A guide to the approvals process for applications to drill Exploration and Appraisal wells in Falklands waters: May 2009 LEGISLATION Legislation and associated operations notices relevant to drilling can be found at www.falklands-oil.com – choose the “Downloads” section from the top-bar menu. Petroleum Operations Notices of relevance are: No. 1 - Record and Sample Requirements for Surveys and Wells; No. 4 - Application for Consent to drill Exploration, Appraisal and Development Wells; No. 5 - Application to Abandon or Temporarily Abandon a Well; No. 6 - Application to Complete and/or Workover a Well; and No. 7 - Department of Mineral Resources Well Numbering System. Primary legislation controlling drilling is covered in: Petroleum Survey Licences (Model Clauses) Regulations 1992; The Offshore Minerals Ordinance 1994; Offshore Petroleum (Licensing) Regulations 1995; The Offshore Minerals (Amendment) Ordinance 1997; Offshore Petroleum (Licensing) Regulations 2000; Offshore Petroleum (Licensing) Regulations 2000 - Invitation to apply for open-door licences. Please Note: environmental requirements are not listed above or dealt with in this document. Please refer to www.falklands-oil.com, or contact email@example.com for further details. APPLICATIONS FOR APPROVAL TO DRILL Who approves well proposals? All plans to drill, all attendant down-hole operations, all termination/abandonment plans and all completion plans must be prior approved in writing by the Governor of the Falkland Islands. However, the Governor grants approval having consulted the Secretary of State for Foreign Affairs, and it is therefore necessary for all applications to undergo a vigorous approvals process both in the UK and the Falkland Islands. In order to streamline this approvals process, and make the granting of requests as quick as possible, FIG has designed the following process to review applications. What is the timescale for approvals? All applications to drill must be submitted at least 28 days before drilling is due to commence. However, because of the practicalities of the approvals process and in order to allow time for discussion, all licensees are encouraged to initiate the well approvals process as far ahead of drilling as possible. How applications should be framed Applications for approval should include, wherever possible, two separate documents: 1) the “Basis of Design”, which should incorporate the engineering and safety case for the well; and 2) the “Geological and Evaluation Plan”, which should incorporate the geological prognosis and evaluation programme for the well. “Basis of Design” (ie, safety, drilling, casing, etc) parts of the application will be reviewed by the UK Health and Safety Executive (HSE) acting for FIG. Applicants will, if necessary, be able to liaise with HSE during the review process in order to expedite it. In addition, the HSE will expect to approve the drilling vessel to be used for the well. Whilst approval of the “Basis of Design” for the anticipated well is to some degree independent of the drilling vessel to be used, final approval of the design will necessarily be dependent upon approval of the drilling vessel. A suggested outline for the contents of this document: Copy of completed form PON 4 Summary Well Plan Outline Site survey and shallow gas review Well Design and Drilling programme Drilling Fluids Casing Programme Cementing Programme Well control programme Hazards pressure temperature geological hazards Testing plans Suspension/Abandonment plans Appendices depicting, for each hole section: Pore pressure and fracture gradient Casing schematic Design parameters Safety factors any other relevant data “Geology and Evaluation” (ie, targets, well prognosis, sampling, logging, coring and testing, etc) parts of the application will be reviewed jointly by BGS and the UK Department of Environment & Climate Change (DECC – formerly dti). The two-fold evaluation of this section is because BGS advises the Governor and FIG with regard to local exploration concerns while DECC advises the Secretary of State. Every effort is made to ensure that the BGS and DECC advice is similar. As with the case of “Basis of Design” documents, applicants will, if necessary, be able to liaise with BGS and DECC during the review process in order to expedite it. The Explanatory Notes for PON 4 (see www.falklands-oil.com) discuss the information required for well approvals. A suggested outline for the contents of this document: Copy of completed form PON 4. Prospect description, to include: map of target horizon seismic section through target Well prognosis expected lithologies expected geological intervals Well objectives list the objectives of the well list how these will be achieved state if this will be a “finder well” Well evaluation programme logging programme survey programme sampling programme coring programme testing programme Hazards pressure temperature geological hazards Operational data target tolerance sidetracks Suspension/Abandonment plans if suspension, please state: o reasons for suspension o planned duration o cost of final abandonment o plans for regular inspection To whom should applications be submitted? “Basis of Design” (ie, safety, drilling, casing, etc) parts of the application should be submitted to: Copy 1 Department of Mineral Resources, Ross Rd, Stanley, Falkland Islands; or by e-mail to firstname.lastname@example.org Copy 2 BGS, Murchison House, West Mains Rd, Edinburgh, EH9 3LA; or by e-mail to email@example.com Copy 3 As per copy 2. This copy will be forwarded to the UK Health and Safety Executive (HSE) “Geology and Evaluation” (ie, targets, well prognosis, sampling, logging, coring and testing, etc) parts of the application should be submitted to: Copy 1 Department of Mineral Resources, Ross Rd, Stanley; or by e-mail to firstname.lastname@example.org Copy 2 BGS, Murchison House, West Mains Rd, Edinburgh, EH9 3LA; or by e-mail to email@example.com Copy 3 As per copy 2. This copy will be forwarded to the DECC (the UK Department of Environment & Climate Change). “FINDER WELL” OR CONVENTIONAL WELL FIG notes the trend, in some exploration settings, for companies to drill slim-hole, minimally evaluated “finder wells” as opposed to more conventionally configured wells. Whilst the Government understands the commercial drivers for such wells in certain situations, it does not consider that minimalist finder wells are a satisfactory instrument for evaluating the potential hydrocarbon resources of the Falkland Islands shelf at this time. In essence, the Government view is that all exploration and appraisal wells should be drilled and evaluated so as to provide sufficient information to facilitate and encourage the future safe, expeditious and thorough exploration of the region. The Drilling and evaluation of all wells, whether Finder wells or Conventional wells, must be to such a standard that the TD of the well is reached safely, with minimal environmental impact. Within any well the age and lithologies of all horizons penetrated must be established, and where possible the well should TD just below a recognisable seismic marker, and the petrophysical records allow full analysis of the lithologies and fluids encountered in the well bore. As the Falklands area has few wells, the logging programme must be run high enough up the well to allow the accurate construction of synthetic seismograms from measurements taken in the well. Check Shot or full VSP should be run on all wells. Where possible TVD referenced fluid samples, including water samples for Sw, temperature and pressure measurements should be obtained. All cuttings and core must be depth referenced and properly preserved. However, within the parameters of ensuring adequate information gathering from any exploration well, consideration may be given to approving a “modified finder well concept” for certain exploration wells, particularly where offset well data is available nearby. Not all exploration wells will be suited to the “modified finder well concept”, and there is no guarantee that the regulator will accept a “modified finder well design” in preference to a conventional well design for any particular target. We encourage discussion at an early stage between the operator and the regulator in order to determine what the appropriate “modified finder well concept” may be for any specific prospect. An indication of potentially acceptable practices for modified finder exploration wells is outlined below. EXPLORATION WELLS Hole sizes and casing: it is anticipated that well bore and associated casing design will be left to the operator. However, the well design must be safe, fit for purpose, comply with agreed operations, and be designed such that all hydrocarbon intervals will be identified. Logging: whilst FIG would prefer that all well sections are fully logged over all intervals, it is anticipated that LWD will be used on all wells. Consideration may be given, for exploration wells drilled under certain circumstances, to be logged with a less comprehensive suite of tools as listed below: 1) wireline sonic, gamma ray and VSP logs and deviation survey should be run to surface; 2) if a 12 1/4 inch (or narrower) pilot hole is drilled prior to opening up to a 17 ½ inch hole, then the pilot hole should be logged LWD or Wireline prior to opening up to 17 ½ inches; 3) a full wireline or tubing conveyed suite of calliper, spectral gamma, acoustic, resistivity array, density- neutron, SP and VSP logs should be run through open hole in any hole diameter of less than 17 ½ inches; 4) fluid sampling and Formation pressure tests (MDT tool or similar) must be run over any hydrocarbon-bearing interval. If possible a water sample for Sw should be obtained. Cuttings samples: a full suite of cuttings samples comprising an appropriate number of sets of both bulk-unwashed and washed and dried cuttings (one set of each to be delivered to the regulator) is to be collected in every well as per the following schedule: 1) samples are to be caught at 10 metre intervals in holes of 17 ½ inches or wider; 2) samples are to be caught at 3 metre intervals in any hole diameter of 12 ¼ inches or less; 3) additional samples for biostratigraphic or geochemical analysis to be caught as appropriate. Sidewall coring: if operationally viable, a rotary sidewall coring programme should be run after wireline logging within any hole diameter of 12 ¼ inches or less if hydrocarbon-bearing reservoir units are encountered. Coring: whilst FIG would prefer all reservoir intervals to be cored as per instructions in the PON 4 Notice, consideration will be given to allowing certain exploration wells to be drilled without coring. Gas detection: gas detection equipment should be in operation during the drilling. Fluid sampling: sufficient pressure samples should be collected to establish fluid type and pressures, with several samples per reservoir. Testing: whilst FIG would prefer all reservoir intervals to be drill-stem tested, consideration will be given to allowing certain exploration wells to be tested using a MDT tool or similar. Terminal cores: where there is dispute between operator and regulator with regard to the actual stratigraphic position of the bottom of the well and there is dispute about whether the agreed TD criteria has been reached, the operator may be required to cut a terminal core in order to substantiate any request to terminate the well. Suspension/Abandonment plans: these must be specified in full. If suspension of a well for later testing, re-entry or production is anticipated then the timeframe and anticipated plans should be specified. Note, it is unlikely that wells designed on a modified finder well concept would be granted approval for production. APPRAISAL WELLS FIG considers that appraisal wells are not suited to the “modified finder well concept” and should be designed to maximise data, especially if the exploration well was drilled using a “modified finder well concept”. Appraisal wells are therefore to be drilled conventionally, with full casing, coring, logging, testing, etc. Hole sizes: all appraisal wells should be drilled as stepped, decreasing diameter holes unless the targets are very shallow. Casing: all appraisal wells should be fully cased as appropriate. Logging: it is anticipated that LWD will be used where possible throughout, and all well sections should be fully logged, with, as a minimum, a full suite of calliper, spectral gamma, acoustic, resistivity array, density- neutron, SP, VSP logs and deviation survey. Cuttings samples: a full suite of cuttings samples comprising an appropriate number of sets of both bulk-unwashed and washed and dried cuttings (one set of each to be delivered to the regulator) is to be collected in every well as per the following schedule: 4) samples are to be caught at 10 metre intervals in holes of 17 ½ inches or wider; 5) samples are to be caught at 3 metre intervals in any hole diameter of 12 ¼ inches or less; 6) additional samples for biostratigraphic or geochemical analysis to be caught as appropriate. Sidewall coring: if operationally viable, a percussion and/or rotary sidewall coring programme should be run after wireline logging within any hole diameter of 12 ¼ inches or less. Coring: all reservoir intervals should be conventionally cored. Coring should commence upon encountering a drilling break and/or cuttings suggesting potential reservoir or if direct evidence for hydrocarbons is seen in the form of shows in cuttings or significantly elevated gas readings. Coring should continue until the base of the reservoir unit is reached. Gas detection: gas detection equipment should be in operation during the drilling. Fluid sampling: sufficient pressure samples should be collected to establish fluid type and pressures, with several samples per reservoir. An Sw sample should be obtained if not already available from a nearby exploration well. Testing: all hydrocarbon-bearing reservoir intervals as defined by the logging and coring programme should be drill-stem tested during the current drilling operation without the need to suspend the well. Approval to spud may be withdrawn unless well testing equipment, including equipment for surface testing, subsea, DST, perforating (tubing conveyed and wireline), electronic data acquisition and fluid sampling equipment (with back-up/repair facilities) is available either at the well head or at the forward supply base at the time of well spud. Testing should aim to: 1) obtain average reservoir pressure and temperature; 2) collect surface metered flow rates and pressures; 3) evaluate the reservoir properties of the hydrocarbon-bearing interval; 4) obtain representative formation fluid samples. Testing should be conducted over hydrocarbon-bearing intervals in appraisal wells even if only marginal reservoir is indicated by logs. TD DETERMINATIONS IN ALL WELL TYPES Exploration wells: where a TD depth (in metres or at a stratigraphic horizon) has been defined in the relevant licence, then TD position will be determined by that licence agreement. Where the TD is not defined by the licence agreement it will be a matter for prior discussion between the operator and the regulator to determine TD location before the well plan is approved. The expectation is that any exploration well will test any identified prospect at any reasonable stratigraphic level, irrespective of the depth of the primary target. In positions where basement rocks are considered to be at relatively shallow depth beneath the principal target horizon the operator may be required to drill to basement. Appraisal wells may be configured to test only target horizons if the corresponding exploration well was drilled to sufficient depth to investigate the other potential of the locality. Appraisal wells: these may only be required to test hydrocarbon bearing horizons seen in the original exploration, as long as the original exploration well was drilled to sufficient depth to investigate the other potential of the locality. Discussion at an early stage between the operator and the regulator to determine if this is the case is encouraged.
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