VZCZCXYZ0000
PP RUEHWEB

DE RUEHRH #0001/01 0030713
ZNR UUUUU ZZH
P 030713Z JAN 10
FM AMEMBASSY RIYADH
TO RUEHC/SECSTATE WASHDC PRIORITY 2157
RHEBAAA/DEPT OF ENERGY WASHINGTON DC PRIORITY
INFO RUEHHH/OPEC COLLECTIVE
RUEHJA/AMEMBASSY JAKARTA 0240

UNCLAS RIYADH 000001 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR NEA/ARP AND EEB/ESC/IEC 
 
E.O. 12958: N/A 
TAGS: EPET ENRG ECON PREL SA KU
SUBJECT: CHEVRON INAUGURATES LARGE SCALE STEAM INJECTION 
PILOT PROJECT IN SAUDI-KUWAITI PARTITIONED NEUTRAL ZONE 
 
Summary 
------- 
 
¶1. (U) Ambassadors Smith and Jones, and Dhahran Consul 
General Kenny, participated in the inauguration of Chevron's 
large scale steamflood pilot project at the Wafra field in 
the Saudi Arabia-Kuwaiti partitioned neutral zone November 4. 
 Saudi Minister of Petroleum and Mineral Resources Ali 
Al-Naimi, Kuwaiti Minister of Oil and Information Sheikh 
Ahmed Al-Sabah, and senior Chevron officials also 
participated.  Saudi Arabian Chevron was presented as a 
successful company with a 90% Saudization rate (higher than 
Saudi Aramco).  The substantive presentations focused on the 
project's high technology aspects but acknowledged that not 
all technical problems have been resolved.  This was our 
first visit to the site since Saudi Arabia renewed Chevron's 
concession in July 2008, which now will expire in 2039.  End 
summary. 
 
The project 
----------- 
 
¶2. (SBU) According to Chevron, the Wafra Large Scale Pilot 
(LSP) project, which began operating in June, is designed to 
determine the technical and economic viability of 
thermal-recovery projects in the field's Eocene heavy-oil 
carbonate (i.e. limestone) reservoir.  Steamflooding involves 
injecting steam into heavy oil reservoirs to heat the crude 
underground, reducing its viscosity and allowing its 
extraction through wells.  Using this technology in a 
carbonate reservoir is technically demanding because the rock 
is naturally fractured making it hard to predict how injected 
steam or water will affect reservoir pressure, and the use of 
steam in particular releases chemicals that lead to 
degradation of oil production equipment.  The project is a 
greenfield site, in an existing field, and at this stage 
involves 16 injection wells, 25 producing wells, and 16 
observation wells, as well as water treatment, and steam 
generation and distribution facilities.  The company hopes 
that the $340 million pilot will lead to full-field 
steamflooding, marking the first commercial application of a 
conventional steamflood in a carbonate reservoir anywhere in 
the world.  The LSP is over the Wafra field on the Kuwaiti 
side of the Partitioned Neutral Zone (PNZ), in which the two 
countries divide the oil revenues jointly. 
 
Inauguration touts Saudi Chevron culture 
---------------------------------------- 
 
¶3. (SBU) Saudi Arabian Chevron (SAC) President Ahmed Al-Omer 
hosted visiting dignitaries and a few hundred Saudi Chevron 
employees at the event, which took place in a large tent next 
to the LSP facilities.  The program touted Chevron corporate 
culture, especially its focus on safety, and also showcased 
its local subsidiary SAC as a successful model of Saudization 
(Note:  One Chevron manager told us 90% of SAC personnel are 
Saudi, which is unusually high compared to many Saudi 
companies and even higher than national oil company Saudi 
Aramco.) 
 
¶4. (SBU) Chevron states it is the only large international 
energy company with a continuous upstream presence in Saudi 
Arabia for more than seven decades.  (Note:  In addition, 
Omer and several other managers at the inauguration are 
holdovers from Getty Oil which operated the onshore PNZ 
fields under a 60-year agreement renewed for 30 additional 
years in 2008.  Getty was taken over by Chevron in 2001, via 
Texaco in 1984.) 
 
Chevron VP:  heavy oil production 
expertise key part of company strategy 
-------------------------------------- 
 
¶5. (SBU) George Kirkland, Chevron Executive Vice President 
for Global Upstream and Gas, said primary recovery from Wafra 
would only be 5% of the reservoir without this technology. 
Steamflood will add years, and many millions of barrels, of 
additional production capacity.  Kirkland estimated there are 
12 billion barrels of oil in the field's first Eocene layer, 
so each additional 1% recovery equals 100 million barrels. 
He estimated Wafra full field development would add an extra 
billion barrels of recoverable oil.  Although Chevron will 
need to evaluate the results of the LSP before moving to full 
field implementation, he estimated doing so would create 
thousands of jobs. 
 
¶6. (SBU) According to Kirkland, developing heavy oil 
 
production expertise is a key part of Chevron's strategy. 
The world has 4 trillion barrels of extra heavy oil.  That's 
four times conventional reserves, he estimated.  In a 
sandstone reservoir, steamflood technology has demonstrated 
recovery rates of 50%.  Chevron began using steamflood 
technology in the 1960s at the Kern River field in 
Bakersfield, California.  That field had been producing since 
the 19th century, and with this technology, Chevron has set a 
recovery target for the field of an incredible 80%.  It used 
the technology in the Duri field in Indonesia to develop 
major efficiency gains, also including non-thermal methods. 
Chevron also developed downstream technologies to handle 
heavy crude. 
 
LSP success remains uncertain 
------------------------------ 
 
¶7. (SBU) Project manager Leland Neblitt, noted that in 
addition to the first Eocene reservoir's 12 billion barrels, 
a second Eocene reservoir in the field contains an additional 
5.4 billion.  He emphasized that the technology being piloted 
has great promise:  primary recovery in a field like Wafra 
can get 5-10% of the oil; water flood can get 15-25%; and 
steamflood in sandstone can get 50-80%.  However, using 
steamflood technology in Wafra's carbonate (vice sandstone) 
reservoir remains unproven.  Small scale testing in previous 
years resulted in scaling and corrosion on the pipes, as well 
as iron sulfide deposits, that might drive up costs sharply 
or pose technical hurdles to make full field implementation 
uneconomical. 
 
Saudi oil minister:  Project 
has "important implications" 
---------------------------- 
 
¶8. (SBU) In a conversation with Ambassador Smith after the 
inauguration, Saudi oil minister Ali Al-Naimi praised 
Chevron's handling of the inauguration and the LSP, noting 
that the project has several important implications.  A 
number of countries have significant reserves of heavy oil 
that they cannot produce with available technology.  Several 
companies, like Chevron and Exxon, have experience using 
steam to produce heavy oil in sandstone, but this will be the 
first real test of production in limestone.  He said the 
company's projection that it might be able to increase the 
current recovery rate from 7% to 20% would have a huge 
impact.  If the three-year trial is successful, Al-Naimi said 
many other producers would be interested in applying it to 
their fields, including Saudi Arabia, which has a very 
similar field offshore in the Red Sea (Hasbah). 
 
¶9. (SBU) Naimi said although serious technical challenges 
remain, he was very confident based on Chevron's careful 
planning and extensive coordination with Aramco engineers 
that the LSP would be successful over its three year period. 
He relayed that Chevron told him the project would be 
commercially viable at any price over $40 per barrel, while 
Saudi heavy crude was trading at $7-9 less than the WTI 
benchmark.  Naimi said his Ministry decided that Chevron 
deserved this project without having to bid on it separately 
because of its long partnership with the Kingdom, which 
stretches to the very beginnings of oil production here.  He 
said the two sides had negotiated a very good deal that would 
work for both. 
 
Comment 
------- 
 
¶10. (SBU) Chevron's project is significant not only for 
potentially adding reserves to Saudi and Kuwaiti capacity, 
but also for the opportunity to prove a technology that could 
increase recovery rates in fields in the region and around 
the world.  The fact that Saudi Arabia chose Chevron to 
pursue this project based on its long history of cooperation 
in the Kingdom and its clear interest in being a long-term 
partner is a useful demonstration of the value of continued 
strong energy ties between the United States and Saudi 
Arabia.  We do not want to make too much of Al-Naimi's 
comment, although it is noteworthy that he suggested the 
Kingdom might be interested in applying this technology to 
other fields beyond the neutral zone, which would be the 
first foray for IOC's into Saudi oil production since the 
Saudi upstream oil sector's nationalization. 
 
¶11. (U) Embassy Kuwait cleared this cable. 
SMITH