[ROCKMAN]

Not the news the oil patch needs to put out while telling folks they shouldn’t worry about the long term effects of frac’ng. I still don’t feel there are any significant long term downsides but the news is the news:

http://www.rigzone.com/news/oil_gas/a/1 ... rill_Fluid

“A corrosive drilling fluid that triggered the North Sea's worst gas leak in 20 years could threaten similar deep-sea wells across the world, and operator Total has already warned Shell that its nearby Shearwater field may be at risk. The corrosive fluids implicated in the leak at Total's Elgin field, such as calcium bromide, are commonly used in such deep-sea wells, and experts fear a recurrence as operators, under pressure to offset declining output from conventional reservoirs, turn to deeper, hotter and higher pressure fields.

"Bromide brines have been used in thousands of wells since their introduction in the 1980's," John Downs, a chemical engineer who runs his own consultancy group, told Reuters. "An extensive well repair programme may be needed if the stress corrosion cracking caused by bromide brine in Elgin is also happening elsewhere." So worried is Total about recurrence in the Elgin field itself, it has plans to kill at least 10 other wells in the complex as well as the one that leaked, which could cost more than 1.5 billion pounds ($2.34 billion) to replace. The North Sea is host to the highest number of high-pressure, high-temperature (HPHT) reservoirs of any mature oil and gas producing basin.

[Plantagenet]

Doesn't the oil biz employ a lot of very smart and well paid chemists? How could they be so stupid as to use corrosive brines in their down hole work?

Wait--- I know----- it was the cheapest way to go wasn't it?

[ROCKMAN]

P - We actually use a lot of corrosive chemicals but have long standing protocols for dealing with them. Somehow no one was monitoring the long term effects in this situation. I've set many "corrosion tags" in wells: when you know there may be a problem you use those tags and check periodically to monitor for corrosion. We also do a lot of cathode protection. This is actually a well understood cottage industry in the oil patch which earns many tens of $millions world wide. But someone missed this.

And yep...probably someone trying to save on maintenance costs. Unfortunately not a rare excuse.

[Ron Patterson]

$this->bbcode_second_pass_quote('', 'T')otal has said the leak was caused by a corrosive reaction between calcium bromide used to complete the well and grease in the pipework, which under high pressure cracked the piping.

[Plantagenet]

You make calcium bromide by mixing hydrobromic acid w calcium carbonate


It doesn't take too much imagination to see the possibility of hydrobromic acid being generated down hole

Yes it is fx#%ing corrosive as hell. It's right on the safety sheet for this chemical.

Do people in the oil biz know about the standardized safety sheets that accompany all chemicals in the US?

[godq3]

Here's update on North Sea (UK July data):
"The largest downward contribution came from oil & gas extraction, which fell by 17.2%" (year over year).
http://www.ons.gov.uk/ons/rel/iop/index ... y-analysis

[rockdoc123]

Total is suggesting the problem was a reaction that occurred between calcium bromide (a completion additive that has been used for the last few decades in the North Sea) and grease in the pipework combined with the high pressure and high temperature environment.
The area they are drilling is one of a few HPHT (high pressure high temperature) areas in the world so there are still unknowns. Stress corrosion cracking is something that can be a much bigger problem in this environment. The issue here is that calcium bromide has been used for a long time in the UK North Sea with no problems, the difference being that it was used under more benign P&T conditions. As Rockman points out lots of monitoring is generally applied to these wells but stress corrosion cracking is something that isn't all that easy to predict as it entails many, many variables.
I guess my first question would be what grade of casing they were using. That is often where operators cut corners.

[sparky]

.
Beside brine , which is very corrosive , the next one is Hydrogen sulfide , H2S
present in many fields it is a glutton for hard steel ,
particularly the stress points , it doesn't take ten years either to chew through it

[ROCKMAN]

Ron et al - sorry to be mia ...out on a sick well. Doc gave a good answer. The reason they have to use CaBr and other heavy salt brines is to create a sufficiently high weight fluid to control those high down hole pressures. Zinc compounds are even heavier. But as doc says we've been using brines on the completion side of the biz for decades. My sick well actually had a problem displacing the brine we had in the hole for the last three years...no corrosion problem. Also as doc points out you match your csg specs to the fluids you plan to use. There is very expensive chromed tubing used in the most severe cases. Not only very expensive but also more expensive to run into the hole. And then start if contaminating with other compounds like grease and problems ensue. Add high temps and it can get much worse.

Yep...you would think with the monies involved they wouldn't get it wrong. But consider the Motive refinery rebuild that cost $10 billion. And they had to shut down almost immediately because some fluid they has used caused terrible corrosion. Spent $10 billion and still didn't get it rich. F*cking engineers! LOL.

[Subjectivist]

The Guardian newspaper in the U K is unhappy about north sea oil again.
$this->bbcode_second_pass_quote('', 'L')ast Wednesday, every single Norwegian became a millionaire – without having to lift a lillefinger. They owe the windfall to their coastline, and a huge dollop of good sense. Since 1990, Norway has been squirreling away its cash from North Sea oil and gas into a rainy-day fund. It's now big enough to see Noah through all 40 of those drizzly days and nights. Last week, the balance hit a million krone for everyone in Norway. Norwegians can't take a hammer to the piggy bank, amassed strictly to provide for future generations. And converted into pounds, the 5.11 trillion krone becomes a mere £100,000 for every man, woman and child. Still, the oljefondet (the government pension fund of Norway) owns over 1% of the world's stocks, a big chunk of Regent Street and some of the most prime property in Paris: a pretty decent whipround for just five million people.

Wish it could have been you with a hundred-grand bonus? Here's the really nauseating part: it should have been. Britain had its share of North Sea oil, described by one PM as "God's gift" to the economy. We pumped hundreds of billions out of the water off the coast of Scotland. Only unlike the Norwegians, we've got almost nothing to show for it. Our oil cash was magicked into tax cuts for the well-off, then micturated against the walls of a thousand pricey car dealerships and estate agents.

All this was kick-started by Margaret Thatcher, the woman who David Cameron claims saved the country. The party she led still touts itself as the bunch you can trust with the nation's money. But that isn't the evidence from the North Sea. That debacle shows the Conservatives as being as profligate as sailors on shore leave.

[ROCKMAN]

Sub - Here is an interesting stat I pulled up the other day: UK North Sea oil production peaked in 2000 at 2.9 million bopd. Today it appears to have fallen 50% to around 1.5 million bopd. But revenue from UK NS oil in 2000 was about $87 million/day while today it's about $150 million/day. IOW the N Sea production is creating $20+ TRILLION more revenue per year now then when production peaked 14 years ago. Assuming the British govt's royalty share is about the same now as then they have a greater opportunity then ever before to store some nuts away for the future. So a simple question: why aren't they doing it now? Folks over there can piss on ole Mags for a variety of reasons IMHO. But she assumed room temperature some time ago so they can't blame her for any shortsightedness in recent years.

[dolanbaker]

I think that's fair to say that the only mistake UK oil producers made was to over produce during the 1990s when the world oil price was low, restricting production to match consumption could have delayed the decline for about a decade, with a far better financial benefit to the country than the short term income from selling the oil at rock bottom prices.

The Norwegians on the other hand could never consume all they produced so exporting and pocketing the profits was a no brainer.

[ROCKMAN]

DB - True but jump into your Way Buck machine: during the 90's they were selling oil or 300% more than they were getting just a decade early. I'm to tired to dig: was the UK exporting oil during peak NS production or was it all going to local consumption?

[dorlomin]

$this->bbcode_second_pass_quote('ROCKMAN', 'w')as the UK exporting oil during peak NS production or was it all going to local consumption?

[dorlomin]

$this->bbcode_second_pass_quote('ROCKMAN', ' ')IOW the N Sea production is creating $20+ TRILLION more revenue per year now then when production peaked 14 years ago. Assuming the British govt's royalty share is about the same now as then they have a greater opportunity then ever before to store some nuts away for the future.

[ROCKMAN]

d - Mucho thanks. That last chart is very interesting. Were those revenue numbers adjusted for inflation? If not that was a huge drop in revenues in the 80's explained by the global recession and oil price collapse. Also striking to note where most of the gov't revenue is recently coming from (corporate taxes and that supplementary fee which sounds like another tax) and where it isn't coming from (bonuses from new leases and royalties). I didn't integrate the total volume of exports exceeding consumption but it appears significant. But here's a key question: could the gov't restrict exports if it had wanted? In general it isn't legal to export any oil from gov't leases in the US. But since all minerals rights in the UK belong to the gov't such a restriction would apply to all oil production. OTOH would trade treaties have prevented it...many of those producers were foreign companies. And it should be remembered that only the royalty revenue belonged to the gov't: the operators needed the balance to maintain their value and provide capexfor additional development. Would have been nice to keep some of that oil in the ground but at the expense of damaging the industry and destroying incentive to develop more resources? Also consider that the largest component of gov't income during that period was corporate taxes: restricting production would have destroyed much profit and reduced gov't revenue.

I know it's a very old phrase but still as true today as ever before: you can have your cake and eat it to. While one could make an argument for restriction production during the peak years and selling it later that same argument could be made today...even stronger in light of what we now understand about PO. Would the British people support restricting domestic production today and become more dependent upon energy imports so the can save reserves for a rainy day? That's the same proposition they could have been offered when production peaked. My inclination is that the public would not support the idea at either time. Perhaps shortsighted but hasn't that been the public attitude about energy, well, forever? And despite what some folks think don't the politicians follow the lead of the majority opinion? If not they would be replaced by ones that would.

[Subjectivist]

$this->bbcode_second_pass_quote('dorlomin', '')$this->bbcode_second_pass_quote('ROCKMAN', 'w')as the UK exporting oil during peak NS production or was it all going to local consumption?

[ROCKMAN]

Sub - Your right...good sport. Another prediction of the past: the UK gov't limits oil production...but before or after the fields are discovered? Before: fields aren't discovered/developed so there's no capability to increase production when prices rise. And it takes years to start up the exploration phase even before the years it takes for drilling/production begins. Thus the UK is forced to import a lot of oil at the new high prices for many years. At the same time the gov't loses revenue it needs to provide social services to it's citizens. After the fields are discovered: some companies that have spent/borrowed $billions can't meet debt burden. And many will lack capex to maintain exploration programs. In addition economic incentive to explore/develop new fields is lost so a future gap in production develops. But the fields that will be developed during this time will be the largest ones with the cheapest oil to develop. The remaining fields will be the smaller and more costly projects. Thus it will take even higher prices to develop them later. Shareholders, including many Brits, lose equity in the oil company stocks. And jobs are lost.

That's the thing about those unintended consequences. We can imagine the best of times/the worst of times. And all the what-ifs are valid. I've been living this game for almost 4 decades. I've dealt with most of those what-ifs throughout my professional career.

[dorlomin]

Oil is only the icing on the UKs economic cake. It is still something like the worlds 6th largest manufacturing nation and near the top in terms of financial activity. It is likely that being stimulating growth in the 80s we would get a much larger cut from the whole economy (growing at something like 2.5% pa) over 30 years than the growth in the value of that oil would provide.

To get all David Riccardo, we are better at focusing on growing our manufacturing, service and financial industries then buying the oil than going for some kind of energy mercantalism and hoarding our oil.

[ROCKMAN]

Dolomin - Good point. It's a complex system and difficult to put together a comprehensive model. I can offer a purely oil patch perspective. You've offered a manufacturing perspective. Someone could offer a balance of trade perspective, a gov't revenue perspective, a national security perspective, a stock market perspective, etc., etc.

Now we just need someone really smart to put the whole enchilada together and show us the golden path. LOL.