Persistence Paid Off for Liuhua - Eventually

American Association of Petroleum Geologists (AAPG)

The discovery of giant oil fields in new basins typically occurs only after multiple exploration periods and numerous unsuccessful wells. The first explorers might or might not have the right technical concepts, but for various reasons they fail to find the big prize.

This pattern was repeated prior to the discovery of the giant (in place) Liuhua 11-1 Field, Pearl River Mouth Basin, South China Sea.

Fortunately, the persistence of a highly experienced exploration team and key decisions by management led to one of Amoco’s largest international oil discoveries.

The field, located 120 kilometers southeast of Hong Kong in 370 meters of water, contains a STOOIP of 1.3 billion barrels. Development was sanctioned in 1993; the field was produced via 25 horizontal wells with ESP’s (electrical submersible pumps).

Production started in March 1996; at its peak late that year the field produced 65,000 bopd through an FPSO.

Production dropped off rapidly, and along with the newly connected 4-1 Field, it now produces about 2,200 bopd.

A New Play Concept

A summary of key events leading to the discovery of the field and the geology of the Pearl River Mouth Basin were discussed in Willis Tyrrell and Harry Christian (1992).

To paraphrase Tyrrell, the story involved numerous “ups and downs,” but the persistence of a few dedicated explorers eventually paid off.

Amoco formed a veteran team in 1979 to prepare for the first exploration bid round in the basin. They focused their efforts on prospects in the shallow water, siliciclastic section, but also discovered a large carbonate platform in the more distal marine parts of the basin.

The “Whale” structure was mapped over a regional basement uplift (the Dongsha Massif) and was presented to management as a risky secondary (but large volume) prospect. Located in 300 meters of water, it was nearly 40 kilometers distant from what was believed to be the source kitchen for the basin.

Recognizing this risk, management still authorized a bid for the 29/04 contract area, which covered most of the Whale.

When the results of the first round of bids were announced in 1982, however, Amoco had not won a single shallow water block. The team was very disappointed and management ceased negotiations for the 29/04 area.

Amoco Orient was downsized and the basin was put on “monitor” status.

Persistence Pays Off

Following the first bid round, Christian and a small exploration team remained in Amoco Orient to prepare for the second bid round in 1984, when they finally captured a large, shallow water contract area (04/29).

Christian continued to monitor the basin for any evidence that might reduce the technical risks still surrounding the Whale, and his persistence was rewarded when, in 1985, the ACT Group (Agip-Chevron-Texaco) announced that their Huizhou 33-1-1 well discovered light oil, testing at a rate of 2,589 bopd from two zones.

The significance of this discovery was immediately apparent to Harry: 33-1-1 was drilled 10 kilometers from the center of the source basin and on a regional structural nose that led directly to the Whale.

The pay was within the regional Zhuhai Sandstone carrier beds, meaning the risk of long-distance migration was now significantly reduced!

Tyrrell and Ed Shaw recommended and received quick approval from Houston management to capture 29/04, and their successful presentation to Chicago senior management allowed Mike Reavey to re-open negotiations with CNOOC. Amoco finally was awarded contract areas 29/04 and 16/34 in January 1986. Two additional large contract areas located west of 29/04 (28/11 and 29/16) were captured in the third bid round in January 1989 (Bob Dudley, current BP CEO, was my teammate for this presentation in Chicago).

Amoco’s large acreage position demanded a big investment in 3-D seismic, so a 120 hertz (cycles per second), zero-phase dataset was acquired over 29/04 and 16/34 during April-June 1986. Structural mapping was completed in late 1986 and the 11-1-1 well was spud in December. Unfortunately, the well encountered mechanical trouble 17 meters above the top of the objective and had to be abandoned with no shows.

Nerves in Chicago were frayed – but Harry and the team persisted. With the support of George Bell, the division manager, and Bob Blanton, Houston region VP, Amoco continued the program with the 11-1-1A well.

The rig was moved 50 meters and drilling started again.

In January 1987 management’s concerns were answered. The 11-1-1A well drilled 75 meters of net oil pay in the Zhujiang carbonates, overlying 149 meters of very porous and permeable water-bearing Zhuhai Sandstones.

The elation of the exploration team was short-lived, however, when results from the first RFT in the pay section arrived. That first sample and subsequent testing confirmed the oil was biodegraded, and instead of the light oil found by ACT to the north Amoco had to deal with 16-22 degree API crude!

Amoco soon realized that development of this giant in-place oil field would be technologically and commercially challenged, even though the well tested 2,240 bopd.

To complicate matters, the second well (11-1-2), drilled on a separate structure to the east was abandoned as a non-commercial dry hole. Although long-distance migration had worked, charge volume was insufficient to fill all the available traps in the 29/04 contract area.

Field Appraisal and Additional Exploration

Amoco moved to the west to drill the 4-1-1 well, a pinnacle reef on the windward edge of the Liuhua carbonate platform. It was successful, but was 11 kilometers distant, meaning a standalone development was unlikely to be commercial.

The company then came back to the 11-1 block and drilled east of the 11-1-1A to confirm the extent of the field. The 11-1-3 well was a successful appraisal of the original discovery, so a new team was formed to evaluate further opportunities in the area.

I joined the project in 1987 while the 11-1-3 well was drilling, and was responsible for seismic sequence stratigraphic mapping of the Liuhua area. Working with geophysicists Chris Stiteler, Ed Shaw, Ed Chau, David Ternes, Grant Goodyear and Jorgen Risum, we mapped the contract areas and picked locations for the 11-1-4, 11-1-5, 11-1-6 and other wells.

Drill stem tests of the 11-1-3, 4, and 5 were good, but the low gravity oil and high permeability of the carbonates meant we coned water quickly at high flow rates. Initial reservoir geological interpretations done by Neil Turner led to a decision to drill the 11-1-6 as a horizontal well in the upper carbonate pay interval.

An ESP was used, and although the well still produced water, it also produced more than 900,000 barrels of oil in 30 days. A reservoir model was constructed and formed a basis for future development well locations.

I was also responsible for the interpretation and evaluation of our other contract areas. Each area came with drilling commitments, and the 04/29 area unfortunately came with multiple well obligations.

After two months I communicated the unhelpful news to Harry Christian and George Bell that I could not find a drillable location within the contract area. They reminded me we had to drill at least one well, and had to technically justify the location to Nanhai East or they would require us to drill a second well.

I finally recommended a location that had some technical merit, although I was certain it would fail.

I was correct; 32-1-1 was drilled in a very sandy, seal-poor area 120 kilometers northeast of 29/04 and was indeed a failure, with no shows.

Fortunately, however, we were able to demonstrate that the well successfully evaluated the license, so our remaining obligation was waived. For the achievement of drilling a dry hole and saving the company from a second well I was given a special corporate award.

It’s the only time in my career I’ve been rewarded for drilling a dry hole!

Ahead of Our Time?

The discovery of Liuhua 11-1 Field involved solid geoscience work, intuition and persistence. Unfortunately, Amoco’s next three exploration wells in the 16/34, 28/11, and 29/16 contract areas failed, with the latter well drilled on a prospect I was certain would be successful (a story for another time). Only Amoco’s 11-1 and 4-1 areas ever yielded commercial oil, certainly a disappointing result.

I left the project in 1989, as a new team arrived to move Liuhua through development.

Despite all the good geoscience and engineering work, Amoco ultimately was the victim of low oil prices and bad timing; had it been discovered 10 years later, Liuhua 11-1 Field would have been a robust commercial success instead of a marginally economic project.

The company also intentionally focused only on oil prospects to the exclusion of gas, and that directive meant we bypassed the numerous large gas prospects we observed on seismic. Now, a burgeoning mainland gas market will probably reward those bold enough to take that risk.

Nevertheless, the discovery of Liuhua 11-1 Field opened up deepwater exploration in the South China Sea, and set the stage for everything that followed.

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Historical Highlights

Historical Highlights - Bob Erlich

AAPG member Bob Erlich is currently vice president of exploration and new ventures for PanAtlantic Exploration. He’s held a number of senior technical and executive positions during his 34-year career with major multi-national and small independent oil and gas companies such as Amoco, Burlington Resources, BP, Petrolifera and Hess. His assignments included work in Trinidad, Peru, Colombia, Venezuela, Argentina, Suriname, Brazil, Costa Rica, Panama, Guatemala, Equatorial Guinea, the United Kingdom and the People’s Republic of China. Erlich received his doctorate in paleoceanography from Vrije Universiteit in Amsterdam, Netherlands, and has published extensively on the geology of northern Latin America with an emphasis on Cretaceous petroleum systems. 

Historical Highlights

A history-based series, Historical Highlights is an ongoing EXPLORER series that celebrates the "eureka" moments of petroleum geology, the rise of key concepts, the discoveries that made a difference, the perseverance and ingenuity of our colleagues – and/or their luck! – through stories that emphasize the anecdotes, the good yarns and the human interest side of our E&P profession. If you have such a story – and who doesn't? – and you'd like to share it with your fellow AAPG Members, contact the editor.

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