increase refining capacity by a third to 6 million BOPD, he said. Currently, it has 120 rigs in operation—double the number from 2004—with plans to expand to 130 working rigs by the end of 2007. The firm is confident of its E&P plans because few exploratory wells have been drilled in Saudi Arabia, the country has a tremendous resource base, and new technologies are being applied that will boost production, he said. Key applications, in particular, are being made in reservoir simulation and downhole monitoring. Al-Buraik said future battles in the petroleum industry will be battles for talent. Aramco spends more than 10 million manhours a year training employees and has begun sponsorship programs with engineering and geoscience students to encourage them to join the industry, he said.

Keith Morley, Vice President, Enterprise Excellence, for Weatherford Intl., spoke of the industry’s drive to develop technology to push mature resource production, “chase” unconventional output, and manage extreme environments. Just as pharmaceutical companies are helping develop new drugs because of demand from an aging population, service companies are developing new technologies to help develop and extend the life of reservoirs, he said. Service firms are paying particular attention on optimizing well costs, maximizing reservoir contact, and boosting well productivity, he added.