Interview: Well intervention market dynamics in Asia Pacific

Many operators in the Asia Pacific have specialist intervention and workover teams in place that are dedicated to improving well work and ensuring enhanced production from their current portfolio or planning for a safe and effective plugging and abandonment program.

Due to the challenges with ageing infrastructure and facilities in the region, accessing wells and undertaking intervention work often requires a large budget to guarantee successful operations as well as a safe working environment.The need for offshore well intervention work on both platform and subsea wells in the Asia Pacific is rising due to redevelopment work at brownfield sites, the increasing need for enhanced production and the need to extract the maximum amount of hydrocarbons from current fields.

Well access is becoming more challenging and ultimately resulting in higher costs for industry. In an ever-maturing Asia Pacific market, industry have to look to newer intervention techniques to extend production life and enhance production volumes and recovery as well as executing safe and effective abandonment campaigns.The well intervention market in the Asia Pacifc was estimated to be $1,240 million in 2013 and is forecast to reach $2,338 millionby 2018. China leads the intervention market in the region where an estimated 600 wells in the South China Sea are in need of some kind of intervention. The main drivers for this sector include technical challenges such as weight restrictions, limited space on the platform and issues with accessing the well but also include safety challenges, environmental considerations, competence of staff and the reliability of equipment – all to be overcome whilst keeping costs to a minimum.

Douglas Westwood will be presenting at the Offshore Well Intervention Workshop on June 10-11 in Kuala Lumpur. For more information on speaking, sponsoring, exhibiting or attending this meeting, download the workshop brochure at https://bit.ly/17X8NKF

Intervention methods in the Asia Pacific are focussed heavily on extending hydrocarbon recovery, improving well integrity and undertaking plugging and abandonment operations. The industry is faced with numerous issues due to the ageing of infrastructure and facilities, which causes additional challenges in safely accessing the wells for intervention work.The benefits of well intervention work are well known globally but the traditional intervention method of using a drilling rig with riser can be expensive and delays valuable well construction programmes (particularly in the Asia Pacific where drilling programs are still very frequent). Rigless and riserless intervention, with the use of subsea wireline lubricators and specialist vessels have proven to be a much more cost-effective and efficient alternative to traditional rig-based methods.

Offshore Network spoke with Jason Waldie (Associate Director at Douglas Westwood) to discuss current market dynamics in the Asia Pacific and how they will affect future offshore well intervention projects.

Offshore Network: What are the main drivers for operators in the Asia Pacific to carry out well intervention work on their offshore well stock?

Jason Waldie: 90% of projects in the Asia Pacific are going to be in shallow water and much of this is already in place – what will be needed is a lot of drilling in order to continue the brownfield work for enhanced oil recovery.

Firstly, in terms of geographical regions – the main areas that will be focussing on work associated with maturing oil fields in shallow water are Malaysia, Indonesia and Thailand. So as long as the existing field work continues in these regions, there will be a need for well intervention work.
As mentioned previously, oil prices are obviously a driver for well intervention work but the Asia Pacific can still continue to make projects viable even with a slightly lower oil price.

Another positive for future well intervention work is that PETRONAS has been promoting its brownfield work to boost production. Their drive to enhance brownfield work to enhance production is also very positive for intervention work in this region.

From a more technical standpoint, well integrity issues also need to be taken into account. Integrity of wells is not in the same shape as it is in some other regions such as the North Sea or Gulf of

Mexico but this is improving and is better than some other regions. Well integrity work will improve as the brownfield industry continues to develop in the region and people become more familiar with this work.

Well integrity challenges are certainly a driver for intervention work in the region but will also have been challenges in other regions when they started to take more of a focus on brownfield
developments.

Offshore Network: Over the next 3-5 years, how do you see the offshore well intervention market changing in the Asia Pacific region?

Jason Waldie: With the current state of oil prices, this is at the top of everyone’s agenda currently. We probably won’t see change to the declining oil price for 6-9 months and will need to see a drop in drilling and production activity to rebalance the supply and demand of oil –only then will we see a return to ‘normal’.

This ‘normal’ however may be a new ‘normal’ and may not get up as high as $100 per barrel but this really shouldn’t matter too much in the Asia Pacific as the hurdle rate for the barrel in this region is generally much lower than other areas of the world. As such, Asia Pacific projects may continue and even increase over time with more Brownfield activity.

Despite the low oil price, there will definitely be continued drilling and production projects in the Asia Pacific particularly in shallow water areas and brownfield areas – there will continue
to be a growing need in these markets as existing offshore fields are beginning to develop and there will be a need to carry out intervention projects.

A lot of operators were banking on bigger oil prices so there may be some work that is delayed in the short term but there will be a return to pretty much normal by the start of 2016. Albeit if oil prices settle at $75 (rather than $85-$95) there may be a small incremental downshift in projects but this should be offset by an increasing need for brownfield work particularly in the Asia Pacific.
So the brownfield market will be larger but people may scrutinise a little more if the oil price settles at less than $80 – but westill see it as being a positive market in the Asia Pacific for the medium to long term.

Offshore Network: You mentioned Malaysia, Indonesia and Thailand earlier as being hugely important for future well intervention work – are these the main growth areas for offshore well intervention work in the Asia Pacific?

Jason Waldie: Malaysia, Indonesia and Thailand are certainly the main countries for future well intervention projects and to a slightly lesser extent Vietnam – these are certainly the areas of focus for contractors looking to win work regarding well intervention projects. These countries are all serviced by National Oil Companies (NOC’s) and organisations that have come in from overseas to help on upcoming projects. The other markets are probably not as key at this moment in time:

• China is a very different market to get into as the majority of work is contracted internally. In China, there is a certain amount of well intervention work that is required to be undertaken but for
international companies it is very difficult to gain a foothold in this market. As soon as they develop their industry domestically, they tend to ensure work goes to Chinese companies. I just don’t see this as a big market for international companies.

• Papua New Guinea is very new so brownfield work is not really happening there.

• The Philippines is a very small market regarding well intervention work.

• Burma is a very new industry where new blocks are being opened up regularly. They do have some large gas fields but again well intervention work is not that frequent.

• Australia is also worth a mention. This area is very similar to the North Sea and Gulf of Mexico as it is comparatively high cost. We will see a number of delays in projects here until they can figure out their project economics but this could then be a key area for well intervention work. So the four key countries that the intervention market need to be
concerned with for the time being are Malaysia, Indonesia, Thailand  and Vietnam.

Offshore Network: As the number of subsea wells increases in the Asia Pacific, so will the need to intervene on these wells. How will the increased challenges associated with subsea well interventions affect industry?

Jason Waldie: We haven’t seen as many subsea well completions in the Asia Pacific as we first thought there would be – this is because it’s much cheaper and simpler to continue with platform wells as industry already have the technology and service providers to work on subsea wells. As developments continue into deeper water, this may change.
Going forward, there is a small percentage of subsea wells that are in deepwater environments in the Asia Pacific which will need intervention work going forwards but the majority of intervention
jobs will be with the shallow water platform wells.

Offshore Network: Any final thoughts on how the Asia Pacific market will continue to develop in the short to medium term?

Jason Waldie: Industry can go one of two ways. The problem can be somewhat fixed in the short term if production is halted or cancelled in some parts of the world – or it could drag on for a while.
We need to note that a lot of companies’ plans have been made with estimations of $75-$80 oil which is going to cause some delays. They will still continue to do work because the economics are there but they were making plans to get oil coming through which would produce revenues at a higher figure than it is currently at. I know that share prices within some of these companies have been affected due to this uncertainty in the market in the Asia Pacific as well as the rest of the world so there’s definitely some effect on industry.

But it is important to note that South East Asia particularly is less heavily affected as many other regions around the world due to overall costs for projects being lower.

Offshore Energy Today is sharing this interview with permission from Offshore Network Ltd., an independent business intelligence & conference provider catering speciffcally to the offshore oil & gas industry.