Thorough feasibility analysis needed on proposed piping of gas from oil well

Dear Editor,

Reference is made to the letter `Use of gas from Liza wells raises serious questions’  (SN Jul 24) by one Mr. Gordon Forte.

As I learned from my brief study of oil, the Guyana oil wells are similar to those in the Gulf of Mexico; public information is available on the operations of those wells and collection and use of methane gas. Several Guyanese work with Shell in the Gulf of Mexico and also with BP in other offshore drilling operations. Some related their expertise to me on oil and gas matters.

As told, Shell returns much gas back to the wells from which oil is extracted because it is a difficult and expensive proposition to bring gas on shore or collecting and selling the gas.  Piping gas is not easy to manage by Shell and BP. Gulf platforms are not as distant away from the shore as the Exxon platforms from the shores of Guyana. In addition, the gas may help with the pressure to pump up oil to the surface. Depending on the kind of wells drilled, gas may be needed to pressurize the oil upwards.

It is clear that Exxon wishes to return most of the gas from the wells back into the well perhaps for similar reasons as Gulf operations. At public meetings in Guyana, the ExxonMobil head representative stated that the company planned to return most of the gas to the wells with some retained for electricity generation at the drilling site for operations. Oil wells have early life, mid life, and late life. The more oil recovered from wells, the less will be the flow over time (mid life and late life operations). The wells will need pressure to allow for the flow of oil. Gas (or purified water) could be used to exert pressure on the oil depending on the type of operating wells.

It seems that Exxon is not interested in piping gas to shore because of the costs involved. But lately, the Guyana government indicated that it wants to pipe some of the gas on shore to fuel electricity turbines. It now becomes a question of economics – a cost-benefit analysis on bringing the gas on shore. It should be carried out without delay.

We are talking about 150 miles of pipes from the drilling site to the coast. The pipes will have to be immersed since they may be in the way of shipping lanes. This makes it a very costly operation – US$50 to $100M. And this does not include the storage facility on shore as well as the electric generating plants that will be tens of millions more. Who will pay for it? Guyana does not have the capital for such huge expenses. So Exxon will gladly fund it since the costs will be deducted from the revenues (not from the oil operating costs).

Then there is the issue of the quantity of gas in the wells. Is it gas rich oil? It seems that the wells have a majority oil. Will enough gas be recovered to pay for the capital cost of piping it? Is the projected revenues from the gas and electricity generation worth expending tens of millions of American dollars on the overall operations?

Wells have a life cycle. And the life cycle involves a lot of maintenance costs. Gas pipes and electricity plants also have maintenance costs. Will there be enough monetary value and revenues in the electric plants to recover the costs? And does the country only want the gas for electricity? How about gas for other operations including cooking gas? And what about selling gas to other countries?

A very thorough economic (feasibility) analysis is needed on the proposed piping of gas and electric plants including where it should be located. Exxon has the data on the amount of gas in the wells as well as the fluid analysis. It can share with the government and the public so that an informed decision can be made on bringing gas on shore. The government should seek expertise from patriotic overseas-based Guyanese nationals familiar with the subject matter. Some I spoke with are more than willing to offer their help.

Yours faithfully,

Dr. Vishnu Bisram

Around the Web