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Feature: Japan pursuing tight oil at home, may seek it abroad too

Tokyo — Japanese upstream companies are looking to tight oil to supplement dwindling domestic output and may seek to use the experience gained to become involved in similar projects abroad.

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Japan Petroleum Exploration intends to seek out further prospects by the end of March 2020 over three years since the drilling of Japan's first horizontal exploration well in the Onnagawa tight formation at its onshore oil field in northwestern Akita province.

"While we cannot commit ourselves yet, we will look into the opportunities while monitoring oil prices during the current medium-term business plan," Satoru Yokoi, geologist and technical fellow of Japex's Japan-Onnagawa shale oil project team said in an interview with S&P Global Platts.

Japan's domestic crude oil production

Japex, which earlier this year concluded a pilot test involving multi-stage fracturing from a horizontal well, successfully fractured mostly as intended in the Onnagawa formation, Yokoi, one of Japan's shale pioneers, said.

After drilling and fracturing from 2014 at the Fukumezawa oil field - one of the Sarukawa oil fields at Oga city in Akita, about 600 km (372 miles) north of Tokyo - initially failed to produce natural flows, Japex paused output tests to look into probable causes and consider plans for improvement.



After having confirmed flow backs and adopting artificial lifts, Japex started producing about 10 kiloliters (63 barrels) a day of oil with a gravity of about 40 API from the tight formation at Fukumezawa from December 2016, and the output has been hovering around 7 kl/d more recently, Yokoi, said.


MONTERREY-LIKE SHALE FORMATION


For Japex, Fukumezawa was its second tight oil production site in Japan after it had started commercial production in April 2014 at its wholly-owned onshore Ayukawa oil and gas field in Akita prefecture. It started producing around 220 b/d of medium-grade crude from the Onnagawa formation. Ayukawa tight oil production has been around 126 b/d recently.

Fukumezawa is about 100 km north of the Ayukawa field, both of which straddle the Onnagawa formation. Japex said the Onnagawa formation in Akita has resources of 100 million barrels of oil equivalent.

Yokoi described Onnagawa as including a Monterrey-like formation and said that Japex's commercial production, using acid treatment at the existing well at Ayukawa, was "a great success." Monterrey is one of the largest shale oil plays in the US.

But since its maiden horizontal well at Fukumezawa did not aim for a Monterrey-like formation, Yokoi said he hopes to drill a horizontal well and frack at Ayukawa to prove that drilling at the Monterrey-like formation can be successful. In the short- to medium-term, Japex will look at more acid treatment at existing wells at Ayukawa and consider a horizontal well and fracturing at the field when oil prices recover, Yokoi said.

Japex's incremental production at Ayukawa would not exceed its current capacity of 330 kl a day (2,076 b/d) at the Yurihara processing facility for the Ayukawa and Yurihara oil and gas fields, where it pumps less than 300 kl/d, Yokoi said.


POTENTIAL TO SUPPLEMENT DOMESTIC OUTPUT


Japex's tight oil pilot production tests have been financially supported since fiscal 2011-2012 (April-March) by state-owned Japan Oil, Gas and Metals National Corp, which sees the unconventional oil sector as having the potential to supplement domestic conventional production, which has been steadily falling over the last 10 years.

Jogmec's director of technology planning development, Takaaki Kato, said of Japex's Fukumezawa pilot test: "We would continuously have to evaluate Japan's potential."

"Speaking of Japan's potential, it is more about how to raise productivity from [oil fields] with low productivity," Kato said. "Considering Japan's consumption, with domestic production accounting for a couple of points [of imports], there is potential for [domestic tight oil] production."

Japan produced 9,933 b/d of domestic crude in fiscal 2015-2016, representing just 0.3% of its total imports of 3.34 million b/d, according to the latest Ministry of Economy, Trade and Industry data.

Running pilot unconventional oil output tests in Japan would also help Japanese upstream companies gain knowledge and expertise and consider shale oil developments abroad, Kato said.

With Jogmec's financial support, Japan's largest upstream company Inpex also drilled a pilot well over April-June 2016 at the northern part of the Yabase oil field in Akita, where it had faced difficulties in producing oil from the low permeability oil reservoir in the Onnagawa formation.

"We think there was some oil left in this part of Yabase, and with technological progress over time we want to succeed in [extracting oil]," Hiromi Sugiyama, Inpex's principal engineer of reservoir engineering at technical planning and coordination unit said in an interview. Over 1957-1973 Inpex produced a total of 26,000 kiloliters or 163,535 barrels of crude oil at the northern part of the Yabase oil field. The Yabase oil field is the largest oil field in Japan with the aggregate production of 5.79 million kl or 36.42 million barrels of crude oil up to the end of March 2016.

Inpex, which is currently analyzing results from the pilot well, plans to drill a test well in the northern part of Yabase from fiscal 2018-2019 onward.

"We are not doing this just for Yabase," Sugiyama said. "While there are still tight oil around the world, we intend to equip ourselves technologically to be able to develop such oil."

--Takeo Kumagai, takeo.kumagai@spglobal.com
--Edited by Jonathan Dart, jonathan.dart@spglobal.com