Chevron tackles stretched limits of offshore tiebacks

Houston — Chevron is working on game-changing industry technology to stretch the tieback distance between an offshore field and an existing production hub, which would improve project economics and allow more discoveries to be produced at reduced cost, the company's CEO said Friday.

The company, a big player in the US Gulf of Mexico, has focused much of its investment and energies in that arena during recent years on tiebacks – that is, hooking up discoveries to existing production hubs. Developing those discoveries would otherwise be uneconomic if newbuild infrastructure were required to produce them.

Tiebacks are currently limited to distances of around 30 miles between an offshore field and a production hub.

But Chevron is working to lengthen that to 50 miles, which would reduce the need for large, costly and time-consuming new production installations, Chevron CEO Mike Wirth said in webcast remarks during the company's fourth quarter earnings conference call.

"The concept of tiebacks, I think, is one that we need to continue to invest more in," Wirth said.

ESOX BROUGHT LINE JUST 4 MONTHS FROM DISCOVERY

He noted that the Hess-operated deepwater US Gulf's Esox find, where Chevron is a partner, is currently being tied into Hess' Tubular Bells production facility five miles away from the field. Esox is expected online next month – a mere four months after discovery.

In years past, new infrastructure was built to produce each discovery, which were pricey and took years to construct. Tiebacks, which especially gained momentum during the 2015-2017 downturn when oil prices were low, slashed both cost and time needed from a field's discovery to first oil.

"We've been working on technology to extend subsea tiebacks and this includes longer-distance pumping of fluids, compression and movement of liquids and the ability to avoid formation of hydrates and other things on the sea floor," Wirth said. "[That] really expands the opportunity set for us to use existing infrastructure to improve production."

A number of these technologies will utilize multi-phase subsea pumps, he said.

"I think as we go forward, what you will see is an increased blend of tiebacks and use of existing infrastructure as well as the occasional large greenfield project," said Wirth.

Last month, Chevron sanctioned development of a new production hub at its Anchor discovery. But this will be the "occasional" project, Wirth said.

Anchor, discovered in 2015, was deemed large enough at an estimated 440 million barrels of oil equivalent reserves, to invest the time and cost for a new production facility, which will cost $5.7 billion.

The discovery is the first 20,000 psi field to be developed. Until now, technology only allowed 15,000 psi fields to be produced.

ANCHOR DEVELOPMENT COSTS LESS THAN $20/b

Anchor, which carries development costs of less than $20/b compared to previous deepwater US Gulf projects with costs above $30/b, is targeted to come on stream in 2024.

Despite lower development costs, the $20/b figure includes advanced high-pressure, high-temperature technologies needed to produce the field, and what Wirth called "a little bit of additional export pipeline."

"[Anchor] is competitive in our portfolio," he said. "It sets us up for additional follow-on development that will improve returns, and the technology unlocks a resource type we believe holds a lot of potential as we go forward."

"We're not done driving these costs down in the deepwater," he added.

For Q4, Chevron's total companywide production averaged 3.078 million b/d, about flat with the same 2018 quarter. Oil accounted for 62% of the volumes at 1.893 million b/d. Of this, 41% or 771,000 b/d, came from the US.

For full-year 2019, the company produced a record 3.058 million b/d, up 4.4% and in line with its 4%-7% output growth target for the year.

In addition, Wirth said he foresees some production this year from the Neutral Zone between Saudi Arabia and Kuwait, which jointly agreed last month to resume output from that area after five years of inactivity.

"We're likely to see a startup at some point [this year], and then some work before we begin a gradual ramp," he said, adding he expects preliminary work prior to output resumption to assure safety and equipment integrity.

Most of the production ramp will likely be completed in 2021, he added.

Production pre-2014 was about 500,000 b/d from fields in the zone. Chevron has an agreement with Saudi Arabia to operate the kingdom's 50% stake in the Zone's resources.

"We'll eventually have to get some new rigs in there to begin drilling additional wells, but it should be on a trendline over the next 18 months or so back towards something that looks like it was before we shut down," he said.