A nice article...........................................
Digital Gas To Develop China Shengli Oil Field
By Lester J. Gesteland
ChinaOnline News
(11/03/1999) New York-based Digital Gas, Inc. announced on Nov. 1 the formation of a new
venture in China, Qingdao Digital Gas Enhancement & Exploration Co., Ltd., which was set
up to more effectively tap petroleum reservoirs at the Shengli oil field in northern Shandong
Province.
Qingdao Digital Gas is formally registered as a foreign corporation and will be working with
the Shengli Petroleum Association to introduce Digital Gas? oil & gas field reservoir
exploration technologies to China.
The first area to be explored by Qingdao Digital Gas will be the Shengli Basin where Digital
Gas management conservatively projects that on average it can boost production from
existing wells by 200-1000%.
Company officials base their projections on the application of advanced drilling techniques
that are currently not used in China.
The Chinese "use 1950s technology that was originally brought over by the Soviet Union,"
said John Kirk, President and General Manager of Qindao Digital Gas. "We can substantially
increase oil output using our advanced technology."
Mr. Kirk wouldn?t go into detail regarding what exact methods would be applied to boost
output but referred to "different types of horizontal drilling."
Richard Calderhead, on the Board of Directors for Digital Gas, said that state-of-the-art
drilling technologies "developed by MIT and certain government agencies" would be utilized.
He also said that Qingdao Digital Gas employs "oil experts from the Western U.S. and
Canada" that helped in site selection and will be conducting the actual drilling.
The company?s claim that it can boost oil output from the fields by 200-1000% is "totally
credible," according to Prayful Desai, vice president of engineering at Smith International,
Inc., a worldwide supplier of products and services to the oil and gas exploration and
production industry.
"If [the Chinese] are using 1950s technology, they are only drilling vertically," Mr. Desai said.
By drilling horizontally, oil reservoirs are intercepted from the side, "which can enhance output
considerably," Mr. Desai explained.
"This technology is being used all over the world, in the North Sea, for example," he added.
Qingdao Digital Gas? John Kirk believes the potential of the Shengli oil field is "tremendous."
When asked how Digital Gas?a relatively small startup?landed this deal, he said
technology transfer played a big role.
"Unlike other foreign companies in China, we?re not bringing out-dated technology," Mr. Kirk
explained. "We?re bringing the latest advances. These are all going to be transferred to the
Chinese."
According to the company?s "nurturing operational philosophy," training centers will be set up
and local engineers will be taught the methodology and application of Digital Gas? drilling
techniques.
Mr. Kirk also said that his more diplomatic approach in China helped him win the deal.
Whereas representatives of big Western oil companies fly into China to "wheel and deal,"
Mr. Kirk said he was patient and took the time to make the right contacts and develop strong
personal relationships.
"You have to develop a sense of trust to do business in China," he explained.
Qingdao Digital Gas will take its profits "in gas, oil and in cash," Mr. Kirk said. He did not
elaborate further.
Background on Shengli Oil Field
Shengli is the second largest oil field in China. Located in the Yellow River Delta area on the
Bohai Sea in the northern part of China's Shandong Province, the Shengli Oilfield overlaps
with 28 counties and districts under the jurisdiction of eight cities including, Dongying,
Binzhou, Dezhou.
Its main sections are scattered on both sides of the Yellow River estuary within the jurisdiction
of Dongying. The Shengli Petroleum Administration is headquartered in Dongying City.
The discovery of the oilfield was based on earlier oil surveys conducted in China's northern
central region. The first successful drilling of industrial oil was made in 1961 with the
well-coded Hua-8, which led to the discovery of the first oilfield in the basin of Bohai Bay
known as Dongxin Oilfield.
In 1962, the high-yield Ying-2 well was drilled on the Dongying Formation, and in 1964, the
Chinese government authorized large-scale oil surveys and development in this area.
Shengli has five depressions with a total area of 65,000 square kilometers. Current
development is mainly focused in the Jiyang Depression, with major production fields
concentrated within an area of 10,000 square kilometers in the eastern part.
Jiyang Depression is an oil/gas-rich region with complicated geological features such as a
large number of faults, a great variety of rock formations and reservoir types, and many
differences in the quality of crude oil. To date, 17 types of reservoirs have been found,
including sandstone, conglomeration, limestone, igneous and metamorphic rock, as well as
others.
Over the past three decades more than 60 different oil/gas fields have been found and over
10,000 production wells have been drilled. A million tonnage offshore oil field has also been
established.
To contact Lester J. Gesteland:
P: (312) 335-3022
F: (312) 335-9299
E: lgesteland@chinaonline.com |
