Insight: Exploration in South East Asia
Thursday, July 28, 2011
China claims “indisputable sovereignty over the South China Sea islands and adjacent waters” based on centuries’ old rights that allow its maritime border to reach almost to Borneo; these claims bring it into dispute with Vietnam, Malaysia, Philippines, Brunei and Taiwan.
This renewed interest is based on China’s need for resources and its assessment that there may be 200 billion barrels of oil, as well as 2,000 Tcf of gas, under the South China Sea.
Does the history, and recent experience, of exploration in this region – and in South East Asia more generally - indicate that such huge resources may remain undiscovered and if Yes, where might they be?
By David Bamford, OilEdge
The Exploration “Life Cycle”
This is a cartoon representation of the Exploration “Life Cycle” of exploration plays (and, occasionally, whole basins). It illustrates the essential discussion about “Where shall we explore?”
Exploration “Life Cycle”: Play Status
The status of any play can be considered in terms of its position in this Cycle. To illustrate, the movement of the UKCS North Sea Brent (oil) province can be positioned over its 45+ year history: Frontier - in the 1960’s: Prolific – in the early 1970’s: Mature – in the late 1970’s and in the 1980’s: “Red” - today
Explorers are often accused of being only concerned with Volumes but of course this Cycle has profound implications for Value.
In the early, Frontier, phase, of course there is only expenditure with as yet no production of even significant discoveries.
In the Prolific phase, value creation is at a maximum, as discoveries are large (typically, “Giant” accumulations of >250mm boe gross), and therefore F&D costs are spread over a large number of barrels.
In the Mature phase, value creation can still be good but technology application and cost reduction become important in order to enhance economics.
In the “Red” phase, value destruction is probable, occasionally inevitable, as success rates plunge, the very few discoveries are small, and costs escalate. Of course, it remains possible for a company to “win” during this phase but the number of “winners” is small, the number of “losers” very high!
The following sketch illustrates the evolution of discovered resources, value, costs and a notion of ‘reward’, through these cycles of exploration from Frontier to “Red”.
Exploration “Life Cycle”: Value Generation
It is important to emphasise that the right level of analysis is the play level. It would be absurd to pretend that a whole region lies in the “Red” zone for example.
A historical perspective
There is a long history of exploration in South East Asia, beginning with the observation of seepages in the Dutch East Indies; by 1865, more than 50 seeps had been identified in the region. The first successful oil well was drilled in northeastern Sumatra in 1885 and the Royal Dutch company was launched in 1890, by the end of the century becoming a key global competitor of Standard Oil.
Just over one hundred years later, the descendants of Royal Dutch/Shell knew the South East Asian petroleum story very well, perhaps better than anybody. The broad ideas discussed below originate from a regional review of the oil and gas potential of South East Asian Tertiary basins, carried out in Shell during the 1990s and reported on by the eminent Shell geologist Harry Doust (Doust and Sumner, 2007). The main conclusions of this study were that petroleum prospectivity could be linked to the presence and relative development of a small number of petroleum system types (PSTs), common to the SE Asian family of basins as they pass through an early Tertiary synrift to late Tertiary postrift geological history, with an almost exclusively land–plant and/or lacustrine–algal charge system and characterized by rapid short wavelength sedimentary variations involving a distinct suite of depositional environments and their associated lithofacies.
Petroleum System Types in SE Asia Tertiary basins (after Doust and Sumner, 2007)
The cartoon shows Doust and Sumner’s summary of the four main petroleum system types recognized in South East Asia, namely:
- Early Syn-rift (typically Eocene to Oligocene) - corresponds with the period of rift graben formation and the following period of maximum subsidence. Often deposition is limited to early-formed half-grabens.
- Late Syn-rift (Late Oligocene to Early Miocene) - corresponds with the period of waning subsidence in the graben, when individual rift elements amalgamated to form extensive lowlands that filled with paralic sediments.
- Early Post-rift (typically Early to Middle Miocene) - corresponds with a period of tectonic quiescence following marine transgression that covered the existing graben–horst topography.
- Late Post-rift (typically Middle Miocene to Pliocene) - corresponding to periods of inversion and folding, during which regressive deltas were formed.
Note that as shown in this cross-section, the existence of a lacustrine source rock system in the Syn-rift is a crucial component of the working petroleum systems.
What is especially relevant is that these South East Asian PSTs are in the main thoroughly explored and have significant production histories allowing us to ask two crucial questions, namely “what field sizes do such PSTs yield?”, and also “are there any special issues connected with them?” Doust and Sumner summarize as follows:
- The Pre-rift (pre-Tertiary basement) is only lightly explored.
- Fields producing from Early Syn-rift lithofacies are oil-rich but small, with average ultimate reserves of 25 million barrels oil and 60 bcf gas.
- Fields producing from Late Syn-rift lithofacies are oil prone but with significant gas (2:1 ratio) and of moderate size, with average ultimate reserves of 55 million barrels oil and 293 bcf of gas.
- In the Early Post-rift, gas dominates, perhaps due to access to contemporaneous gas-prone marine source rocks. Average field size is 28 million barrels oil but 2.2 Tcf of gas.
- In the Late Post-rift, average field sizes are moderate – 41 million barrels oil and 486 bcf gas. Potentially, contemporaneous turbidites distal from the deltaic depocentres is an exciting play in present day deep water.
As mentioned above, lacustrine source rocks are important and these provide a complication in that the reservoired crude oil usually has a high wax content. The difficulty with waxy crude is that it can have a tendency to turn solid en route from the reservoir to the processing facilities, in a pipe-line and so on. The technology to overcome this problem, including the injection of chemicals, lighter oils and the heating of flow/pipelines, exists and has led to successful production throughout SE Asia
Current trends
Reflecting on the raw data of South East Asian exploration success rates, discovery sizes and finding costs, both Wood Mackenzie
# and IHS
# assert that:
- Since around 2003, the number of discoveries has been rising slowly but the resource additions have been dropping
- Whilst exploration success rates are more or less holding up, discovery sizes are dropping: average field recoverable size: 5-10 MMbbl for oil fields; 5-20MMboe for gas fields; overall, gas is more prominent
- Discovery costs ($/boe) are rising more rapidly than elsewhere and so there is competitive pressure from other regions
- Whilst exploration is just about profitable globally, in SE Asia it is not.
Thus, this broad brush summary would suggest that much of SE Asia is either
Mature or in the
“Red” zone.
However, SE Asia is large with a complex geological history and complex politics and Longley
# has pointed out that recent and planned activity gives plenty of encouragement at the play level:
- The last two years have delivered a variety of material discoveries around the region: both in “Frontier” areas and in new plays in “Mature” areas; by large and small companies; using old and new technologies
- Results have demonstrated that significant exploration potential remains; both in accessible areas and in areas preserved due to boundary disputes
- Many already identified exciting plays will be drilled and tested in the next 2 years; and there is no reason that this should not continue into the foreseeable future.
Where are the “Giants” lying in wait?
It is worth probing the issue of the size of recent discoveries in a little more detail, using Longley
# as a source:
- Paus: Deepwater Sarawak, April 2009: ?125bcf and 10mmbo
- White Shark: Phu Khanh (offshore Vietnam), March 2009: <100mmboe
- Lingshui 21-1-1: Deepwater Quingdongnan (offshore China), 2010: ?260bcf
- Asap-1: Kasuri (West Papua), May 2008: ?2.4Tcf
- Badik-1: Tarakan (Kalimantan), 2010: 40-60mmbo and 100bcf
- Janggrik-1: Kutei (Indonesia), 2010: 20mmbo and 500bcf
- Liwan: Deepwater Pearl River Mouth (offshore China), 2006 - 2009: multi-Tcf and moderate oil volumes
- Sultan: Makassar Straits (Indonesia), 2009: 50bcf
Based on these numbers, the hopes for “Giant” fields would either be Deep Water – as exemplified by the Deepwater Pearl River Mouth and some of Indonesia - or more remote areas – as exemplified by West Papua, in both cases where new play ideas and new technology may be deployed.
Equally, it must be said that some areas, such as the Makassar Straits, have proved disappointing – dropping directly from
Frontier to
“Red” - and that the technical approach
# to some of the onshore areas - such as onshore Borneo; northern Thailand - seems to be bereft of any modern technologies, for example gravity gradiometry or wireless (3D) seismic.
# as presented at the SEAPEX Conference, Singapore, April 2011.
Reference
Doust and Sumner: Petroleum Geoscience, Volume 13, 2007.
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