Oil & Gas / Oil Services / Offshore Production Process 2 comments

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The share of offshore oil and gas production is set to increase in the future. In particular, deepwater production is set to enjoy the greatest growth rate, as high oil prices continue to justify higher exploration costs.












The typical capital expenditure for deepwater exploration by main group components:












The upstream activities consist of the offshore exploration, extraction and production of crude oil and gas. The key processes as shown below:









Stage 1: Locating of oil and gas trap
Oil and gas trap as it is known in the industry is the potential location for oil and gas. Locating an oil and gas trap can be achieved by detailed analysis of seismic survey data. However, whether the location contains oil or gas can only be ascertained upon the drilling of the well.

Stages 2 and 3: Drilling and well completion
Drilling is carried out by a drilling rig which may take the form of a jack-up drilling rig and semisubmersible or by a drill ship. The drilling process commences with the lowering of the drill bit, which is attached to a drill pipe, into the seabed. As drilling of the well progresses, extra sections of the drill pipes are added to enable the drilling to proceed deeper. A navigation device is installed on the drill bit to feed back information to measure and monitor the drilling. Drilling may take weeks or months before the targeted depth is reached.
During the drilling process, drilling fluid is used to reduce friction and remove drill cutting for disposal. Drill cutting may consist of crushed rock and clay. Drilling fluid is known in the industry as drilling mud. A separation system is used to separate the mud from drill cutting after its removal.
After the well has been drilled to its target depth, equipment to monitor and control the fluid flow has to be installed on the well prior to the commencement of oil and gas production. The first step is the installation of casing pipe in the well which runs to the bottom of the well. Cement will be injected by a cement processing system to seal off the well to prevent fluids from leaving. Thereafter, a perforator will be used to make openings in the cement seal through which the fluids will flow. The final step is the installation of valves and fittings to regulate, measure and direct the flow of oil and gas from the well.

Stage 4: Starting the flow and artificial lift
After the well has been completed, the hydrocarbons, namely, oil, gas and water, flow from the reservoir to the well on the surface to the production facility, which is known in the oil and gas industry as topside processing and storage facility. Natural pressure in the reservoir will raise the hydrocarbons to the surface.
Once the reservoir loses its natural pressure, artificial lift methods are used to expedite extraction of oil and gas. Artificial lift can be achieved by injecting water or gas into the reservoir to raise the hydrocarbons to the surface.

Stage 5: Treatment and separation of oil, gas and water
Hydrocarbons that are removed from the well consist of oil, gas, water and other minerals such as sand. These hydrocarbons will undergo a treatment and separation process via specialised separation equipment whereby oil, gas and water are extracted and stored separately. Water will then be returned to the ocean. Great care is taken to ensure that the quality of water returned to the ocean after the treatment and separation processes complies with strict regulations. The water is known as “produced formation water” or PFW. The processing of PFW has to comply with strict regulations to ensure that the PFW does not pollute the ocean.

Stage 6: Transportation of oil and gas
Oil and gas has to be transported from the production site to the storage facilities which may be located in another part of the world. For offshore oil and gas production, oil tankers and subsea pipelines are normally used to transport oil and gas from the production site at sea to the storage facility on land.
Custody transfer metering systems are installed at the storage facility to measure the quality and quantity of oil and gas received.

References:
(1) UOB Kayhian 29 Jan 07 report on Hiap Seng
(2) Technics IPO prospectus