Sometimes it's not enough to discover and produce gas. Sometimes a company has to create the market for it, too.
That's what Noble Affiliates subsidiary EDC Ecuador had to do to create value for its Amistad project on Ecuador's Block 3 in the Gulf of Guayaquil. Gas from that block will begin flowing late this year or early next year.
The company has commissioned Horizon Offshore to lay and bury a 42-mile (68-km), 12-in. pipeline from the offshore field to a Noble-built power-generation plant onshore at Machala, Ecuador, just north of the border with Peru. The company will use one of its pipelay barges.
Noble bought two power-generation turbines capable of a combined output of 240 mw of electricity and continued work at the field to make sure it could provide 13 Bcf/year of gas for the plant for 20 years, starting early next year. The field has 345 Bcf in proven reserves. Any power generated above the 80 mw needed by Machala becomes available for the Ecuadorian power grid.
In an agreement with the Ecuadorian government, Noble made sure the gas price is linked to the price of fuel oil to make sure the plant produces electricity at a competitive rate.
Returns generated by the power plant will provide payout of some US $137 million in project costs in 5 years from a cash flow of about $32 million a year.
A previous operator, Ada Oil, had drilled four wells in Block 3 in the late 1970s, but it had to abandon the project because no market existed for the gas. Noble negotiated a new contract with the government of Ecuador in 1996 and acquired the 864,000-acre concession.
It then invested in 84 sq miles (218 sq km) of 3-D seismic to get a good look at the shape and limits of the field. Another 419 miles (674 miles) of 2-D seismic also helped define the block.
The company's first well - the Amistad 5, completed in September 2000 from the Amistad platform in 130-ft (40-m) waters - went to 10,900 ft (3,325 m) TD and penetrated some 341 ft (104 m) of gas pay. That success convinced the company to drill the Amistad 9 and 6 wells.
The second well, completed in July, was the Amistad 7. That well tested at 19.4 MMcf/d of gas from 172 ft (52 m) of perforations through a 32/64-in. choke with 3,208 psi of flowing tubing pressure. The company logged 472 ft (144 m) of gross sand in the Miocene Progreso formation.
The company will finish the program to make sure it has adequate supplies for the power plant. According to a spokeswoman for the company, economics will determine whether EDC expands its operations in the area.
The Amistad project lies in the Tumbes-Progreso Basin, 5 miles (8 km) north of the Peru-Ecuador border.
Although the Noble spokeswoman knew of no activity in the Gulf of Guayaquil by other operators, the Peruvian government is trying to draw interest to its offshore properties immediately south of the border with Ecuador.
Among other blocks, it has put its deepwater Block Z-5 up for licensing. Although much of that block is in water from 3,281 ft to 16,405 ft (1,000 m to 5,000 m) deep, it is a part of the Tumbes-Progreso Basin.
During a recent promotional campaign, Perupetro President Luis Ortigas said Harken was interested in Block Z-5, although the company did not affirm that contention.
Promotional materials from Peru say the Block Z-5 and Block Z-4 to the south haven't been explored and have only a few miles of 2-D seismic shot over them.
Occidental Petroleum picked up the Block Z-3 license closer to shore, and Argentina's Perez Companc holds Block Z-1, also bordered on the north by the Peru-Ecuador border. That tract lies along the Peruvian coastline and includes some onshore acreage.
The Perez Companc acreage lies immediately south of the Amistad license.
Some Peruvian offshore fields exist farther to the southwest in the Talara Basin, but they are nearly 80 miles (129 km) away.
Peru has identified several geological features that make its northern waters prospective for hydrocarbons, and at least Occidental and Perez Companc feel the northern territory has some promise for production.
If Amistad is a good indicator, development should begin moving north from existing Peruvian fields or south from Amistad into Peruvian waters.