The maturation phase
This involves securing a better understanding of the sub-surface as well as determining what installations are needed to produce the oil and gas in the most profitable manner. Other considerations are the way the liquids should be transported to market and, not least, how the various facilities are to be constructed and installed.
Valhall’s potential was first confirmed in 1975 by the eighth well (2/8-6) on the field. Drilled by Waage Drill I , this proved a thick oil zone and initiated Norway’s fourth field development. ”A new and important oil and gas province has been added to the nation”,[REMOVE]Fotnote: Aftenposten , 10 July 1975. wrote Oslo daily Aftenposten.
Ahead of this crucial discovery, exploration wells 2/11-1 and 2/11-2 had also been drilled on the nearby and connected Hod field. Conditions there are very similar to those on Valhall in terms of gas encapsulated in the rocks over the reservoir. But conditions are smaller and thereby easier to test.
It turned out that the oil in Hod was located at the top of the chalk formation as expected, but that this structure was several hundred metres higher up than the geologists had thought.
Their expectations were based on seismic data disrupted by gas in rocks overlying the chalk layer, which delayed the returning signals and made interpretation difficult. Efforts to compensate for this interference had not been wholly successful.
Since Valhall had a corresponding structure and similar overlying gas, it was assumed that oil must be present in the same layers as on Hod. Well 2/8-6 provided the confirmation.
Because the gas volumes in the rocks over the Valhall oil were larger than on Hod, experience from the latter laid the basis for further adjustments to the estimated reservoir location.
When the well finally penetrated Valhall’s oil-bearing formation, however, it proved to be even closer to the surface than had been calculated.
Further wells drilled in 1976 established that the discovery could be declared commercial. This determination is based onthe following considerations.
- Revenues are largely calculated on the basis of an estimated production profile (how much can be produced each year and for how long) and a product price.
- Costs are estimated on the basis of a rough estimate of planning, development and operating costs, including direct and indirect taxes.
Drilling appraisal wells gives geologists and geophysicists a more secure picture of reservoir size and quality (heavy oil, condensate and gas, and their relative proportions). Sufficient knowledge of the conditions can thereby be acquired to say something about the amount of oil in place (OIP) with an adequate or desired degree of probability.
It will then be possible to estimate how quickly the hydrocarbons should be recovered in order to achieve optimum production.
The assessment of product prices takes account of historical trends and the quality of the output to be sold.
Where costs are concerned, the price tag for a development will be the crucial factor. The challenge lies in determining what level of cost can be expected before either process equipment or platform types have been determined.
That was a demanding process for the Valhall development because the available information about such projects was limitedfor the Norwegian continental shelf (NCS) in the late 1970s.
At this stage of the process, operating costs are normally estimated as a percentage of investment spending because the uncertainties are so substantial.
The period up to the final decision then becomes much more important, and working in concert with the operator’s partners will be a key condition.
Finding alternative solutions
The Amoco/Nocogroup and the Norwegian Petroleum Directorate (NPD) discussed the Valhall/Hod development during the summer of 1976, with the latter pressing the operator to submit an application which could be considered by the Storting (parliament) in its 1977 spring session.
At the same time, the NPD made it clear that Valhall and Hod had to be viewed as a single development. From a resource management perspective, the directorate was not prepared to accept production based solely on the most profitable part of the hydrocarbon reserves.
Spontaneous solution
Before a plan for development and operation (PDO) could be submitted, a decision was needed on where to position the platforms. Amoco’s Asbjørn Tansø and colleague John Evans were asked to present their recommendations to the company’s European organisation in London.
They had only been speaking for five to 10 minutes when the Europe manager interrupted them. ”Hang on a second,” he said, took out a pencil, went over to the map of the licence area and put a cross in the middle of the field.
”That’s where the platform’s gonna go,” he announced, leaving Tansø wondering to himself about the point of the preceding six months of studies aiming to come up with the best solution.
With the benefit of hindsight, the effect of seabed subsidence on the platforms could undoubtedly have been reduced were they positioned as recommended by the studies. That would have put them a little out on the western flank of Valhall, where the reservoir is at its thinnest. Although the rocks would still have been compressed, the installations would not have subsided as much as has been the case on Ekofisk.
Compression of the reservoir is both important and necessary because it represents the biggest driving force for Valhall production through helping to maintain pressure in the structure.
Another issue was the platform solution – should it be steel or concrete? The Condeep concrete design was preferred for fields in deep water, and was more expensive than a steel jacket. Its advantage was that the gravity basestructure (GBS) could support a larger load, which allowed all the functions to be integrated in a single topsides. Moreover, the base cells provided storage if crude was to be loaded into shuttle tankers. Steel platforms were cheaper to build and very suitable for waters less than 100 metres deep.
When work on the PDO began, Amoco’s engineers envisaged a solution with an integrated platform combining production, drilling and quarters (PDQ).
That was similar to the approach adopted on the neighbouring Tor field, part of the Ekofisk area, and involved a staged development of Valhall to reduce the need for compressor capacity, which would mean in turn that less deck space was required.
But the NPD demanded that the field installations should be able to support a more or less parallel development of the whole field – which called for substantial compressor capacity.
Amoco accordingly found that a one-platform solution was not acceptable in safety terms, and proposed instead to install two structures. That would separate the quarters from the processing of large gas volumes under high pressure.
This two-platform solution was envisaged ascomprising a combined PDQ facility and a smaller C structure for compression as well as a flare.
To comply with the NPD’s order to include Hod in the development plans and because the reserve estimates were very uncertain,a four-stage approach was proposed (figure 2):
- Valhall A
- Hod
- Valhall B
- Valhall C
That solution formed the basis of the PDO submitted by the Amoco/Noco group on 4 October 1976. In separate letters of 30 November and 24 December, the Ministry of Industry requested the clarification of certain important questions.
The group’s response on 28 January 1977 included a change to the concept. This transferred the process area to the platform designated for compressing output before was transported to Ekofisk (as shown in figure 2). Among other benefits, the amendment would create greater security against accidents caused by production problems. The two platforms were to be linked by a bridge.
The PDO based on this response still assumed a four-stage development. Also including the pipelines, stage 1 was due to come on stream in the second half of 1980.[REMOVE]Fotnote: Plan for development and operation. Subsequent stages would follow up to Valhall C in 1983. This plan assumed simultaneous drilling and production, and by extensive studies by Amoco/Noco were claimed to demonstrate that adequate care had been taken of safety.
Storting acceptance of the PDO on 1 June was conditional on approval by the NPD, which was very dubious about drilling and producing on a platform where the workers would also be quartered. After a meeting between Amoco, the Ministryof Industry and the NPD on 29 July, the licensees resolved to alter the development plan to a three-platform solution. That provided a separate installation for accommodation, and thereby secured the NPD’s consent for simultaneous drilling and production in September 1977.[REMOVE]Fotnote: Letter from the NPD.
To bring the field on stream, ways of bringing the oil and gas ashore had to be found. The question was which concept would be best – dedicated pipelines from Valhall to continental Europe, tie-into a gas-gathering line from Statfjord, or other possible options.[REMOVE]Fotnote: Stavanger Aftenblad , 8July 1975, “Valhall et godt nytt hjørne av sokkelen”.
The Norwegian authorities had been demanding for many years that oil and gas from the NCS should be landed in Norway, and the sixth ”oil commandment” – a set of policy principles adopted by theStorting in 1971 – reads as follows:
“Petroleum from the Norwegian continental shelf must asmain rule be landed in Norway, except in those cases where socio-politicalconsiderations dictate a different solution”.[REMOVE]Fotnote: Standing committee on industry, Storting, 1971.
However,technology was not available in 1976 to cross the Norwegian Trench – a deep submarine valley close to Norway’s coast – with a big pipeline. Plans for landing in the country were therefore quickly shelved.
In practice, the most rational approach turned out to be laying pipelines from Valhall and later also from Hod to the Ekofisk centre about 35 kilometres away.That made it possible to tie into the Norpipe system and avoid building a separate oil storage tank on Valhall.
An application to land output from Valhall and Hod via Ekofisk and the pipelines for oil to Teesside in the UK and gas to Emden in Germany was submitted to the Ministry of Industry on 4 October 1976.
Great uncertainty over the quantity of petroleum in the fields prevailed at that time. Definitely commercial deposits had only been proven for the central areas of Valhall, and only one exploration well was drilled on Hod.
The Amoco/Noco group had also studied three other options.
- A dedicated pipeline to Esbjerg in Denmark tied into a separate receiving and processing terminal (which would need to be built) and a land-based pipeline from there to a possible German customer. This would be so expensive that the necessary transport tariff had to be three times higher than for Norpipe.
- A tie-in to a proposed gas-gathering pipeline to mainland Norway,but this was not due to be ready until 1984. That would delay gas deliveries by several years, which would mean reinjecting the gas and severely harming the recovery factor.
- A final solution was to build a separate platform for electricity generation close to the Valhall production centre, using the gas as fuel. The power could then be transmitted by cable to Denmark for connection to the Danish grid. This option was not considered feasible without a dramatic increase in the price per kilowatt-hour.
If the oil could not be accommodated in the Norpipe system, an alternative would be offshore loading into tankers for shipment to a continental European refinery. However, that would require offshore storage capacity and add considerably to development costs. And experience of offshore loading on Ekofisk had been very disappointing in terms of efficiency and availability.
The Amoco/Noco group sought an agreement during the winter with Ekofisk operator Phillips Petroleum Norway covering the sale of Valhall gas and the transport of oil from the field. However, Phillips was not initially very accommodating and claimed that it needed all the transport capacity to Teessidefor its own production.
Negotiations made no progress, and Amoco was on the verge of withdrawing from further work in Norway. Heavyweight political pressure had to be applied to secure a solution. Bjartmar Gjerde, the industry minister at the time, called the parties to a meeting where both sides were given a blunt message: ”You have a job, and that’s to reach agreement – or else…”.
Phillips yielded to this threat, and accepted that Valhall oil and gas could also be accommodated in its export pipelines –but set strict standards for the quality of this production.
Another question was how the pipelines from Valhall/Hod would be tied into the extensive transport system already laid on Ekofisk, but it proved possible to overcome that problem.
The agreement was signed on 19 April 1977 and approved by the government two days later. A further important piece thereby fell into place, and the Storting accepted the Valhall/Hod PDO on 2 June 1977.