Text For RBA Drilling and Completions

KUFPEC (Indonesia) Ltd.
Drilling & Completion Programme for RBA Document

SERAM Non-Bula PSC
RECOMMENDATION FOR BOARD APPROVAL
PHASE 2 DEVELOPMENT
OF THE
OSEIL OIL FIELD
APPENDIX
DRILLING PROGRAMME
Date Issued: 13 May 2003
P:\Kufpec Indonesia 2003\VDR-CD\Drilling\Text_for_RBA_Drilling_&_Completions .doc

Shaw Simon Page 1 12/8/2003
TABLE OF CONTENT
1. Summary ...................................................................................................................................... 4
1.1 Cost & Time ............................................................................................................................. 4
1.2 Uncertainties ........................................................................................................................... 5
1.3 Schedule .................................................................................................................................. 5
2. Introduction ................................................................................................................................. 8
2.1 Objectives & Goals ................................................................................................................. 8
2.2 Business Drivers..................................................................................................................... 8
2.3 Risk Management.................................................................................................................... 8
3. Discussion ................................................................................................................................. 10
3.1 Drilling Performance: Technical Limits Methodology....................................................... 10
3.2 Well sites & Roads ................................................................................................................ 12
3.3 Wellbore Stability .................................................................................................................. 17
3.4 Casing Design ....................................................................................................................... 18
3.5 Completion Design ...............................................................................................................22
3.6 Corrosion ............................................................................................................................... 28
3.7 Drilling Plan ........................................................................................................................... 34
Surface Hole Section..............................................................................................................34
Drilling in the Reservoir .........................................................................................................37
3.8 Well Time & Cost Estimates................................................................................................. 42
3.9 Purchasing & Tendering Process ....................................................................................... 44

Table 1 Financial & HSE Risk Matrix .....................................................................................9

Table 2 Definition of Risk Consequence Criteria ...................................................................9
Table 3 Definition of Risk Frequency Criteria ........................................................................9
Table 4 Example of Drilling Hazards Risk Assessment .......................................................10
Table 5 Oseil Technical Limit Time Analysis .......................................................................11
Table 6 Casing Design Factors............................................................................................20
Table 7 Calculated Design Safety Factors...........................................................................22
Table 8 Summary of Artificial Lift Systems ..........................................................................25
Table 9 Comparison of Installation Times for Conventional Flanged and
SpeedLock/Unihead Wellhead System Connections ...................................................26
Table 10 Cost Comparison between Unihead & Conventional Flanged Wellhead..............27
Table 11 Oseil Field Reservoir Fluid Properties ..................................................................28
Table 12 ...............................................................................................................................30
Table 13 Calculated Tubing Life for L-80 Carbon Steel & API 13 Cr L-80...........................33
Table 14 Oseil Phase 2 Drilling & Completion Cost & Time Estimates ...............................43
Figure 1Estimated Cost Difference between Oseil-4 & Oseil-3 the First Phase 2
Development Well...........................................................................................................5
Figure 2 Oseil Phase 2 Development Planning, Approvals, Procurement, Drilling &
Completions Schedule....................................................................................................7
Figure 3 Determination of the Technical Limit .....................................................................11
Figure 4 Well Time Prediction..............................................................................................12
Figure 5 Oseil Landslip Zonation .........................................................................................15
Figure 6 Multi-Well Pad Design ...........................................................................................16
Figure 7 Bore Hole Instability...............................................................................................18
Figure 8 Conventional & Slim Casing Design ......................................................................18
Figure 9 General Operating Envelope for API & Premium Connections..............................21
Figure 10 Conceptual Completion Schematic for Oseil Ph.2 Development.........................24
Figure 11 Material Selection for Tubulars ............................................................................32
Figure. 12 Oseil Annulus Velocity Profile for PI = 700 ........................................................38
Figure 13 Oseil Inflow Performance for Point Source @ 8440 ft MD (6800 ft TVD) ............38
Figure 14 Generic Well Design Chart .................................................................................41
Attachment 1 Oseil-3 Detailed Well Cost Estimate..............................................................45

Attachment 2 Oseil-13 (Tenggara A) Detailed Cost Estimate ...........................................46

1. Summary
Oseil Phase 2 Development includes drilling and completion of up to 15 additional wells into
the structures located around the existing Oseil Field and a new prospect area called Oseil
Tenggara to the southeast. These additional wells will be drilled directionally and with
underbalanced drilling from the existing Oseil well sites and will have 300-500 ft horizontal
sections in the Manusela reservoir. The wells will be completed open hole with electric
submersible pumps (ESPs) or gas gift. A schematic of the completion design is shown in
Fig. 10. Note, however, that well and completion designs presented in this document are
conceptual based on work completed to date and may change.
Significant efforts have been made to reduce the cost of these wells. Current cost estimates
for the first oil well are US$ 5.647 million with technical limits improvements leading to costs
for the final development well of US$ 5.54 million. Cost reductions relative to past wells are
due to reduced hole size, fewer casing strings, directional wells from existing locations,
batch drilling/completions, and economies of scale from more wells. An added cost
reduction will be from use of a better drilling rig: with more wells will be an increased number
of drilling contractors will participate in the bidding.
Operations will commence with mobilisation of the drilling rig and all materials and services
in late 2003 and completion of the first two wells on the Oseil 4 well pad in 1st qtr 2004. A
schedule is shown in Figure 2.
1.1 Cost & Time
Attachments 1 & 2 contain detailed cost estimates for Oseil-3 and for Oseil-13 (the last well
on the Oseil-4 multi-well pad). For reference, the lowest well cost to date was for Oseil-4 at
US$11.626 million. The cost difference between Oseil-4 and the estimated cost of
US$5.647 million for Oseil-3, the first well in the Phase 2 development, is illustrated in Fig. 1.
The costs and differences between these wells is summarised as:
Difference Percent of
Item Oseil 4 Actual Oseil 3 Forecast
US $ Total $
Time 83 days 40 days 3,228,750 54%
Tangibles $ 1,413,451 $ 538,732 874,719 18%
Mob/Demob $ 1,683,142 $ 463,780 1,219,362 25%
Site $ 715,000 $ 30,000 436,588 9%
Others $ 490,789 $ 270,807 219,982 4%
Total 5,979,401 100%
The 54% difference in time prediction for the first well as compared to Oseil 4 is because of
the large amount of Removable Time (see section 3.1 for further explanation). The
difference is tangibles cost is a function of the simplified slim-hole casing and completion
design and expected cost savings when purchasing materials for 16 wells. The Mob/Demob
difference is also a function of the aggregate cost spread over 16 wells as compared to the
two well programme in 1998. The site upgrade costs per well for the Oseil-4 multi-well pad
are small as compared to the original site cost. The Others is the anticipated lower
services cost for a multi-well programme.

Figure 1Estimated Cost Difference between Oseil-4 & Oseil-3 the First Phase 2
Development Well
14,000,000
12,000,000
10,000,000
8,000,000
US$
6,000,000
4,000,000
2,000,000
0
Oseil-4 Oseil-3
Well Cost Value of Time Difference Value of Tangibles Difference

Mob/Demob Difference Value of Site Difference Others
The estimated well costs for the 16 well programme are shown in Table 14.
1.2 Uncertainties
The following uncertainties are present in the planning, costs, design and execution
assumptions made in this Appendix.
Schedule:
Approval to commence tendering before internal and BP MIGAS AFE approvals have
been obtained.
Longer than expected delivery times for tangibles.
Rig availability after 1Q04
Well Design:
Geomechanical issues restrict directional drilling plans such that targets cannot be
reached within current drilling programmes.
Tectonically stressed Kola Shale may cause serious hole instability and stuck pipe.
Significant over-pressure in overburden (e.g. Lola Kecil)
Inability to drill entire horizontal section through the reservoir in an underbalanced
condition due to frequency and permeability of fracture zones.
Inadequate hole cleaning in horizontal sections due to restrictions imposed by UBD.
Unable to fully isolate gas cap to allow drilling and production in the oil leg without
excessive gas production.
The actual level of corrosion is not currently known and this may seriously impact the
selection of materials.
Costs:
Well cost estimates assume the benefits of a continuous 16 well programme a
lesser well programme or an interrupted, discontinuous programme will cost more
per well.
Drilling Performance:
Ability of lead contractors, particularly drilling rig and directional drilling, to
significantly improve upon previous performance.
Improvement in average rates-of-penetration.
1.3 Schedule
The detailed planning and procurement process for this programme will commence
immediately internal approval is given. Drilling operations in the field are planned to

commence early in the first quarter 2004 and to continue through until the fourth quarter
2005. This aggressive programme will depend upon obtaining timely internal and external
approvals, procurement of goods and services and a significant improvement in performance
from previous drilling operations on the Oseil Field. An outline schedule is shown in Fig. 2

Figure 2 Oseil Phase 2 Development Planning, Approvals, Procurement, Drilling & Completions Schedule
2003 2004 2005

ID Task Name Duration Start Finish Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
1 EXPLORATION, RES ENG, DRILLING & FACILITIES CONCEPTS 141 days Mon 16/12/02 Mon 30/06/03
22 SEAR Presentation of Concept, Well Design & Costs 0 days Tue 15/04/03 Tue 15/04/03 15/04
23 DETAILED DESIGN, PLANNING & ECONOMICS 26 days Wed 16/04/03 Wed 21/05/03
33 KUFPEC, SJV & BP MIGAS APPROVAL PROCESS 137 days Tue 06/05/03 Wed 12/11/03
53 DEVELOPMENT ACTIVITIES 704 days Mon 03/03/03 Thu 10/11/05
54 WELL SITE & ROAD PLANNING & CONSTRUCTION 104 days Tue 29/04/03 Fri 19/09/03
62 PROCUREMENT Est. ~ 25 Contracts 134 days Mon 09/06/03 Thu 11/12/03
738 OTHER NON-DRILLING CONTRACTS est. 20 115 days Mon 03/03/03 Fri 08/08/03
757 REGULATORY APPROVALS 43 days Wed 01/10/03 Fri 28/11/03
786 OPERATIONS 511 days Wed 26/11/03 Thu 10/11/05
787 Mobilisation of Equipment 22 days Wed 26/11/03 Sun 28/12/03
807 Oseil Drilling Operations 456 days Sun 28/12/03 Mon 26/09/05
856 Demobilisation 3rd Party Equip. 24 days Mon 26/09/05 Sun 30/10/05
864 Demobilisation Drilling Rig 33 days Mon 26/09/05 Thu 10/11/05
871 Oseil Completion Operations 238 days Mon 27/09/04 Thu 25/08/05
893 Demobilisation of Completions Rig 8 days Thu 25/08/05 Tue 06/09/05
896 Demobilisation of Completions Rental equipment 16 days Thu 25/08/05 Sat 17/09/05

2. Introduction
2.1 Objectives & Goals
The Oseil Phase 2 Development Team (ODT) has the following main objectives:
Increase production.
Reduce cost per well.
Develop un-drained portions of the Oseil Field.
Appraise further reserves upside potential.

The Operations/Drilling Departments specific goals are:
Design, plan and execute the drilling and completion of the wells on schedule and within
the approved AFE amount
Reduce HSE incidents to as low as is reasonably practical (the ALARP principle)

The goal of the ODT is to deliver these objectives in full, with no compromises.
2.2 Business Drivers

The Oseil Phase 2 Development well design has focussed on delivering sufficient new
production and additional reserves at an economically viable cost. The Oseil appraisal wells
No. 2 and 4 were drilled for US$17 & 7.9 million respectively in 1998 and the wells Oseil-1, 2
and 4 were re-entered, sidetracked and/or completed for reservoir evaluation at a cost of
US$3.3, 8.0 and 3.8 million respectively in 2002.
A detailed review of the previous well designs and the drilling and completions costs and
performance was conducted. The target was to determine the technical feasibility of drilling
and completing a directional well with a 500 ft horizontal lateral section in 34 days at a cost
of US$4.7 million. The previous best performance was 69 days and US$11.6 million. This is
the aggregate time and cost for drilling Oseil-4 to 7,640 ft in 59 days and the completion in
25 days at a cost of US$3.7 million. This step change in performance is essential to
reduce development drilling capital expenditure and therefore improve the overall field
economics (Ref 1).
2.3 Risk Management

The well design process starts with defining the well objectives as above and includes
identification of the risks and opportunities. Identifying, understanding and managing the
financial and HSE risks involved in a drilling operation is vital to achieve a step change in
performance. The risk assessment process starts at the inception of the project and will
continue in increasing detail throughout. The driver for this activity is both KUFPECs HSE
policy and compliance with Indonesian Legislation. A considerable number of the risks
identified so far have only a financial consequence. Mitigation of these risks is through
optimisation of the well design and in due course, the drilling and completion procedures.
There are a number of health, safety or environmental risks. HSE risks are reduced during
the planning and execution process incidents to as low as is reasonably practical (ALARP
principle). This principle recognises that safety has a price but in practice, what is
acceptable is a matter of judgement. It is important to appreciate the difference between
economic and HSE risk. Economic risk is determined by a calculation of cost against
probability. HSE risks are determined by a calculation of severity of risk (in terms of the
impact on health, safety and the environment) against the probability. A Risk Assessment
has been performed for the drilling operations during the conceptual design phase using the
Risk Matrix shown in Table 1 and the definitions from Tables 2 and 3 (see example in Table
4 below). A Risk Register has been established to record the risks identified during the

planning and execution phases, their impact and mitigating plans or actions. The Risk
Assessment is used to communicate the risk picture to Management. A detailed Drilling
Operational Risk Assessment will be performed and subsequently communicated to the well
site team. This will guide the Drilling Team during the preparation of detailed operational
procedures.
Table 1 Financial & HSE Risk Matrix
FREQUENCY / NON-
MINOR SEVERE CRITICAL CATASTROPHIC
CONSEQUENCE CRITICAL
HIGH
MODERATE
LOW
REMOTE
NEGLIGIBLE
Key
ACCEPTABLE RISK ALARP ZONE UNACCEPTABLE RISK
Table 2 Definition of Risk Consequence Criteria
Severity Definition
Non-Critical Event that causes no hazard to personnel, facilities or the environment.
Economic Value < US$10,000
Minor Event that causes light personnel injuries, local damage to facilities or the
environment
Severe Event that causes severe personnel injuries, severe damage to facilities or
the environment
Critical Event that causes personnel fatalities in the vicinity, critical damage that
threatens the integrity of facilities or extensive environment impact
Economic Value < US$10,000,000
Catastrophic Event that causes large numbers of personnel fatalities in the vicinity and
outside, total loss of facilities or long term extensive environment impact
Economic Value > US$10,000,000
Table 3 Definition of Risk Frequency Criteria
Frequency Definition of Return Period

Negligible Less than 1 event per 1,000 years
Remote 1 event occurrence between 100 and 1,000 years
Low 1 event occurrence between 10 and 100 years
Moderate 1 event occurrence between 1 and 10 years
High 1 event occurrence < 1 year

Table 4 Example of Drilling Hazards Risk Assessment
HAZARD PROBABILITY CONSEQUENCE RISK LEVEL

OF OCCURRENCE OF OCCURRENCE
Unstable Kola Shale

exposed below 7" csg. Moderate Minor Low
Shoe
Lost Circulation in top of

Low With UBD Equipment - low Moderate
Manusela Fm.
High Without UBD Equipment - High High
Water
Losses/Contamination into High Low High
reservoir
Gas Cap at top of

High With UBD Equipment - low High
Manusela Fm.
Without UBD Equipment - High
Gas Kick High With UBD Equipment - low Moderate

High Without UBD Equipment - High High
(References 2 & 3)
3. Discussion
The following section discusses in detail the past drilling performance analysis, well
locations for Phase 2, the on-going well bore stability and geomechanical modelling work,
casing and completion design proposals, corrosion issues, the proposed drilling plan and
procurement of goods and services.
3.1 Drilling Performance: Technical Limits Methodology

The past Oseil Field drilling performance was analysed using the proven Technical Limits
Methodology (Ref.4) whereby the following questions were addressed:
Where are we now?

What is possible?
How do we get there?
Technical Limit is a term used to describe a level of performance defined as the best
possible for a given set of drilling parameters. It is the theoretically flawless or perfect time
for performing each of the steps in well construction i.e. the entire process from rig move,
preparation to drill, drilling and completing the well. The perfect time can be described as
the actual well time, from past performance, less the removable time. This removable time
includes conventional lost time (e.g. equipment failures, downhole drilling problems, waiting
on equipment or services, stuck pipe, well control etc.) and lost time for less-than-optimum
performance (use of sub-optimal parameters or equipment e.g. bit performance, slow
tripping times) and time spent on unnecessary work (use of non-applicable procedures e.g.
frequent wiper trips, conditioning mud, surveys). The analysis of the removable time
required defining the problems and causes and seeking solutions in order to eliminate this
lost time from future operations (Ref 5).

Figure 3 Determination of the Technical Limit
ACTUAL WELL DURATION
CONVENTIONAL
THEORETICAL PERFECT INVISIBLE LOST
LOST OR DOWN
WELL TIME TIME
TIME
REMOVABLE TIME
TIME
TECHNICAL LIMIT
A summary of the Technical Limit Time estimate for a typical Phase 2 Development well is
given below:
Table 5 Oseil Technical Limit Time Analysis

(All times are hours unless stated)
OSEIL REMOVABLE TIME THEORETICAL WELL

OSEIL WELLS ACTUAL
AVERAGE LOST INVISIBLE TECHNICAL HOLE / CASING HOLE
HOLE / CASING SIZE TIME TIME TIME LIMIT TIME SIZE DEPTH
26" / 18-5/8" 69.8 20.7 1.2 48.0 16" / 13-3/8"' 160'
16" / 13-3/8" 190.2 57.8 -93.7 226.0 12-1/4" / 9-5/8" 2500'
12-1/4" / 9-5/8" 831.8 244.8 29.0 558.0 8-1/2" / 7" 8000'
8-1/2" 1221.8 653.2 310.7 258.0 6" 9500'
TOTAL (Days) 96.4 40.7 10.3 45.0
Estimating the time required to drill and complete the Oseil Phase 2 Development wells is an
important part of the project planning and determination of project economics. In addition,
the analysis provides a scale against which performance can be measured. Equations
derived from statistical analysis of wells were used to predict the well times for the
development programme (Ref. 6). Because of the small amount of local data available, the
equations were modified to provide a best fit using engineering experience and judgement.
The analysis of the Oseil database shows a steady improvement in well times between
1993 and 1998. This is attributed to learning from the problems in the earlier wells,
improvement in performance of equipment and crews and major changes in the drilling
programmes made after experience on the first and second wells. The Oseil Development

wells are planned to be drilled directionally and whilst it may appear that the vertical wells in
the data base are not applicable when predicting drilling times, other well time analyses
(Ref. 7) have indicated that hole angle has very little effect on well times since the measured
depth of the well overrides this effect. The Geomechanical Modelling as referred to earlier
will help to verify if this is likely to be a valid statement for the Oseil wells.
The equations used to predict the Oseil Ph.2 Development well times are as follows:
Time = A x mdB x LCF x SDF
Where,
The Learning Curve Factor LCF = 1.0 + C x exp (0.693(Drilling Order 1)/D)
And,
The Spud Date Factor SDF = (1.0 E) x exp (Well n Spud Date Well 1 Spud Date)
The 5 parameters used are:

A Time/Depth Factor
B Dimensionless exponent for measured depth
C Dimensionless penalty factor in learning curve
D Half-life of learning curve
E Annual Improvement Factor
n Well Number
Figure 4 Well Time Prediction
Well Time Prediction

80.0
70.0
60.0
Time - Days
50.0
40.0
30.0
20.0
10.0
0.0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Well Number
3.2 Well sites & Roads

KUFPEC has experienced some considerable difficulties and expense with regards to well
site and road construction around the Oseil Field. These problems started with the first road
and well site at Oseil-1 and have continued up to the present. There have been a number of
geotechnical studies with recommendations (Ref 8 & 9), however few of the
recommendations have been adopted or incorporated into construction or upgrading. The

consequence of this has been an escalation in costs and continual upgrading. The cost of
the Oseil well sites and roads is between US$1 to 2.5 million each (about 15 20% of the
total well cost) and require constant maintenance to keep in a useable condition. The
principal reasons for the high costs are:
Topography
Propensity for landslides
Weather conditions very wet season October to April
Remoteness of location from civil engineering infrastructure
The landslides aggravated by the building of the Oseil-4 access road and well site has been
continually monitored since late 2000. The slides continue to slip further and have
completely blocked the original lower section of the access road to Oseil-2 & 4 and now
impinge upon the Bula Air River. The main reasons for the landslides are:
End tipping of fill or high embankments at the top of valleys.

Poor drainage and poor run-off control resulting in erosion, undercutting and
saturation of slopes.
Increased high-energy run-off from road and well pad drainage.
Deforestation and vegetation cover removal.
Poor or limited engineering with the use of steep and inappropriate slopes in-fill and
undersized culverts.
Inadequate geotechnical input into the early construction work.
The topography around the Oseil Field is mountainous terrain up to 700m above sea level,
with steep and distinct ridges and crests with numerous valleys along which landslides, both
natural and induced, have occurred. The surface geology is Middle Triassic to Early
Jurassic rocks of the Kanikeh Formation consisting of interbedded mudstones, shales,
sandstones and siltstone. Tertiary Salas deposits consisting of older boulders or blocks
(sometimes kilometres in size) occur on the flanks of the Oseil Anticline. The Salas and
Kanikeh Formations are often covered by residual soil about 2 4 m in thickness. The
coastal plains are relatively flat low rolling hills that are often waterlogged after heavy rain.
Considering the degree of damage already done to the environment and the long-term
impact on the use of current well sites and continued access to these sites, further well site
construction work would be foolhardy. The physical conditions on the Oseil Anticline are
apparently not suitable for such large-scale earthworks. A preferable solution is to try to
contain the current damage and to avoid building work unless necessary. Drilling the
development wells from the existing well sites would save 85-90% of the typical cost of a
new well site, and would not aggravate the current land slides further, if conducted properly
and with appropriate geotechnical input into the construction design. Geotechnical
investigations have been carried out at the Oseil-1 well site. This work must be extended to
cover the Oseil-2 and 4 well sites.
However some of these cost savings by using existing well sites at Oseil-2 and 4 as the two
main multi-well pads from which to drill directional wells to reach the desired targets in the
reservoir are offset by the requirement to drill directionally and the increased risk involved in
this drilling work. The geomechanical study underway will assist in proper well planning to
mitigate these risks. Fig. 5 overleaf shows the landslide zonation on the north side of the
Oseil mountain ridge. Both Oseil-2 and 4 well sites are situated on stable, if narrow and
restricted, areas. There are severely unstable areas to the north (down-slope) sides of both
well sites. The Oseil-1 site is stable but has active slides upslope and down slope with
movement rates of 2 3 m per year. The geotechnical study of the Oseil-1 site indicted a
high risk of reactivation of the slides under the well site platform. For this reason, the Oseil-1
site has been avoided for the Phase 2 development drilling. It intention is to use the

currently large Oseil-4 well site as a multi-well pad by constructing 10 additional well cellars
either in a line, as shown in Fig. 6 or in a 5 x 2 grid with a 5 m spacing between centres.
The rig derrick, drill floor and substructure would be skidded between well cellars to access
each new well cellar in turn whilst all the other rig equipment and mud pits would remain
stationary. The Oseil-2 well site will require two additional well cellars to be constructed.
This site is considerably more restricted, particularly to the north (down slope) and south
(rock wall) sides. The plan will be to extend the site to the west to place all three cellars in
one line running E W. Construction cost for these site modifications have not been
included in the well costs presented in section 3.8 but are expected to be in the order of
US$150,000 to 500,000 per well pad site.

Figure 5 Oseil Landslip Zonation

Figure 6 Multi-Well Pad Design

3.3 Wellbore Stability

The determination of wellbore stability is an essential part of the well design work (Ref.8).
Investigation into this specialist phenomena will be conducted by a third party contractor
using KUFPEC provided structural and reservoir models and well data during the 2nd Q
2003. The objective is to determine the optimum well design taking into account the
displacement profile in the reservoir to maximize drainage, and an assessment of the
feasibility of drilling horizontal, extended reach, multi lateral or vertical wells. To accomplish
this particular objective, the contractor will address the following:
1. Construction of a Geomechanical Model of the Oseil Field, Seram Island: A

model for the overburden and reservoir will be developed that adequately addresses the in-
situ stresses, maximum stress direction, overburden stress, effective stress ratio, least
principal stress (vertical or horizontal). This will characterize the drilling-induced wellbore
breakouts in terms of position and breakout width along the borehole wall. The model will
infer the direction of the maximum horizontal principal stress and will be used to compare
this stress direction to the maximum horizontal principal stress inferred from observations of
wellbore failure orientation. The principal stresses thus determined will be validated against
available drilling data and experiences, and the KUFPEC subsurface model based on
available 3D and 2D seismic.
2. Applying the Appropriate Geomechanical Model for Reservoir Characterization
Purposes: The geomechanical model will be used in an analysis of wellbore image data to
map fractures seen in the image data. An emphasis will be placed on discriminating
between natural fractures, drilling-enhanced natural fractures and drilling-induced tensile
wall fractures. The geomechanical model (stress directions, stress magnitudes and pore
pressure) will be used to determine the shear and effective normal stresses resolved on the
natural fractures seen in the image data. The interpretation of these results will take into
account a frictional failure criterion to discriminate between fracture populations that are
critically stressed and those that are not critically stressed. The critically stressed natural
fractures would be most prone to repeated slip in the tectonically active Seram area and
therefore most prone to preserving their respective permeability. This information will be
used to optimise the planned well placement, alignment and trajectory for optimal reservoir
drainage.
3. Applying the Geomechanical Model for Well Design purposes: Lower-
hemisphere projection plots will be constructed at selected critical depths in the overburden
and reservoir showing the mud weight and mud window required to maintain wellbore
stability and prevent loss circulation for any arbitrary wellbore trajectory. This will provide a
general overview of the available options for drilling through the overburden and reaching
the Manusela Formation target, which will be the foundation upon which to identify the
optimal wellbore trajectories, designed to ensure wellbore stability in the formations above
the Manusela reservoir. The feasibility of conducting underbalanced drilling operations will
be determined by using active loading wellbore stability analyses and multiphase flow
software. This work will quantify the degree of underbalanced pressures the overburden
and reservoir can tolerate before rock failure exceeds wellbore failure tolerances and hole
cleaning capabilities. The limitations for conventional overbalanced drilling in the
overburden will be determined using passive loading wellbore stability analyses (Ref. 9).
The appropriate casing seat selection points for optimising wellbore stability and well control
whilst drilling through the overburden and the reservoir will be derived from these analyses.

Figure 7 Bore Hole Instability
Typical output from a 3D linear elastic borehole instability risk analysis showing the
equivalent circulating density required to prevent hole collapse as a function of well
inclination and azimuth. Areas with red shading indicate well trajectories that require
overbalanced bottom hole pressure.
3.4 Casing Design

The previous Oseil wells were designed as exploration and appraisal wells with conventional
casing and wellhead sizes to allow sufficient additional casing strings to be available as a
contingency for the risk of encountering unforeseen events such as abnormal formation
pressures and well bore instability. With only three wells drilled on the field and a fewer
number of relevant offset wells, it is not possible to thoroughly define all the well bore
problems. However, the well bore stability study will assist with identification of the risk of
wellbore instability and mitigation by providing practical limits for directional drilling planning
and drilling parameters (see section 3.7 below for more details). By reducing the risk of well
bore instability through proper planning, the additional casing string contingency can be
eliminated. The result is a slim casing design as described below.
Figure 8 Conventional & Slim Casing Design

CONVENTIONAL DESIGN SLIM HOLE DESIGN
CONDUCTOR 18-5/8" 13-3/8"
SURFACE CSG. 13-3/8" 9-5/8"
PRODUCTION CSG. 9-5/8" 7"
OPEN HOLE 8-1/2" 6"
The benefits of the slim casing design are a 48% reduction in tangible costs for casing and
accessories and a 20-35% improvement in the drilling and casing installation time.
Casing Design Process: The Oseil Development well casing design was performed using a
combination of manual calculations and Landmarks StressCheck v. 3.0. It was based on
the deepest prognosed formation tops and lithologies (including a +100ft margin of error for
possible underestimation of stacking velocities), and the estimated formation pore and
fracture pressure gradients as further described below.
The objective of the design was to allow the Jurassic Manusela Formation reservoir to be
safely developed for production using 3-1/2 tubing inside 7 casing. The design also takes
into consideration the expected hazards i.e.
Pressure transitions at the top of the Imbricate Zone (Late Miocene to Late Triassic)
Upper Nief Fm. (Middle Miocene to Late Paleocene) with possible fresh water and
associated gas flows in the Imbricate Zone.
Brittle, tectonically stressed Kola Shale (Late Jurassic)
Sub-normal Manusela Fm. reservoir pressure
Hydrogen Sulphide in the Manusela Fm. reservoir.
A 5 liner has been included as a contingency in the event the 7 casing is required to be set
prior to reaching the base of the Kola Formation.

Design Factors and Load Cases

The design factors used in the casing design are as follows:
Table 6 Casing Design Factors
Condition/Load Casing Tubing

Burst
- Cementing 1.1
- Pressure Test 1.1
- Well Control (70bbl gas kick) 1.15
- Shut-in tubing pressure & tubing leak 1.1 1.1
- Production Loads 1.1 1.1
Collapse
- Cementing 1.1
- Lost Circulation 1.0
- Production Casing
- Above packer: fluid hydrostatic 1.0
- Below packer: gas gradient 1.0
- Tubing Collapse: gas gradient 1.0
Axial
- Tension: Static 1.6
- Tension: Running 1.4 1.4
Triaxial 1.25 1.25
Kick Tolerance: This is the maximum volume of a (usually gas) influx, or kick, into the well
bore that can be tolerated based on a 0.5 ppg influx intensity i.e. the pore pressure at the
point of influx is 0.5 ppg higher than the hydrostatic pressure of the mud weight in the hole.
Kick Tolerance is usually expressed as a volume in barrels because this is the measure
drillers use most commonly when referring to kicks. Some areas use a kick tolerance
expressed as a mud weight e.g. a 12.6 ppg kick tolerance means the calculated mud weight
required to balance pore pressure and incorporates various sizes and lengths of BHAs. The
minimum acceptable tolerance should be >25 bbl and preferably at least 50 bbl.
Tubular Connections
The selection of suitable connections needs to reflect the intended service. The following
flow chart was used to assist with the selection of casing and tubing connections for the
Oseil Phase 2 Development wells:

Figure 9 General Operating Envelope for API & Premium Connections
A P I o r P r e m iu m C o n n e c t io n ?
Is M a t e r ia l Yes
C o r r o s io n R e s is t a n t A llo y ?
No
Is C o n n e c t io n S t r e n g t h R e q u ir e d Yes
t o b e 1 0 0 % o f P ip e B o d y
No
P r o d u c t io n C a s in g P r o d u c t io n T u b in g
o Yes
Tem p > 210 F
No
Type of Type of
F lu id F lu id
L iq u id G as L iq u id G as
Yes P re s s u re > P re s s u re > Yes P re s s u re > P re s s u re > Yes

7 5 0 0 P S I S IT P 5 0 0 0 P S I S IT P 5 0 0 0 P S I S IT P 3 5 0 0 P S I S IT P
No No No No
A P I C o n n e c t io n A P I C o n n e c t io n
P r e m iu m C o n n e c t io n
Casing Design Philosophy: The choice of casing sizes and setting depths was based on
the following:
7 production casing (or 5 liner) production liner set at the base of the Kola Shale to
isolate the overburden from the sub-normally pressured reservoir.
9-5/8 surface/intermediate casing to be set in the Imbricate Zone to isolate the

Kanikeh Fm. sandstone, claystone & siltstone with occasional coal seams and to
provide an adequately strong fracture gradient at the shoe to allow drilling the interval
down to the base of the Kola with sufficient kick tolerance.
13-3/8 Conductor to be set at a depth to allow an ECD of 10.0 ppg.
A contingency 5 liner will be available if unexpected hole conditions force setting the 7
casing prior to reaching the planned section target depth and also for isolating the possible
gas cap on some fault blocks.
The most critical part of this casing design is the setting depth of the 9-5/8 casing. The 8-
1/2 hole section through the Imbricate Zone, Upper and Lower Nief and Kola Shale is
probably the most challenging section of hole to be drilled. Fresh water and gas flows have
occurred in the abnormally pressured Imbricate Zone requiring kill mud weights up to 11.7
ppg (Oseil-2) and minor to moderate lost circulation rates of 10 50 bbl/hour occur in all the

formations. There are formation dips of 20- 45 degrees that have a severe influence on the
well trajectory. Stuck pipe has occurred when drilling the Kola Shale on Oseil-2 and appears
to be related to a thinner, more highly stressed shale section over the crest of the reservoir
in this fault block.
There is possibility that the 7 casing may need to be set prior to reaching the planned
section target depth if the leak-off test at the 9-5/8 shoe is < 14.8 ppg and more severe
over-pressure is encountered in the 8-1/2 hole section, as occurred in well Lola Kecil-1 and
Bolifar Utara-1. To mitigate these risks the Rotating BOP will be installed on to the 13-5/8
or 11 5,000 psi WP BOP after setting the 9-5/8 casing and installing the 9-5/8 wellhead.
The 5 contingency liner may then be required to isolate the overburden from the sub-
normally pressured reservoir.
Section 9 of this programme deals with the issue of corrosion. It is recommended that either
the exposed section of 7 casing below the ESP packer utilises a L-80 13Cr steel or plastic
coated pipe to mitigate the problems of corrosion.
Calculated Results: The results of the Oseil Ph.2 Development casing design are
summarised below:
Table 7 Calculated Design Safety Factors
String OD, Wt., Conn. Shoe Burst Collapse Axial Triaxial

Grade Depth S.F. S.F. S.F. S.F.
ft. brt
13-3/8
Conductor 68 ppf, BTC 165 9.5 33 4 4
K-55
9-5/8
Surface 43.547 2500 2.01 1.16 2.62 2.48
BTC
ppf, J-55
7
Production 26-29
Casing
BTC 8250 2.5 1.21 2.51 2.0
ppf
L-80
3.5 Completion Design

The completion design addresses the following considerations:
Reservoir Formation Type: It is essential that the reservoir rock is competent and
stable to allow an open hole completion. Production of solids with the reservoir fluids
can have an adverse effect on the selection of an artificial lift system (ALS).
Fortunately, the Manusela Fm. Carbonates appears to be stable and production data
from Oseil Phase 1 period indicates low solids production. When the open hole
reservoir sections in wells Oseil-2 and 4 were re-entered almost 4 years later there
was no noticeable deterioration in the well bore condition. Field practice and
experience in other carbonate reservoirs have shown excellent hole stability in
horizontal well bores drilled parallel to the least horizontal stress.
Drilling Method: Formation damage when drilling Oseil-1 was severe when drilling
the 8-1/2" hole interval from 6678 to 11,400ft. Lost circulation to varying degrees
from minor seepage to total lost returns was experienced from 6,782 to 10,296 ft.
Gas Cap: It is important to isolate the gas cap when producing from the oil leg. This
can be done with a liner and external casing packers as performed on Oseil-2ST
Well intervention options and requirements: Minimum wireline / slickline
operations (viscous oil) and workover intervention (workover rig cost is in the order of
US$800,000 per workover job). Therefore, the ALS production life should be
maximised to minimise workover frequency.

Expected production rate: The ALS should be able to efficiently handle an

expected production rate ranging from 2,000 to 4,000 BFPD per well.
The Oseil Phase 1 Development completion design (Ref. 10) currently installed on the 3
wells had the following main objectives:
To perform extensive pressure build-up (PBU) testing of all three Oseil wells to obtain
essential data on reservoir size and properties.
Evaluations of the selected Artificial Lift System (ALS) for Phase 2 when enough
production history records and ESP failure rate data are available.
Evaluation of the corrosive environment to assist in the selection of suitable
materials.
At the time of writing no workovers have been performed on the producing Oseil wells
therefore evaluation of the ALS using Electric Submersible Pumps (ESP) system is
incomplete as is the issue of corrosion (see below). However, the current high completion
cost must be addressed for economic Phase 2 development. The current Oseil well
completion tangible costs are over US$1 million per well because the design incorporates
features required for reservoir evaluation as mentioned above such as surface controlled,
deep downhole shut-in to reduce wellbore storage effects and permanent, high accuracy
surface read-out pressure gauges. Many of these features can be eliminated when the
completion design objectives are long-term, trouble free production using low-cost, low-
maintenance equipment.
The proposed completion design will now feature 3-1/2, J-55, 9.2 ppf, EUE tubing with slim
hole, multi-stage ESPs with possibly tandem motors or tandem ESPs, variable speed drive
(VSD) or Soft-start, Fixed Speed Drive surface controller. Gas lift completions will be used if
sufficient gas is proven. A schematic of the conceptual completion design is shown in Fig.
10.

Figure 10 Conceptual Completion Schematic for Oseil Ph.2 Development
1. 3-1/2 Tubing Hanger

1
2
2. 3-1/2 Tubing
3 3. Retrievable ESP Packer
4 4. Swivel Joint
5 5. Adjustable Union
6 6. Selective Nipple
7 7. Electric Submersible Pump

Artificial Lift
In late 2000, KUFPEC commissioned a study of the most appropriate Artificial Lift System
(ALS) for the Phase 1 Development. The study reviewed the most likely methods as
summarised below:
Table 8 Summary of Artificial Lift Systems
Lift Common Depth Rates Minimum Problems

System Applications Range (ft) b/d FBHP
Gas supply
Gas Lift Offshore wells Hydrates
Deviated wells (0.05)-0.15 Single Wells
Deep wells 12,000 10- psi/ft Casing Design
High-GLR wells 50,000+ Depletion
Moderately productive
wells
Electrical High-rate, low GLR Casing size
Submersible wells Handling
Pump Water-supply wells 5,000 500- 100 psi BHT > 300F
(ESP's) High-WOR wells (12,000) 100,000 above CHP Sand
Alternative to high rate (500- HGLR
GL 3,000)
Hydraulic Mod to low GLR wells - Casing size
Jet Pump Mod to good PI 12,000 100 - 20% net lift High THIP
Deviated wells (5,000) 8,000+ Fluid Volume
Alternative to gas lift (25,000) Triplex Pumps
Hydraulic Piston Deep wells Cleanliness
Pump Low-GLR wells 12,000 10 - CHP Casing size
Deviated wells (18,000) 2,000 High THIP
Alternative to rod (<1,000) Triplex pumps
pumps
Rod Pumps Onshore wells Doglegs
Wells with low SIBHP 5,000 2 - 2,000 CHP Fatigue
Low PI wells (<0.1 (12,000) (<500) HGLR
bId/psi) Sand
Screw Pumps Heavy - oil wells (< .
18API) 5,000 1-500 15 psi above BHT> 250F
Shallow / light wells (1 - CHP HGLR
Sandy wells 1200)
Plunger Lift Dewatering gas wells 12,000 1 - 500 100. 500 psi LGLR
Solids
High-GLR/low rate oil
wells
Hydraulic Mod-high PI wells
Turbine Hot (400F) service 11,000 1200- CHP Pump life
Sour service 100,000 HIghTHP
Deviated wells Fluid volume
From Table 8, the systems that are considered most suitable for the Oseil Field taking into
consideration reservoir & fluid properties, depth of reservoir, required production rates are:
Gas Lift (GL)

Electrical Submergible Pumping (ESP), and
Hydraulic Pumping (HP) either Jet (JP), or Turbine (TP)
None of the above systems has any restrictions at the 6,600 ft (2,012 m) maximum setting
depth in Oseil Field. The report concluded:

Gas Lift has a number of attractive features for Oseil Field. The only big drawback in
the Oseil Field is the uncertainty on the amount of gas. Therefore, it is important to
prove sufficient gas to produce the wells at the required rate by drilling a well to
evaluate the possible gas cap in the fault block penetrated by well Oseil-1 & 4.
ESP is the most reliable system for producing the wells to maximum potential. Pump
life is the biggest concern. If ESP life is between 6 month and one year, then OPEX
will be extremely high.
The well completion design should incorporate the possibility of producing the wells
by Natural Flow.
Due to the highly corrosive nature of the produced fluids, the installation of a
corrosion probe with remote real-time monitoring and surface sampling programs
should be implemented.
Selection of the equipment material should take into account workover rig frequency
and the possibility of changing equipment during workover jobs.
Wellhead and Xmas Tree
Wellhead
A 13-3/8 X 9-5/8 X 7 X 3-1/2 X 3M H2S / CO2 service SpeedLock/Unihead Thru-Bore
Well Head system will be used for the Oseil Phase 2 Well Development Program. This will
consist of a 13-3/8 Slip-On-Lock Casing Head and a 9-5/8 x 7 x 3-1/2 Unihead. This
combination system has been chosen over the conventional flange type because the 13-3/8
SOL casing head is installed after the surface pipe has been set and does not require any
welding. Because of this, the BOP stack will be installed only once and will remain in place
throughout the drilling and completion process. All the casing hangers and pack-offs will be
landed and pressure tested through the BOP without removing the BOPs. Well control will
be maintained throughout each program. The SpeedLock/Unihead wellhead system has
many advantages:
Reduces BOP nipple-up/down time as much as 3.8 days/well when compared to the
Conventional Flange System (Operational Time Comparison of Oseil 1, 2, and 4
wells versus the Conoco Philips Ramba Field wells - refer to tables below).
Less equipment i.e. no additional spools and risers to connect to the bell nipple (one
connection needed only).
Less BOP pressure testing time required.
Reduced manpower needed to complete operation (one man operation using
pneumatic impact wrench).
Installed using a standard set of tools.
Isolates personnel and the environment from dynamic well conditions when setting
and cementing casing and pack-off annular spaces on all strings except the
conductor casing.
Initial capital cost is higher then conventional flanged wellhead systems because of the tool
requirements but this cost is quickly recovered when amortised over a multi-well program.
Table 9 Comparison of Installation Times for Conventional Flanged and

SpeedLock/Unihead Wellhead System Connections

K U F P E C - O S E IL C o n o c o P h ilip s -
C o n v e n t io n a l F la n g e c o n n e c t io n R am ba
C o n v . F lg e Speed
C A S IN G S IZ E 1 2 4 A ve. Conn. Loc S a v in g s
20" 1 6 .5 0 0 .0 0 0 .0 0 1 6 .5 0
1 8 - 5 /8 " 0 .0 0 2 7 .5 0 1 4 .5 0 2 1 .0 0 1 4 .0 0 2 .5 0 1 8 .5 0
1 3 - 3 /8 " 2 0 .5 0 3 0 .0 0 1 6 .5 0 2 2 .3 3 1 5 .0 0 1 .1 5 2 1 .1 8
9 - 5 /8 " 4 6 .0 0 2 7 .0 0 3 9 .0 0 3 7 .3 3 1 7 .0 0 1 .5 0 3 5 .8 3
T re e 3 1 .0 0 1 4 .0 0 9 .5 0 1 8 .1 7 1 0 .0 0 1 .5 0 1 6 .6 7
T o ta l H o u rs 9 2 .1 8
T o ta l D a y s 3 .8
Table 10 Cost Comparison between Unihead & Conventional Flanged Wellhead
CONVENTIONAL FLG.
ITEM UNIHEAD WELLHEAD
WELLHEAD
Wellhead 45,085 52,642
Tree 42,213 42,213
Running Tools 80,424 Rental
Total US$ 167,722 94,855
The Speedlock / Unihead Wellhead System allow the ability of each casing string to be run
and cemented and annulus isolated in the wellhead with dramatically reduced operational
nipple up and or down time when compared to the Conventional Flange Systems. However,
the running tools i.e. casing hanger running and setting tool, casing pack-off running and
setting tool, pressure test plug running tool and bore protector running and setting tool must
be purchased. The initial capital cost is greater for the Speedlock / Unihead Wellhead
System because of these running tools but this disadvantage in cost be recovered in the
operational time saved. The daily operating cost is expected to be in the order of
US$125,000 per day, and as shown above the time saving is about 3.8 days per well.
Therefore, the cost of the tools is recovered during the first well and provides operational
savings of potentially 57 days and US$7.125 million over the development drilling
programme.
Xmas Tree
The selected design and specification of the Xmas Tree will be a H2S/CO2 service stack-up
flanged gate valve type incorporating dual master valves (one hydraulically actuated), flow-
tee, production wing valve, manual adjustable choke and swab valve. The size of the tree
will be 3-1/8 bore and will be rated to 3,000 psi WP.

3.6 Corrosion
The Oseil reservoir fluids contain hydrogen sulphide, carbon dioxide and water containing
choride ions as shown on Table 11. As such, it may be classified as a wet, sour, acidic
environment. It is possible that the high viscosity, low API crude oil may provide some
protection, but this cannot be confirmed until there is an opportunity to check the effects, if
any, of the produced fluids on the completion during the first workover. However, it is
important to understand the risks and the cost of mitigation. To do this requires an
understanding of the corrosion and hydrogen embrittlement processes as briefly presented
below.
Metal corrosion in sour gas environments is an electrochemical process, which consists of
anodes and cathodes, and can be divided into two simple reactions: oxidation and reduction.
Oxidation is the process that results in corrosion of the metal at the anode. The oxidation
and reduction reactions are dependant on each other. The behaviour of iron in acidic
solutions containing Hydrogen Sulphide or H2S is oxidation. The corrosion of steel in H2S, a
mixture of iron, carbon and other elements to form an alloy, is dependant upon the
concentration of H2S in solution, which in turn is dependant on the partial pressure of the
H2S and the solution pH. This is an inverse measure of the concentration of hydrogen ions:
the greater the quantity of hydrogen ions the lower the pH value and the more acidic the
solution.
Carbon Dioxide or CO2 dissolves in water to form a weak acid with a low pH value. A low
solution pH accelerates corrosion. The primary factors that affect CO2 corrosion are the
partial pressure of CO2, temperature and chloride content. The corrosion will take the form
of uniform surface corrosion, otherwise known as uniform weight-loss corrosion, and
localised pitting and crevice corrosion. Another commonly used expression is General
Corrosion, combination of uniform, crevice and pitting corrosion.
The combination of H2S, CO2 and chlorides in solution creates complex reactions that are
difficult to predict. Under certain environments, in addition to corrosion of the steel, there is
a susceptibility to premature failure by fracturing often below the yield strength of the steel
by a process known as hydrogen embrittlement. This process is the charging of the metal
by interstitial hydrogen atoms, causing a weakening of the crystal lattice structure of the
metal. Normally the reduction process at the cathode will result in hydrogen gas, H2, being
produced. However, H2S hinders the re-combination of the two hydrogen atoms and allows
them to enter the metal, since hydrogen atoms are smaller than the spacing between the
metal atoms. Hydrogen embrittlement cause by H2S is known as suphide stress cracking
(SSC). The principal factors that contribute to SSC are environment (H2S concentration,
pH, temperature and applied or residual stress) and materials (yield strength, microstructure,
heat treatment and alloying elements). In addition to SSC there is also a phenomenon
called stress corrosion cracking (SCC) which is brittle fracture of the steel from the combined
effects of corrosion and applied or residual stress. A third mode of failure common to steels
is chloride stress cracking (CSC) that affects some austenitic microstructure steels at
temperatures above 200F.
In summary, there are six common modes of steel failure that are interrelated to different
degrees:
Uniform weight loss corrosion.

Localised pitting corrosion (leading to a localised leak in tubing).
Localised, high density pitting corrosion (leading to localised strength reduction).
Stress Corrosion Cracking - SSC
Sulphide Stress Cracking - SCC
Chloride Stress Cracking - CSC.
Table 11 Oseil Field Reservoir Fluid Properties

The factors that contribute to these failure modes have been given above. The physical
properties of the steel can be controlled by proper materials selection; the environmental
PHYSICAL PROPERTY UNITS OSEIL- 1 (1) OSEIL- 2 (2) OSEIL- 2 (3) OSEIL4 (4) OSEIL 4 (5)
Datum Ft.RKB 6769 Surface 6679 Surface 6795
Pressure (7) psi 2511 200 2449 150 2500
Bubble Point psi 2344 (9) 1710 1710 2344 2344
Temperature deg F Not Known 140 201.8 140 187
% CO2 % mol / ppm 1.14 / 11,400 7.45 / 74,500 2.25 / 22,500 6.71 / 67,100 2.82 / 28,200
% H2S % mol / ppm 0.01 / 100 0.64 / 6,400 0.29 / 2,900 0.66 / 6,600 0.15 / 1,500
pP CO2 psi 26.7 14.9 38.5 10.1 66.1
pP H2S psi 0.2 1.3 5.0 1.0 3.5
NaCl % Wt / lb/bbl 0.0395 / 133 0.0015 / 3 0.0015 / 3 0.0016 / 5 0.0016 / 5
Cl ion (calculated) ppm 377 8 8 14 14
OIL RATE Stb/d 3800 646 646 2207 2207
GAS RATE mmscf/d <1 300 300 613 613
WATER CONTENT %vol 7.3 0.08 0.08 <0.05 <0.05

(7)
GAS/OIL RATIO Scf/bbl Not Known 213 213 260 260
factors cannot be controlled, with the exception of applied stress, and are difficult to predict
over time.
KUFPEC commissioned Helix Well Technologies to conduct a metallurgy selection study
prior to Phase 1 production (Ref.14). Their conclusions and recommendations were as
follows:
All corrosion rates are based on theoretical calculations since no empirical data is
available for this field. Corrosion rates have been estimated using a Helix software
package, Helicorr. This uses 3 phase oil/water/gas corrosion and erosion prediction
models to predict corrosion and erosion tendencies at any specified location in the
production system.
Experience in the Ninian Field, UK Sector suggests that under similar conditions
(even lower CO2 and H2S partial pressures), carbon steel tubing in ESP wells can
corrode severely within 9 months. The expected life of a L80 13Cr completion is in
excess of 2 years assuming that the water composition is valid.
Sulphide stress cracking strongly depends on the pH and therefore on the quality of
the water analysis of the Oseil produced fluids, it is strongly advised to do further
detailed analysis on the water samples to decide whether L80 13Cr is acceptable for
all conditions.
Casing, whether flow exposed or not, can be carbon steel if a flow wetted period of
less than 10 years is expected (water break through is only expected in 4 years). In
future wells carbon steel with adequate H2S resistance should be selected. It should
also be noted that significant erosion/ corrosion has been seen in casings where
ESP pump intakes have been located. This is due to the effect of turbulence and the
restricted flow area between the casing and the pump. This can result in premature
collapse of the casing (e.g. Forties, UK Sector). It is recommended to install a

shroud to prevent such an occurrence. It is recommended that a shroud

configuration be selected to prevent erosion of the casing.
The liner (exposed to the reservoir fluids) should be L80 13Cr.
Completion components, including the ESP pump body should be L80 13Cr material.
The metallurgy of the pump internals will have to be discussed with the vendor with
respect to their resistance to H2S stress cracking. The work done by Mobil on
designing ESP's for high H2S environments should be used as a basis (Ref.15).
Crevice corrosion at interfaces should be avoided by preventing significant scale
build up minimising the number of components in the design of any downhole
jewellery. If sufficient evidence emerges from the initial workovers of the existing
wells to show that the recommendation of a CRA for the ESP was overstated, then
carbon steel components will be used.
Finally, it should be noted, that if H2S levels in the gas phase should increase, for instance
due to a mechanism such as reservoir souring, a metallurgy review will be required.
Corrosion Rate Calculations: The de Waard & Milliams 1995 corrected formula for
predicting corrosion due to carbon dioxide was used with a range of CO2 concentrations
(max. 7.45 mol %) in the produced gas phase and using water cuts of 1%, 50% and 90%.
The following worst-case corrosion results were obtained:
Table 12
Carbon Steel Well Components
Corrosion Rate
Tubular Size
Mils/yr
3-1/2 Tubing 64
7 Casing 42
9-5/8 Casing 32
L80 13Cr steel Well Components
Corrosion Rate
Tubular Size
Mils/yr
3-1/2 Tubing
4.1
Sulphide stress cracking will occur in N80 carbon steels and 13Cr N80 CRA steels. L80
13Cr will be adequate under current producing conditions and theoretically calculated pHs.
There is a low risk of pitting and crevice corrosion for L80 13Cr under Oseil anticipated
conditions. It is recommended that downhole completion components, including pump
bodies should be L80 13Cr material.
Screening of Materials: Published manufacturers test data under similar conditions of
partial pressures of CO2 & H2S show that the steels containing 13% Chrome, commonly
referred to as 13Cr, 15Cr and also the 22 to 25Cr duplex steels are susceptible to SSC at
the temperatures present in the Oseil wells. Specifically, according to NACE MR-01-75, the
above mentioned materials cannot be used if the partial pressure (pP) H2S > 1.5 psi, and
with any amount of H2S if the water pH < 3.5. Because of the potential for catastrophic
failure of the tubing, these steels can be eliminated from further consideration.
Steels that are resistant to SSC with certain caveats as mentioned below are:

Low-carbon, low maximum yield stress steels (e.g. AISI 10XX to 41XX class or API
5CT Spec. grades H-40 to L-80) with Rockwell C hardness HRC < 22.
9Cr-1Mo low-alloy steel.
At the other end of the cost scale there are high Nickel-Chrome alloys such as Incoloy 825
and 925 or Inconel 718 that are resistant to SSC but cost about 11 times more than low-
carbon steels. The low-carbon, low maximum yield stress steels and low-alloy 9Cr-1Mo are
generally immune to SSC if the water content pH is greater than 3.5 in the temperature
range 150-212 deg. F and the Chloride ion concentration is less than 2% (i.e. 20,000 ppm).
These conditions are met by the downhole conditions on all three Oseil wells. However,
these steels will suffer badly from corrosion; how badly is difficult to predict until the first
completion is recovered from a well. Empirical data from sour oil wells indicates that the
corrosion rate will be initially slow because of the oil film on the steel, but that as water cut
increases above 30 40% the steel becomes water-wet and the corrosion rate will increase
to the rates as shown above.

Figure 11 Material Selection for Tubulars
As defined by NACE MR-0175-91 Known data :

(See Section 15.4) - Pipe Size
YS - Specified Minimum Yield - Material strength required
Strength - Connection type
Service
Completion Brines/ Produced
Environm ent
Drilling Muds only Fluids
Use carbon or low

alloy steel casing
Has corrosion
resistant alloy Yes Consider using CRA's
production tbg
been specified
No
Is exposure to sour No Specify materials according to API 5CT

conditions likely
Yes
Consideration can be given
o o
to using N80 (Q+T) or C95 (150 F) (175 F)
What is the
o o
in addition to the standard >65 C minimum service >80 C Consideration can be given to using H40, N80, or
temperature
sour-resistant casing P110 grades in addition to the standard sour-resistant
materials in API 5CT and casing materials in API 5CT and NACE MR-175-91
NACE MR-0175-91
o
(150 F)
o
<65 C
Use only the standard
sour-resistant casing What is the
materials in API 5CT and <95 ksi required strength >95 ksi Consideration to be given to using proprietary sour-
grade
NACE MR-0175-91 resistant casing grades with up to 110 ksi YS
s (Refer to Table 3 of NACE - consult with a relevant specialists
MR-0175-91 "For All
Temperatures" Column)
Has a suitable
combination of Yes Specify materials according to (API 5CT)
strength and SSC together with (NACE MR-0175-91
resistance been
achieved
If in doubt, ask the

No appropriate specialists
Refer to NACE Std.

MR0175-91
or consult the relavant
specialists

Tubing Life and Costs: the expected life of the tubing, string in the wells can be calculated
using autoclave derived corrosion rates for various materials or corrosion rates calculated
using one of many mathematical models. The de Waard & Milliams formula for predicting
corrosion due to carbon dioxide was used to calculate the general corrosion rates for both a
low-carbon steel and API 13% Chrome steel under the conditions determined from Oseil-2
and Oseil-4 well test results. Three different weights of 3-1/2 OD carbon steel and 13Cr
L80 tubing were analysed for their resistance to failure at the calculated corrosion rates.
The axial forces and tri-axial stresses on the tubing were calculated using Bakers
Tubemove software under the conditions of shut-in and production. These forces and
stresses with appropriate safety factors have been used as the maximum likely loadings on
the tubing. The corrosion rates were used to calculate the reduction in wall thickness and
thus remaining strength of the tubing, and these results were compared with the loadings
from the Tubemove program to estimate the time to failure for three different failure modes:
General corrosion resulting in a loss of strength

Pitting corrosion resulting in a leak or
Pitting corrosion resulting in a loss of strength.
The calculations of tubing life to failure used the shut-in load as the worst condition likely to
be encountered during the middle to late life of the tubing when the tubing has undergone
significant corrosion. The time to failure is determined by calculation to be when the
remaining strength in the tubing is equal to the maximum applied load at shut-in multiplied by
a 1.6 safety factor. The summary of these calculations is shown in Table 13.
Table 13 Calculated Tubing Life for L-80 Carbon Steel & API 13 Cr L-80
LIFE OF TUBING TO FAILURE

SIZE WEIGHT CORR. GENERAL TUBING LOSS OF TBG
RATE CORROSION LEAK STRENGTH
(in) (lb/ft) (mpy) (yrs) (yrs) (yrs)
3-1/2" 9.3 42 2 6 7
64 1.4 4 5
3.58 25 71 82
4.12 22 62 71
3-1/2" 10.2 42 2.3 7 8
64 1.5 5 5
3.58 27 81 94
4.12 23 70 81
3-1/2" 12.95 42 3.2 9 10
64 2.1 6 7
3.58 37 105 121
4.12 32 91 105
CARBON STEEL L-80 API 13 Cr L-80
From the above table it is apparent that general corrosion resulting in a loss of strength will
be the mode of failure for both L-80 carbon steel and API 13 Cr L-80 steel, and as would be
expected, larger wall thickness found in the higher weight tubing results in a longer life
before failure.
The cost of the workover services and lost production must be added to the costs of tubing
to arrive at the total cost of the workovers over a 10-year field life:

Total Cost of Workovers = Original Cost of the Workover & Completion +
(Replacement cost of completion + workover cost + lost production) x No. of Workovers
The higher price of 3-1/2, 12.95 ppf, L-80 tubing is easily offset by the real cost to replace
the 3-1/2, 9.3, L-80 more frequently during the well life. Should a well fail unexpectedly, the
shut-in lost time could be about 30 days to allow time to mobilise the Kalrez rig and required
support services. This favours a tubing string that would not fail during the expected life of
the well. Since the table above is based on the tubing life impact from CO2 corrosion, the
risk of other forms of corrosion and catastrophic failure are still present. As already stated
above the only materials which would meet this criteria are the exotic high chrome-high
nickel CRA steels such as Sumitomos SM2535 at eleven times the cost per meter than L-80
carbon steel. At $2.9 million for 15 x 8,000 ft strings of SM2535, the economics of this once
only cost compares very favourably with the potential cost of replacing corroded API low-
carbon steel tubing.
However there is another important factor to be considered is the completion design. The
initial choice of artificial lift system was Electric Submersible Pumps or ESPs. These pumps
can provide the output to match the expected well performance i.e. ~6,000 bopd and ESPs
can deliver higher flow rates of total liquids to maintain the oil rate should the water cut
increase significantly, albeit by replacing the ESP with a higher output unit.
UNFORTUNATELY, ESPs suffer from a number of failure modes including power cable and
cable splice failure (the most common). The frequency of ESP repair/replacement
workovers is difficult to predict but the experience of Indonesian operators such as Maxus
S.E.S., Santa-Fe/Devon in Irian Jaya and East Java and Kondur (formerly Hudbay and
Lasmo Malacca Straits) who have used ESPs extensively over the past decade would
suggest that 6 months might be optimistic.
If the life of wells between workovers were reduced to as little as 6 months, it would require
pulling and re-running the CRA tubing many times. These materials suffer from a common
weakness: they are easy to damage through poor handling and from galling of the threaded
connections simply by backing out and re-making up. Low-carbon steels are considerably
more robust in these respects and the cost impact of damage is significantly less. A cost
comparison between these two possible tubing materials for the Oseil wells must take into
consideration a back-up string of the CRA material to allow re-cutting connections and
handling damage to be repaired.
It is likely that the time to failure of the low-carbon steel tubing due to the worst form of
corrosion, pitting, would still be greater than the likely time to failure of the ESP. However, it
would be prudent to replace the partially corroded low-carbon steel tubing string at this time
rather than wait until the tubing has corroded to a point when failure is imminent. This
analysis then favours the 3-1/2 9.3 ppf, J-55, EUE API 8RD Carbon Steel tubing. The 7
casing exposed below the ESP packer should be made from L80 13 Cr steel or internally
plastic coated to provide some resistance to corrosion.
3.7 Drilling Plan
Surface Hole Section
Directional Drilling
The 16 surface hole will be rotary drilled vertically to 160 ft RKB . A Totco survey will be
obtained once TD has been reached.
The 12.1/4 surface hole will be drilled vertically to 2,500 ft RKB. A PDM motor and MWD
BHA will be used to control direction and angle due to the tough drilling and high dip
formation angles found ranging from 20-30 degrees in the Kanikeh Formation.
The 8.1/2 hole section will be directionally drilled using a steerable PDM motor and MWD
BHA . The well profile is designed to achieve lateral displacements ranging from 500-4,000
ft.. Kick-off depths will be initiated below the 9.5/8 casing with angle and direction built up

to 30 to 55 degrees, followed by a hold-section before a second build to 75 degrees at the 7

casing shoe depth at the base of the Kola Shale Formation.
Drilling Fluid
The 16 surface hole will be drilled using water in conjunction with high-viscous slugs (80-
100 cp) composed of pre-hydrated bentonite to ensure proper hole cleaning. The hole will
be displaced to gel mud prior to running the 13.3/8 casing.
The 12.1/4 and 8.1/2 hole sections will be drilled overbalance using a water base inhibitive
polymer based mud system at 9-11 ppg mud weight (average fracture gradients observed in
both Oseil-2 and 4 areas is 14.0-14.3 ppg EMW) in a closed circulating system. The mud
system will be designed to handle sloughing / swelling of the reactive clays found throughout
the Imbricate Zone (interbedded siltstone, sandstone, claystone and limestone) and partially
reactive and techtonically stressed shales in the Kola Formation.
Cementing
The 16 conductor hole X 13.3/8 conductor casing will be cemented to surface using a 5
drill pipe cement stinger stabbed into the 13.3/8 float shoe with Class G Cement + 3%
Accelerator at 14.5 ppg weight.
The 12.1/4 surface hole X 9.5/8 surface casing will be cemented to surface using dual plug
loaded cement head based upon following criteria:
Lead: Class G Cement + Extender at 13.5 ppg
Tail: Class G Cement + Accelerator at 16.0 ppg
For on-site cement volume requirements, a 50% excess applied to the hole volume will be
used. The cement will be displaced using water plus mud.
The 8.1/2 intermediate hole X 7 intermediate casing will be cemented to 2000 ft RKB using
dual plug loaded cement head based upon following criteria:
Lead: Class G Cement + Extender + Fluid loss at 13.5 ppg
Tail: Class G Cement + Fluid Loss at 16.0 ppg
The top of the cement will be extended 500 ft inside the 9.5/8 X 7 annulus and include a
anti-corrosion plus bacteria pre-flush.
The cement will be displaced using water plus mud.
If losses occur during drilling a two-stage cement job may be considered using a DV collar.
Bit Selection
16 Conductor Hole - Rotary Drilling (surface 160 ft RKB)
Formation Kanikeh Interbedded siltstone, claystone, and sandstone
Maximize bit hydraulics to increase ROP and proper hole cleaning.
Bit Type: Milled tooth centre jet - Y13C (IADC - 1-3-1)
PDC - S91 (IADC S123)
12.1/4 Surface Hole PDM motor + MWD BHA (160 2,500 ft RKB)
Formation Kanikeh and Imbricate Interbedded siltstone, claystone, sandstone and
limestone (coal stringers)
Maximize bit hydraulics to increase ROP while controlling direction and angle.
Bit Type: PDC - S91 (IADC S123)
Milled tooth centre jet - Y13C (IADC - 1-3-1)
8.1/2 Intermediate Hole Steerable PDM motor + MWD BHA

Formation Imbricate/Upper-Lower Nief and Kola Shale Interbedded siltstone, claystone,
sandstone and limestone (intermittent chert and pyrite nodules) and shale
Maximize bit hydraulics to increase ROP while controlling direction and angle.
Bit Type: PDC bit - S91 (IADC S123)
TCI bit - EHP-41/43 (IADC - 4-1-7/4-3-7)

Electric Logging
No open-hole electric logs are proposed.
Mud Logging
Gas detection sensors (degasser, total gas, chromatograph, hydrogen sulphide H2S,
cuttings gas, and carbon dioxide CO2) will be run, monitored and recorded continuously
from surface to TD. A mud and drilling real time monitoring system will be run continuously
and include well site parameter monitoring, trip monitoring, pore and fracture pressure
gradient as well as kick and kill monitoring. Daily reporting including lithology log, formation
pressure log, drilling parameter log and chromatograph ratio logs will also be provided.
Collection of cuttings samples will be from surface to TD.
Solids Control
To provide maximum Solids Removal Efficiency, the following should be adhered to:
The shale shaker must be capable of handling the entire drilling pump rate and allow the use
of 180-200 mesh screens. Screen up as flow rate dictates.
The surface fluid-transfer system (shaker box/tank and overflow lines) must be capably of
handling high flow rates up to 1000 gpm.
The twin centrifuge system should be able to process 100 to 120-gpm of whole mud while
providing a discharge of 0.75 to 1.25 gpm.. Recovery of barite and maintaining LGS less
than 5% is required.
A planned dilution schedule may be implemented.
QHSE
Safety is a main concern. No operation is so important or urgent that it cannot be
done safely.
Health and Safety are of the utmost importance during all phases of the operation. All
operational personnel must ensure that they are fully conversant with the relevant HSE
regulations.
Particular attention must also be given to rig specific operating procedures, which may
highlight additional HSE requirements.
The following will be implemented during the drilling operations:
All incidents, accidents and near misses must be reported and investigated.
Abandon rig drills and safety meetings must be held prior to spud.
Hold a pre-spud meeting and ensure that all personnel on location attend.
Safety meetings should be held on a weekly basis and include all on/off duty personnel.
A safety meeting should be held prior to any hazardous/key operation i.e. casing running
etc.
Ensure shift handovers are effective and information on status is transferred.
Ensure all personnel on site use the proper Personnel Protective Equipment (PPE). If in
doubt on anything, ask your direct Supervisor, good communication is encouraged.
H2S and CO2

Hydrogen Sulphide (H2S) levels of 14,000 to 16,000ppm and Carbon Dioxide (CO2) levels of
74,500ppm have been recorded during recent production from the Manusela Carbonate
formation in the Oseil 2 and 4 areas and therefore it is particularly important that all
operational personnel must fully trained and qualified in this type of environment. H2S safety
equipment will be installed and operating prior to entering the objective Manusela Carbonate
reservoir. There will be rig / site orientation briefings and complete training in H2S safety for
all personnel on site.
For all H2S safety and handlings procedures/considerations reference is given to the
Rutledge H2S Safety Manual and UBD Under Balance Drilling Contractor (UBD) Safety
Manual.

Drilling in the Reservoir
Underbalanced Drilling
The reservoir section in well Oseil-1 was drilled conventionally over-balanced using mud.
Large volumes of mud, water, cement and lost circulation materials were lost to the
formation and the results of the drill stem tests had strong indications of formation damage.
The total cost in materials and lost time spent fighting the lost circulation was about US$1.5
million. Apart from the damage to the reservoir and was a serious risk of losing well control
and stuck pipe. The appraisal wells Oseil-2 and 4 were drilled using under-balanced drilling
techniques whereby the hydrostatic pressure provided by the drilling fluid is less than the
reservoir pressure. This results in formation fluids flowing to surface in a controlled manner
by means of adjusting the degree of under-balanced pressure and annulus backpressure.
This method has the advantages and disadvantages as follows:
Advantages: Non-damaging, able to drill reservoir effectively, closed circulating
system, real-time formation PI determination.
Disadvantages: Expensive, inherently hazardous, large equipment & number of
personnel
Because of the high cost of underbalanced drilling a number of alternatives have been
reviewed for drilling the reservoir section in the Oseil Phase 2 Development. These are
briefly presented below:
Lost Circulation Materials (e.g. Aphrons, X-Linked Polymers):

Advantages: Moderate/Low unit cost, minimises produced fluids at surface, simple to
use & control
Disadvantages: Mostly ineffective in under-pressured, highly permeable, fractured
reservoirs, high cost for total quantities required, high risk of formation damage,
incompatible with most directional BHAs
Foam & Mist Drilling:
Advantages: Moderate cost, minimises formation damage
Disadvantages: Closed system needed with H2S gas & oil at surface.
Mud-Cap Drilling (normal, floating and pressurized)
Advantages: No produced fluids at surface, low-cost, maintains on-balance
conditions, less equipment & quick rig-up time
Disadvantages: High risk of stuck pipe, moderate risk of well control problems,
formation evaluation difficult, large volumes of water & mud required ~10,000 bbl/day
One of the unusual features of the Oseil reservoir is the frequency and distribution of
fracture zones (see Geological Section for further details). These fractures have recorded
permeabilities in the range of 1 to 30 Darcies and the Productivity Index of the fractures is in
the range of 50 to 700 bbl/psi. This presents a problem when under-balanced drilling
because of the high inflow from the reservoir at very low-pressure draw down. If only one
fracture zone is encountered, further underbalanced drilling through the reservoir is
technically feasible whilst maintaining adequate hydraulic power and circulation through the
drilling motor and bit and sufficient annular velocity to circulate rock cutting from the well
bore. However, if a second or third high permeability fracture is encountered the effect is to
lose the ability to drill underbalanced at the bit because of the frictional back-pressure
imposed on the system by the inflow into the annulus, and the very likely possibility that
cross-flow from one fracture zone to the next will occur.
UBD Flow Modelling was performed using Neotechs WellFlo 7 Software and the actual
drilling parameters from Oseil-2ST to determine the feasibility of UBD technology to drill a
1,500ft horizontal lateral section.
Minimum annulus velocity required for hole cleaning > 200 ft/min
Wellhead annulus pressure assumed constant @ 50 psi

Calculations made at 6940 ft MD (heel) and 8440 ft MD (toe) of horizontal section

with no inflow and with point source inflow @ specified PI = 700 bbl/d/psi
Membrane Nitrogen @ 95% N2 & 5% O2
Drilling Fluid 1:2 mix Diesel /Oseil Crude (excess fluids sent to FF)
Flow modelling indicated the following conditions are likely to occur:
Increased annulus backpressure required to reduce draw down & oil inflow because
of additional point sources & increasing PI (see fig. 13).
Difficult to maintain underbalanced conditions at bit once fractures are penetrated
with high PIs
Slight changes in parameters causes overbalanced conditions at bit
Annulus flow slugging annulus velocity erratic difficult to achieve stable
conditions (see fig. 12 below)
High pressure booster will be required as N2 injection pressure likely to exceed
rating of standard medium booster ~ 1800 psi
Standard 1500 scf/min capacity Nitrogen Membrane Unit sufficient
Figure. 12 Oseil Annulus Velocity Profile for PI = 700
800
Case 2: Inflow @ 6940 ft MD

Case 3: Inflow @ 8440 ft MD
Case 4: Inflow distributed from 6940 ft MD
700 to 8440 ft MD
Case 4
Annular Liquid Velocity (ft/min)
4 1/2 inch DP to
600 3 1/2 inch DP X-over
and casing shoe BHA
Case 2
500
400
No Production
300
Case 3
4 5/16 inch DP to
4 1/2 inch DP X-over
200
0 1000 2000 3000 4000 5000 6000 7000 8000 9000
Measured Depth (ft)
Figure 13 Oseil Inflow Performance for Point Source @ 8440 ft MD (6800 ft TVD)
2410
Reservoir Pressure - 2400 psi

2400
PI=700
PI=200
PI=1.3 PI=150
PI=100
2390Simon
Shaw Page 38 12/8/2003
PI=50
In conclusion, because over-balanced conditions are almost unavoidable after penetrating a

highly permeable fracture it is recommended to attempt to drill using a floating mud cap &
build up experience in drilling horizontal laterals through the Manusela Formation with the
goal of eliminating most of the UBD equipment & services, if possible.
Directional Drilling
The 6 hole section will be drilled below the 7 production casing through the remaining Kola
Shale Formation whilst building up the hole angle until 90 degrees horizontal is achieved as
close as possible to the top of the Manusela Fm. using a PDC drill bit with a steerable
positive displacement motor (PDM) and MWD/LWD. Once the horizontal plane and desired
azimuth (direction) is achieved drilling will be continued to a minimum of +/- 350 ft. lateral
with the primary objective to penetrate the anticipated fracture network systems while
maintaining a horizontal plane and direction. As mentioned in the section on UBD above the
challenge will be to penetrate a sufficient lateral section and maintain adequate hole
cleaning, well bore stability and well pressure control. Once two-phase fluids are introduced
down the drill string with an equivalent liquid volume greater than 22-24% (the measure of
nitrogen-to-liquid ratio) normal positive pulse type MWD will not function. Therefore, it is
planned to use Electro-Magnetic MWD. This system transmits the data gathered at the bit
i.e. hole angle, azimuth, magnetic & gravity tool face, tool temperature, drill pipe & annulus
pressure, gamma ray. Dependant upon the resistivity of the overburden, an extended range
antenna may be required for adequate transmission of the electro-magnetic waves to the
receiver at surface.
Drilling Fluid
The 6 hole section will be drilled from the Kola Shale to within the top of the objective
reservoir Manusela Carbonate using the water based inhibitive polymer mud system and
once significant fractures have been encountered changed over to a nitrified-diesel/crude oil
drilling fluid by means of under-balanced drilling (UBD). Returns to surface will be achieved
and maintained as a result of under balance conditions until either an extensive fracture

system and or multiple fractures are drilled through causing loss of complete circulation
(under balance becoming overbalance with possible cross flow interference of fracture
systems). If this event occurs, drilling will be continued but the circulating fluid and
technique will be slightly changed. A mud cap drilling system (MCD) using nitrified water
instead of crude oil as the main drilling fluid and either nitrogen and or water will be pumped
down the annulus to maintain a mud cap to prevent H2S gas from flowing to surface. The
extent of the horizontal displacement using this modified UBD-MCD drilling technique will be
a function of the fracture(s) system permeability and differential pressure(s) and the ability to
take in the drilling fluid and solids generated without causing hole instability.
Cementing
No cementing requirements are needed for the 6 horizontal hole section.
Bit Selection
6 Production Hole Steerable PDM motor + MWD/LWD BHA
Formation - Kola Shale and Manusela Carbonate Shale, dolomite and limestone
Bit Type: PDC bit - S94PX (recommended)
Button - EHP-51/EHP-53
Electric Logging
No open-hole electric logs are proposed.
Mud Logging
Same operational requirements as carried out in the previous hole sections.
Solids Control
High Capacity Centrifuge: A centrifuge will be the key component to treat and isolate the
solids build up in the under balance drilling UBD circulating fluid. The centrifuge will be
rigged-up to the closed-loop surface circulation system to process the diesel/crude oil drilling
fluid. The high capacity centrifuge is to be complete with an adjustable feed pump and be
able to process in the order of 200 gpm.
Cuttings Drying Equipment: The cuttings from the UBD drilling fluid will have to be dried to
reduce the oil content to less then 80 gm/kg. The recovered oil will then be recycled back
into the closed loop circulating system. The unitised equipment arrangement consists of a
minimum of 2-10 de-sanders and 20-4 de-silters with the discharge flow to a shaker bed.
The shaker bed or high G force dryer is capable of producing a continual 6 G force and
utilizing pyramid type screen designs. The drying system will be closed with an exhaust
arrangement to vent hydrogen sulphide gas through a scrubbing system.

Figure 14 Generic Well Design Chart

OSEIL PHASE 2 DEVELOPMENT WELL DESIGN
CASING DESIGN CEMENT TOP FORMATION
MUD PROGRAMME BIT PROGRAMME EVALUATION COMMENTS Time (days ) Vs Depth (ftRKB) Plot
RKB LEVEL PROGRAMME NAME
SPUD MUD 16" Bit From Spud
Bentonite - Gel 13.3/8" Csg
Conductor Mill tooth Mud Logging Cutting "Tough Drilling"
W t: 9 -10ppg Plug Loading 0
Csg., Center Jet Condition
Sweep Vis: >120 Cementing. 'G' + Drill 16" Hole & Mobilisation: 35.7 days
13.3/8", 61 lb/ft k- (1-3-1)
sec/quart Accelerator 14.5 ppg Set 13.3/8" Conductor,
55, 160ft RKB Move & R/U: 17.5 days
PV: < 20cP NU UNIHEAD
KANIKEH Fm Drill: 42.5 days
YP: > 10lbs/100ft2 W/ BOP & Test
1000 Completion: 2.0 days
Lead: Cmnt Class 'G' + 12.1/4" PDC with Move Rig: 0.5 days
Extender 13.5 ppg PDM Motor and Mud Logging Cutting
Surface Csg., MW D Steep formation dips
9.5/8" 40 lb/ft, Tail: Cmnt Class 'G' +
K-55 BTC, Accelerator 16 ppg 2000
Drill 12.1/4" Hole &
2,500 ft RKB MAIN HOLE PDC Drillable Float Eqpt
Set 9.5/8" Surface Csg, & Test
12.1/4" & 8.1/2"
R/U H 2 S Services after BOP's
Inhibitive Mud System
setting 9.5/8" Csg
KCl/Polymer 3000
W t: 9 - 10 ppg
Slow ROP's
Vis: 40 - 50 sec/quart
PV: > 25cP
Kick off below 9.5/8" YP: 10 - 25lbs/100ft2
casing build angle to 8.1/2" PDC with PDM IMBRICATE Zone 4000
75 degrees Motor and MW D
set 7" casing
/ Upper NIEF Steep formation dips
into Kola Shale Mud Logging Cutting
5000
Lead:
Cmnt Class 'G' + Extender Drill 8.1/2"
Intermediate Csg., Directional Hole &
+ Fluid Loss 13.5 ppg
7" , 26 lb/ft, L-80,
Tail:
6000 Set 7" Intermediate Csg.
BTC, Drill into Kola shale
Cmnt Class 'G' + Fluid NU UBD/RBOP & Test
8,000 ft RKB MD and then set 7" Csg
Loss 16 ppg
PDC drillable float eqpt Low er NIEF into the Kola shale
TOC ~ 500ft above 9.5/8"
shoe
KOLA Shale 7000
H 2 S gas
UBD/MCD techniques If losses during drilling

Diesel/Crude Oil use DV tool with
with N 2 injection. Two Stage Cement
6" Horizontal 6" PDC bit Mud Logging Cutting 8000
Or Drill out csg. & to TD
Open Hole Fluid sampling w/
W ater with N2 injection w/ PDM Motor and
MANUSELA Fm
8,000 - 9,500 ft RKB Non Reactive
with W ater or N2
MD MW D containers (for
Injection Cap
PVT analysis).
9000
Drill/Test 6" Horizontal Hole
8000 - 9,500 ft BRT MD
Run 3.1/2" Tubing & ESP W/Packer
10000
0 10 20 30 40 50

3.8 Well Time & Cost Estimates
The well time and cost estimates were calculated using the technical limit time estimates as
a target base case with variable contingencies added for the expected learning curve,
measured depth and spud date factors as referred to in section 4. The cost model used the
actual prices for goods and services obtained during the 2002 Oseil Phase 1 tender process.
The actual prices from the forthcoming tenders for Phase 2 are expected to be lower
because of the economies-of-scale benefits derived from a much larger programme for
Phase 2 Development as compared to Phase 1. In addition, lower rates are likely from the
proposed changes to the GSA and Exhibits. These changes place a greater degree of the
manageable risks onto KUFPEC rather than the Contractors. This apparent over-estimation
of times and costs is considered to be off-set by the uncertainties with the drilling and
completion programme such as contractor performance, geological variations and market
forces e.g. the effects of oil price and regional drilling activity influence on prices. The
accuracy of these costs are to be considered as Order-of-Magnitude i.e. in the range 15%
to + 15%.
The following assumptions were used when developing the well cost model:
Initial mobilisation and rig up time and final demobilisation time is 15 days each.
The drilling rig is used to drill and complete wells Oseil-3, 5, 6, 7 and 8 then proceeds
to drill wells Oseil-9, 10, 11, 12 and 13 (Oseil Tenggara A appraisal well) all from the
Oseil-4 multi-well pad. The drilling rig is then moved to the Oseil-2 multi-well pad to
drill wells Oseil-14 and 15. The rig is moved to a new well site at Nief Utara A
location and after drilling this exploration well will be moved to a new multi-well pad to
drill and complete three Oseil Tenggara development wells.
Drilling Rig moves between cellars on the same pad require 2 days.
All wells, with the exception of Oseil-3 and Nief Utara will have a 500 ft long
horizontal section in the reservoir.
A completions rig will be used to batch complete wells Oseil-9, 10, 11, 12 and 13
followed by Oseil-14 and 15.
Completion Rig moves between cellars on the same pad requires 1 day.
No well site costs have been included in any of the well cost estimates. Well sites
and access roads will be included in the Opex costs.
The well design is given in this appendix: 13-3/8 conductor set at 165ft, 9-5/8
surface casing set at 2500ft, 7 production casing set at between 6500 to 8250ft.
ESP set at 4,000 ft MD with gas compressor, 4-sensor pump instrument., carbon-
steel materials, soft-start ESP controller.
ESP Packer set at 3800 ft and 3-1/2 low-carbon steel tubing.
Flanged gate valve Xmas Tree with 4 valves and manual choke, Trim FF, 3,000 psi
WP.
13-3/8 Speedlock / Unihead 3,000 psi well head.
Table 14 presented below includes the exploration well Nief Utara. This well is included to
meet KILs Seram Non-Bula PSC exploration commitment in the event that the Oseil
Tenggara 'A' well is successful and is classified as an Oseil Field appraisal well for cost
recovery purposes. All costs were calculated using real US Dollars as of 1 Jan 03 and
are Gross amounts (not KUFPEC net costs).

Table 14 Oseil Phase 2 Drilling & Completion Cost & Time Estimates
(Real US Dollars 1 Jan 03- Gross)
Total Time
WELL WELL PAD & TARGET Cumulative Total
REMARKS TOTAL US $ per Well
NO. LOCATION US $
Days
Under Balanced Drilling, Directional Well to find

Oseil-4 Loc A GOC. Complete as gas well producer open hole - 5,647,406 5,647,406 40
1 packer & tubing only.
Directional Well with 500ft Horizontal. Complete as oill
Oseil-4 Loc B 6,133,114 11,780,520 42
producer open hole - ESP, packer & 3-1/2" tbg
2
Oseil-4 Loc C 5,613,159 17,393,679 38
3
Oseil-4 Loc D 5,443,410 22,837,089 36
4
Oseil-4 Loc E 5,730,133 28,567,222 38
5
6 Oseil-4 Loc F Directional Well with 500ft Horizontal. 4,696,635 33,263,856 34
7 Oseil-4 Loc G Directional Well with 500ft Horizontal. 4,856,603 38,120,459 36
8 Oseil-4 Loc H Directional Well with 500ft Horizontal. 4,780,282 42,900,741 35
9 Oseil-4 Loc I Directional Well with 500ft Horizontal. 4,799,624 47,700,365 35
Oseil-4 Loc Oseil
Directional Well with 500ft Horizontal. 4,760,430 52,460,795 35
10 Tenggara A
6C Oseil-4 Loc F Batch Completion 842,737 53,303,532 9
7C Oseil-4 Loc G Batch Completion 817,334 54,120,867 8
8C Oseil-4 Loc H Batch Completion 804,526 54,925,393 8
9C Oseil-4 Loc I Batch Completion 794,866 55,720,258 8
Oseil-4 Loc Oseil
Batch Completion 778,908 56,499,166 8
10C Teng A
11 Oseil-2 Loc A Directional Well with 500ft Horizontal. 6,075,416 62,574,582 44
12 Oseil-2 Loc B Directional Well with 500ft Horizontal. 5,858,019 68,432,601 42
11C Oseil-2 Loc A Batch Completion 903,189 69,335,791 10
12C Oseil-2 Loc B Batch Completion 866,237 70,202,028 10
13 Nief Utara Location Vertical Exploration Well 7,725,552 77,927,580 53
Oseil-Tenggara Loc B 6,246,847 84,174,427 42
14
Oseil-Tenggara Loc Directional Well with 500ft Horizontal. Complete as oill
6,053,683 90,228,110 40
C producer open hole - ESP, packer & 3-1/2" tbg
15
Oseil-Tenggara Loc Directional Well with 500ft Horizontal. Complete as oill
5,860,518 96,088,628 39
D producer open hole - ESP, packer & 3-1/2" tbg
16
TOTAL COST 96,088,628

3.9 Purchasing & Tendering Process
All purchasing and tenders will be conducted according to KUFPEC procedures and the
Indonesian Government / BP MIGAS Regulation BP 077 Rev III. Briefly, a minimum of three
valid quotes will be obtained wherever possible and the award will be based on the lowest
price of the technically qualified quotes. In the event that less than 3 quotes are obtained, a
re-tender will be conducted unless there are valid reasons to believe that a re-tender will not
result in obtaining the desired number of quotes for evaluation. The system of tendering will
invariably be using the 2-envelope method whereby the administrative and technical parts
will be submitted in one envelope and the commercial part in a second envelope at the same
time. The evaluation of the administrative and technical parts of the tenders will be
conducted first and only the qualified bidders commercial quotes will be considered for the
subsequent commercial evaluation.
According to the KUFPEC process, tendering may only commence after approval of the AFE
related to the goods and services required. This RBA will address the need for a waiver of
this requirement to order to commence the often-lengthy tender process after approval of the
RBA, not after approval of the internal AFE. However, in order to maintain sufficient control
according to the established delegation of authority, the award of contracts (i.e. commitment)
will not be made until approval of the AFE at the appropriate level. The same conditions
also apply under the Indonesian government and BP MIGAS system. In brief, the Oseil
Phase 2 Plan of Development (POD) is submitted for approval by BP MIGAS. Once the
POD is approved the Work Programme and Budget can be revised and submitted for
approval, and then in turn well AFEs are submitted for approval. Award of contracts is
predicated upon prior approval of sufficient funding in the AFE. However, in this case
dispensation must be obtained from BP MIGAS to award contracts prior to formal approval
of the AFEs. If this dispensation is not granted and award of contracts is delayed until the
Work Programme and Budget approval and AFE approval is obtained, a delay of 3 to 5
months in the commencement of operations will ensue.
The schedule shown in Fig. 4 is based on the assumption that dispensation from KUFPEC
to commence the tender process after approval of the Company AFEs is obtained and also
that BP MIGAS allows KUFPEC to award contracts at its sole risk, subject to later audit
approval, prior to approval by BP MIGAS of the AFEs.
It has been conservatively estimated that the cost-benefit to be realised by tendering for
goods and services for a full 16 well programme is in the order of US$250,000 to 500,000
per well.

Attachment 1 Oseil-3 Detailed Well Cost Estimate

Oseil-4 Loc A Gas Well
TD 7000'MD (6470' TVD); 13-3/8" @ 165'; 9.5/8" @ 2500'; 7" @ 6900'MD (6370' TVD);
WORK PRGM REVISED FINAL ACTUAL EXPENDITURES ACTUAL OVER % OVER

DESCRIPTION DRY HOLE TESTING TOTAL PRIOR YEARS CURRENT YEAR TOTAL UNDER BUDGET UNDER BUDGET
1 2 3 4 5 6 7 8
1 TANGIBLE COSTS
2 CASING 279,794 0 279,794
3 CASING ACCESSORIES 15,634 0 15,634
4 TUBING 0 58,454 58,454
5 WELL EQUIPMENT - SURFACE 59,417 74,953 134,370
6 WELL EQUIPMENT - SUBSURFACE 0 66,115 66,115
7 OTHER TANGIBLE COSTS 0 0 0
8 0 0 0
9 TOTAL TANGIBLE COSTS 354,845 199,522 554,366
10 INTANGIBLE COSTS 0 0 0
11 PREPARATION AND TERMINATION 0 0 0
12 *SURVEYS 0 0 0
13 *LOCATION STAKING AND PREPARATION 0 0 0
14 *WELLSITE AND ACCESS ROAD PREPARATION 0 0 0
15 *SERVICE LINES & COMMUNICATIONS 0 0 0
16 *WATER SYSTEMS 0 0 0
17 *RIGGING UP / RIGGING DOWN 62,500 0 62,500
18 * 0 0 0
19 SUBTOTAL 62,500 0 62,500
20 DRILLING / WORKOVER OPERATIONS 0 0 0
21 *CONTRACT RIG 791,398 169,158 960,556
22 *DRILLING RIG CREW / CONTRACT RIG CREW 30,525 6,265 36,790
23 *MUD, CHEMICAL & ENGINEERING SERVICES 186,311 8,810 195,121
24 *WATER 0 0 0
25 *BITS, REAMERS AND CORE HEADS 170,592 0 170,592
26 *EQUIPMENT RENTALS 1,068,271 405,110 1,473,381
27 *DIRECTIONAL DRILLING AND SURVEYS 1,134,935 115,605 1,250,540
28 *DIVING SERVICES 0 0 0
29 *CASING INSTALLATION 73,544 8,479 82,023
30 *CEMENT, CEMENTING AND PUMP FEES 70,674 11,622 82,296
31 * 12,565 2,444 15,009
32 SUBTOTAL 3,538,815 727,494 4,266,308
33 FORMATION EVALUATION 0 0 0
34 *WATER (CORING) 0 0 0
35 *MUD LOGGING SERVICES 32,718 4,934 37,652
36 *DRILLSTEM TESTS 0 0 0
37 *OPEN HOLE ELECTRICAL LOGGING SERVICES 141,192 26,842 168,034
38 * 0 0 0
39 SUBTOTAL 173,910 31,776 205,686
40 COMPLETION 0 0 0
41 *CASING LINER AND TUBING INSTALLATION 33,190 19,294 52,484
42 *CEMENT, CEMENTING AND PUMP FEES 0 0 0
43 *CASED HOLE ELECTRICAL LOGGING SERVICES 0 0 0
44 *PERFORATING AND WIRELINE SERVICES 12,873 0 12,873
45 *STIMULATION TREATMENT 0 0 0
46 *PRODUCTION TESTS 0 0 0
47 SUBTOTAL 0 0 0
48 46,063 19,294 65,357
49 GENERAL 0 0 0
50 *SUPERVISION 155,805 31,978 187,782
51 *INSURANCE 0 0 0
52 *PERMITS AND FEES 5,000 0 5,000
53 *MARINE RENTAL AND CHARTERS 57,668 4,668 62,336
54 *HELICOPTERS AND AVIATION CHARGES 32,144 6,449 38,593
55 *LAND TRANSPORTATION 15,350 0 15,350
56 *OTHER TRANSPORTATION 1,116 0 1,116
57 *FUEL AND LUBRICANTS 78,821 17,621 96,442
58 *CAMP FACILITIES 62,982 12,926 75,908
59 * ALLOCATED OVERHEADS - FIELD OFFICE 10,661 0 10,661
60 * - JAKARTA OFFICE 0 0 0
61 * - OVERSEAS 0 0 0
62 *TECHNICAL SERVICES FROM ABROAD 0 0 0
63 * 0 0 0
64 SUBTOTAL 419,546 73,642 493,188
65 TOTAL INTANGIBLE COSTS 4,240,834 852,206 5,093,040
66 TOTAL COSTS 4,595,678 1,051,728 5,647,406

Attachment 2 Oseil-13 (Tenggara A) Detailed Cost Estimate

Oseil-4 Tenggara A Oil Producer
TD 9000'MD (6420' TVD); 13-3/8" @ 165'; 9.5/8" @ 2500'; 7" @ 8250'MD (6380' TVD);
WORK PRGM REVISED FINAL ACTUAL EXPENDITURES ACTUAL OVER % OVER
DESCRIPTION DRY HOLE COMPLETION TOTAL PRIOR YEARS CURRENT YEAR TOTAL UNDER BUDGET UNDER BUDGET
1 2 3 4 5 6 7 8
1 TANGIBLE COSTS
2 CASING 305,919 0 305,919
3 CASING ACCESSORIES 15,634 0 15,634
4 TUBING 0 33,400 33,400
5 WELL EQUIPMENT - SURFACE 59,417 71,581 130,998
6 WELL EQUIPMENT - SUBSURFACE 0 295,893 295,893
7 OTHER TANGIBLE COSTS 0 0 0
8 0 0 0
9 TOTAL TANGIBLE COSTS 380,970 400,874 781,843
10 INTANGIBLE COSTS 0 0 0
11 PREPARATION AND TERMINATION 0 0 0
12 *SURVEYS 0 0 0
13 *LOCATION STAKING AND PREPARATION 0 0 0
14 *WELLSITE AND ACCESS ROAD PREPARATION 0 0 0
15 *SERVICE LINES & COMMUNICATIONS 0 0 0
16 *WATER SYSTEMS 0 0 0
17 *RIGGING UP / RIGGING DOWN 3,906 40,000 43,906
18 * 0 0 0
19 SUBTOTAL 3,906 40,000 43,906
20 DRILLING / WORKOVER OPERATIONS 0 0 0
21 *CONTRACT RIG 830,015 51,579 881,593
22 *DRILLING RIG CREW / CONTRACT RIG CREW 31,775 4,515 36,290
23 *MUD, CHEMICAL & ENGINEERING SERVICES 188,537 0 188,537
24 *WATER 0 0 0
25 *BITS, REAMERS AND CORE HEADS 170,592 3,675 174,267
26 *EQUIPMENT RENTALS 1,014,179 84,638 1,098,817
27 *DIRECTIONAL DRILLING AND SURVEYS 1,224,217 2,518 1,226,735
28 *DIVING SERVICES 0 0 0
29 *CASING INSTALLATION 75,236 0 75,236
30 *CEMENT, CEMENTING AND PUMP FEES 73,277 12,046 85,323
31 * 13,052 3,032 16,084
32 SUBTOTAL 3,620,880 162,002 3,782,882
33 FORMATION EVALUATION 0 0 0
34 *WATER (CORING) 0 0 0
35 *MUD LOGGING SERVICES 34,241 7,150 41,391
36 *DRILLSTEM TESTS 0 0 0
37 *OPEN HOLE ELECTRICAL LOGGING SERVICES 145,492 51,661 197,152
38 * 0 0 0
39 SUBTOTAL 179,733 58,811 238,543
40 COMPLETION 0 0 0
41 *CASING LINER AND TUBING INSTALLATION 34,373 19,666 54,039
42 *CEMENT, CEMENTING AND PUMP FEES 0 0 0
43 *CASED HOLE ELECTRICAL LOGGING SERVICES 0 0 0
44 *PERFORATING AND WIRELINE SERVICES 12,873 0 12,873
45 *STIMULATION TREATMENT 0 0 0
46 *PRODUCTION TESTS 0 0 0
47 SUBTOTAL 0 0 0
48 47,246 19,666 66,912
49 GENERAL 0 0 0
50 *SUPERVISION 162,183 34,544 196,727
51 *INSURANCE 0 0 0
52 *PERMITS AND FEES 5,000 0 5,000
53 *MARINE RENTAL AND CHARTERS 58,459 7,469 65,928
54 *HELICOPTERS AND AVIATION CHARGES 33,430 7,695 41,125
55 *LAND TRANSPORTATION 15,350 15,350 30,700
56 *OTHER TRANSPORTATION 1,116 0 1,116
57 *FUEL AND LUBRICANTS 83,274 12,895 96,168
58 *CAMP FACILITIES 65,560 18,487 84,047
59 * ALLOCATED OVERHEADS - FIELD OFFICE 10,661 1,117 11,778
60 * - JAKARTA OFFICE 0 0 0
61 * - OVERSEAS 0 0 0
62 *TECHNICAL SERVICES FROM ABROAD 0 0 0
63 * 0 0 0
64 SUBTOTAL 435,034 97,556 532,590
65 TOTAL INTANGIBLE COSTS 4,286,798 378,035 4,664,833
66 TOTAL COSTS 4,667,767 778,908 5,446,676

References 1
1. Delivering Step Change in Performance From Well Construction Teams J.L.

Thorogood IADC/SPE 37572
2. Risk Management in Exploration Drilling J.L. Thorogood SPE 61038
3. An Integrated and Structured Approach to the Management of Exploration &

Development Risks J.S. Corbett SPE 66511
4. Step Change Improvements and High Rate Learning are Delivered by

Targeting Technical Limits on Sub-Sea Wells D.F. Bond, P.W. Scott et al.
IADC/SPE 35077
5. Applying Technical Limit Methodology for Step Change in Understanding and

Performance D.F. Bond et al SPE Drilling & Completions Set. 1998
6. Drilling Time Predictions From Statistical Analysis J.A. Noerager et al

SPE/IADC 16164
7. Drilling Time Analysis: A Total Quality Management Tool for Drilling in the
1990s A.G. Kadaster et al SPE 24559
8. Landsliding & Other Geotechnical Problems Seram Oil Field Production

Facilities and Infrastructure Development PT Geoindo KUF/008/00 12 Jun 00
9. Landslide Risk Evaluation Oseil-1 PT Geotechnical and Environmental

Services Indonesia Ref 02635005 6 Feb 02
10. Integrated Borehole Stability Studies: Key to Drilling at the Technical Limit
and Trouble Free Cost Reduction E.van Oort et al SPE/IADC 67763
11. Coupled Modelling of Borehole Instability and Multiphase Flow for

Underbalanced Drilling C.D. Hawkes et al. IADC/SPE 74447
12. Oseil Field Completion Design J.C. Mantecon, Helix Well Technologies,
KUFPEC 2035/002
13. Oseil Field Artificial Lift System Selection J.C. Mantecon, Helix Well
Technologies, KUFPEC 2035/001
14. Oseil Metallurgy Selection Review Heiko Morgenroth Helix Well Technologies
PSD427
15. Increasing the Run Life of ESPs in high H2S Wells, B.L. Wilson, T.P. Comeau,
Mobil, SPE 28527,


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KUFPEC (Indonesia) Ltd.

Drilling & Completion Programme for RBA Document

KUFPEC (Indonesia) Ltd.

RECOMMENDATION FOR BOARD APPROVAL

Date Issued: 13 May 2003

P:\Kufpec Indonesia 2003\VDR-CD\Drilling\Text_for_RBA_Drilling_&_Completions .doc

1.1 Cost & Time ............................................................................................................................. 4

1.2 Uncertainties ........................................................................................................................... 5

1.3 Schedule .................................................................................................................................. 5

2.1 Objectives & Goals ................................................................................................................. 8

2.2 Business Drivers..................................................................................................................... 8

2.3 Risk Management.................................................................................................................... 8

3.1 Drilling Performance: Technical Limits Methodology....................................................... 10

3.2 Well sites & Roads ................................................................................................................ 12

3.3 Wellbore Stability .................................................................................................................. 17

3.4 Casing Design ....................................................................................................................... 18

3.5 Completion Design ...............................................................................................................22

3.6 Corrosion ............................................................................................................................... 28

3.7 Drilling Plan ........................................................................................................................... 34

Surface Hole Section..............................................................................................................34

Drilling in the Reservoir .........................................................................................................37

3.8 Well Time & Cost Estimates................................................................................................. 42

3.9 Purchasing & Tendering Process ....................................................................................... 44

P:\Kufpec Indonesia 2003\VDR-CD\Drilling\Text_for_RBA_Drilling_&_Completions .doc

Table 1 Financial & HSE Risk Matrix .....................................................................................9

Attachment 1 Oseil-3 Detailed Well Cost Estimate..............................................................45

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1.1 Cost & Time

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Well Cost Value of Time Difference Value of Tangibles Difference

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P:\Kufpec Indonesia 2003\VDR-CD\Drilling\Text_for_RBA_Drilling_&_Completions .doc

2003 2004 2005

P:\Kufpec Indonesia 2003\VDR-CD\Drilling\Text_for_RBA_Drilling_&_Completions .doc

2.1 Objectives & Goals

Reduce cost per well.

Develop un-drained portions of the Oseil Field.

Appraise further reserves upside potential.

Reduce HSE incidents to as low as is reasonably practical (the ALARP principle)

2.2 Business Drivers

2.3 Risk Management

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Table 1 Financial & HSE Risk Matrix

Table 2 Definition of Risk Consequence Criteria

Table 3 Definition of Risk Frequency Criteria

Frequency Definition of Return Period

Remote 1 event occurrence between 100 and 1,000 years

Low 1 event occurrence between 10 and 100 years

Moderate 1 event occurrence between 1 and 10 years

High 1 event occurrence < 1 year

P:\Kufpec Indonesia 2003\VDR-CD\Drilling\Text_for_RBA_Drilling_&_Completions .doc

Table 4 Example of Drilling Hazards Risk Assessment

HAZARD PROBABILITY CONSEQUENCE RISK LEVEL

Unstable Kola Shale

Lost Circulation in top of

Gas Cap at top of

Gas Kick High With UBD Equipment - low Moderate

3.1 Drilling Performance: Technical Limits Methodology

Where are we now?

P:\Kufpec Indonesia 2003\VDR-CD\Drilling\Text_for_RBA_Drilling_&_Completions .doc

Figure 3 Determination of the Technical Limit

ACTUAL WELL DURATION

Table 5 Oseil Technical Limit Time Analysis