Since being awarded, in the 28th seaward licensing round, Licence P2244, which covers the well appraised Pilot and Harbour fields, The Steam Oil Production Company has been progressing internal studies on the Pilot development project. This work has increased the company's confidence that steam flooding is both feasible offshore and is the approach which will maximise economic recovery from the Pilot oilfield.
We have now completed thermal reservoir simulations of representative sectors of the Pilot field. We modelled injection of ninety percent quality steam into the reservoir, in line with our calculation of heat losses in the wellbore and to the sea. Heat loss is a significantly less difficult issue than we had expected due to the high productivity of the horizontal injection wells we plan to drill. Extending the results of the sector modelling only to the thicker regions of the Pilot reservoir, where steam is expected to be effective, results in an overall recovery factor of 58% from the Pilot Main reservoir. This initial projection is less than the average of recovery factors seen in onshore steam flood projects in multi-darcy reservoirs around the world. We expect to recover over 140 mmbbls from the Pilot Main and Pilot South fields, which places the Pilot project just outside the top ten of UKCS oilfields, ranked by remaining reserves.
We have also re-estimated the likely development costs by benchmarking drilling, production facility and operating costs for the development against recent projects such as Catcher, Western Isles and Golden Eagle. The relatively shallow water depth at the Pilot location (260 feet) and the very shallow reservoir depth (2,700 feet) mean that both the cost of drilling the wells and installing the facilities will be at the low end of the range of costs seen in the North Sea. Working with specialist suppliers (Cleaver Brooks and Aquatech) we have also been able to estimate the equipment weights for the additional facilities needed to prepare boiler quality feed water and to generate steam. The additional equipment, required to generate 120,000 bbls per day of cold water equivalent of steam, weighs under 2,100* tonnes.
Taking into account an expected 10% to 15% reduction in capital costs as a result of the recent fall in oil prices we now estimate that the development of Pilot Main and Pilot South will require an investment of approximately £2 billion, about 65% of which needs to be invested prior to first oil. The operating cost per bbl, including fuel purchases to generate the steam, is projected to be less than £19 per barrel.
The development of Pilot also benefits from the new investment allowance and the reduction in the supplementary charge announced by the Government in the recent budget. Applying the new tax rules and assuming a long run oil price of $80 per barrel the net present value of the project is over £500 million and the project rate of return exceeds 20%.
The company presentation on the Steam Oil Production Company website has been updated and is available at http://www.steam-oil.com/presentations/.
The company will also be presenting the Pilot project at the upcoming DEVEX conference in Aberdeen.
* Updated Dec 2015