If a resource discovered during exploration is considered commercially viable, petroleum operators will begin the process to commercially extract oil and gas.
All operators will first need a petroleum mining permit which normally cover just the area of the extractible hydrocarbons, and are much smaller than either exploration or prospecting permits. Only a small percentage of exploration permits are progressed to active producing operations.
Before production takes place, operators will accurately define the petroleum field. Following this, and a full appraisal of the resource potential in the area, the permit holder will make a decision whether to invest in the discovery.
Exploration permit holders have a subsequent right to apply for a mining permit. Such an approach takes into account the significant investment an explorer has already made in assessing the potential of an area.
The production process represents the successful realisation of a company’s investment and work locating the resource. It is also the point at which royalties are paid to the Government and the wider economic benefits are seen.
Production life estimation
Discovery appraisal operations estimate how big the resource is, what is expected to be produced (i.e. crude oil/condensate and/or natural gas), the specific chemical composition of such products, and how much of the resource can be extracted (i.e. reserves). This, and other technical information, will allow the expected production life of the field to be estimated.
Production facility design
The engineering design process considers all this information along with the geographic location of the resource (i.e. water depth and distance to other fields), and designs appropriate infrastructure to ensure the safe, effective and efficient extraction of the resource.
It is important that the development and design of the production facilities are fit for purpose and will operate safely and efficiently for the extent of the field’s production life.
This is the point at which the greatest capital investment is requirement. Costs for such developments can run into the billions of dollars.
Off-shore production facility
In general terms, an offshore production facility will include the following:
Oil and gas is extracted from the ground by way of a production well(s) that is drilled into the subsurface reservoir horizon. A steel pipe (casing) is placed in the hole, to provide structural integrity to the newly drilled wellbore. The well is then ‘completed’ to meet the unique characteristics of the reservoir to enable oil and gas to pass into the well at production capacity.
Finally a collection of valves – known as an Xmas tree – is installed on top of a well to regulate pressure and control flows during production.
A collective system of pipes allows produced products (in the case of almost all offshore fields from multiple production wells) to be collected into a single production stream. This can then be directed to the appropriate infrastructure hub for processing.
Production facilities and related infrastructure are built to process the oil and gas, either onshore, as in the case of the Kapuni field gas-condensate production station, or offshore, as in the case of the Tui oil field.
An offshore platform arrangement
Acting as a central hub to offshore operation, there are numerous possible platform arrangements in existence around the world, dependent on individual development requirements.
Platform arrangements (if deemed appropriate) allow a central means to access wells for production monitoring operations, well refurbishment processes and additional well drilling if required. These platforms can be fixed to the ocean floor or moored if water depths dictate. Some have the capability for personnel to work and live onboard (i.e. Maui A platform), or can be unmanned (i.e. Kupe platform).
New Zealand’s offshore petroleum operations use permanent platforms, such as the Maui platform where gas is piped onshore for processing, or Floating Production Storage and Offloading (FPSO) vessels, where oil undergoes basic processing onboard the ship and is offloaded to another vessel for transportation overseas.
Where onshore processing is not appropriate, produced products are directed to a floating production storage and offloading (FPSO) vessel. These floating vessels are designed to receive hydrocarbons, process, store, and offload the produced product to a tanker for transport to market. The Tui Oil field, offshore Taranaki, is an example of this.
Means of transport
In the event of onshore processing facilities, produced hydrocarbons are transported via a pipeline system to a centralised processing facility onshore. Examples of offshore/onshore pipelines in New Zealand include the Maui, Kupe and Pohokura fields.
Onshore production facilities
If produced hydrocarbon is piped to shore, a processing plant will separate the petroleum products for sale, i.e. oil and gas. Production stations vary in size dependent on the nature of the produced hydrocarbons and daily production volumes.
Once all infrastructure requirements are built and appropriately commissioned, the development project then moves into a production phase which involves 24 hours a day production, processing and transport of the petroleum products to market.
Production operations can last for decades. Large development projects in New Zealand such as the Kapuni and Maui accumulations, with initial production commencing in 1969 and 1979 respectively, are still producing today.
For more information read our Producing petroleum and minerals factsheet.