Increasing Oil Production Through Leasing of Idle Wells
Authors: Hosein Aleem 
Published: June 2014

The national oil company of Trinidad and Tobago (Petrotrin) has more than 5,000 idle wells. The company initiated a procedure for leasing these idle wells to small independent operators in July 1989 through a program known as the "lease operatorship" program. This paper reviews the status of lease operatorship activities, examines the benefits and the strategies adopted by the operators as well as some of the important issues involved, describes the requirements for external operatorship, and outlines plans for the future of the program.

Introduction

Petrotrin is a fully integrated petroleum company on the island of Trinidad in the Caribbean (Fig. 1). The company, formed in Oct. 1993 by the merger of two previously owned state oil companies (Trintoc and Trintopec), is involved in oil production and the refining and marketing of products, both locally and internationally.

In addition to ˜3,000 active wells producing ±30,000 BOPD, Petrotrin has more than 5,000 idle wells consisting of marginally economic wells, wells requiring workover and/or equipment, and wells awaiting abandonment. Also, some production facilities, especially in remote areas, have deteriorated over the years and are in a state of disrepair.

We initiated a program for leasing these idle wells to small independent operators in July 1989 with a reasonable degree of success through a lease operatorship program. Because of the initial success, the program has been expanded. To date, 1,114 wells have been leased out; of these, 363 were active in Sept. 1995, producing 1,717 BOPD. Cumulative oil production from program initiation to Sept. 1995 amounted to 2.48 million bbl.

Government Policy

Sec. 6.3.3. of the Trinidad and Tobago Government's Green Paper on "Energy Policy for Trinidad and Tobago" on lease operatorships and farmouts states the following.

" There are several idle wells and blocks in shallow horizons in the country which can be viable producers given a lower cost regime. It is the view of the Government that small independent operators, especially those with small overheads and access to underutilized equipment, acting alone or in consortia with local or foreign operators, can be effective in this respect.

" The Minister of Energy can grant permission to licensees to issue sublicenses for operators to undertake specific petroleum operations in their licensed areas for lease operatorships or farmouts. The onus is upon the licensee to satisfy themselves as to the financial viability and technical competence of the prospective sublicensee and to apply to the Minister on their behalf."

The stated policy is, "Farmouts and lease operatorships shall be encouraged as a means of augmenting production and employment as well as mobilizing idle equipment." This policy sets the framework for carrying out lease operatorship activities in Trinidad's producing fields.

Background

Commercial oil production was established from Trinidad's land-based fields in 1908. In 1933, the first attempts at improved oil recovery (IOR) was initiated with natural gas injection into the Forest Reserve field (Fig. 2). Several other IOR techniques, including waterflooding, fireflooding, cyclic steaming, and steamdrive as well as cyclic stimulation and flooding with CO2, have been attempted with varying degrees of success.

The geology of Trinidad's hydrocarbon reservoirs is very complicated because of the deltaic environment of deposition, and Trinidad is called the "graveyard of geologists." As a result of the complicated geology, well spacing has had to be comparatively small ±10 acres on average) to exploit the reserves; therefore, more than 10,000 wells have been drilled over the years.

At a producing rate of ±12 million bbl/yr, Petrotrin's land-based reserves are being continuously depleted. Reserves/production ratio currently stands at ±16 years. The traditional means of replacing reserves in mature fields include stepout or infill development drilling and IOR activity, both of which are highly capital intensive. Because of a tight cash-flow situation, the company has embarked on only a limited amount of activity in these areas.

Stripper wells, on the other hand, are on the tail end of the decline curve and should continue to produce with very little decline as long as they are economical. Under certain economic scenarios and operating conditions, reactivation of idle wells can therefore provide opportunities for increasing land-based reserves at lower initial capital cost to Petrotrin.

At the end of Sept. 1995, Petrotrin had more than 5,000 idle wells, which had become idle for one or more of the following reasons.Poor mechanical condition, including bad casing/liner or fish in the hole.High water cuts.Low oil production rates.Excessive sand production and high well-maintenance costs.Inefficient artificial-lift methods.Lack of attention owing to remoteness.Competition with higher productivity wells for well servicing.Shut-in wells awaiting workover.Shut-in injection wells.

In the late 1980's, because of the drop in oil prices these wells were left idle. At the same time, a lot of contractor equipment, including well-servicing rigs, trucks, and pumps, became idle. Reactivation of idle wells with Petrotrin's normal cost and mode of operation today would be uneconomical owing to soft oil prices, low oil rates, high overhead and operating costs, and the overspecialization of labor.

In July 1989, the company initiated an external lease operatorship (ELO) program, in which eight blocks of idle wells (Fig. 2) were leased out to small independent operators by one of the predecessor state-owned oil companies (Trintopec). In addition to normal royalty payments to the government or private owners, the operators had to pay an overriding royalty to Trintopec on all oil produced and also had to sell the produced oil to the company.

The first purchase of oil from an external operator came in Oct. 1989 from Lease CO-1 in the Coora field (Fig. 2). In 1991, the other predecessor state-owned oil company (Trintoc) initiated a similar program with the first purchase of oil from an external operator coming from Lease WD-1 in the Palo Seco field (Fig. 2). Production has increased steadily to 1,717 BOPD by the end of Sept. 1995 (Fig. 3 and Table 1) from 14 blocks that have been awarded to date. To date, 1,114 wells have been leased out; 363 of these were active in Sept. 1995, producing at ˜5 BOPD per well. Five other blocks have been awarded, and production from these new blocks is expected to start during the last quarter of 1995.