STATEMENT OF CITIES SERVICE OIL COMPANY BEFORE THE HOUSE OF REPRESENTATIVES SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS OF THE COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE FRIDAY, JUNE 27, 1975 Cities Service Oil Company is the operator of the South Brazos Block A-76 platform, which is located approximately 48 miles southeast of Port Lavaca offshore Texas in the Gulf of Mexico. Block A-76 was acquired at the May 21, 1968 Federal Lease Sale by four oil companies, including Cities Service Oil Company. By the fall of 1969, the existence of economically recoverable hydrocarbons was determined after the drilling of two exploratory wells which discovered natural gas. A platform was constructed and placed over one of the wells in water approximately 168 feet deep in August of 1970, and seven additional directional wells were drilled from the platform, two of them being dry holes, which defined the limits of the reservoir. The development drilling was completed in early 1972, and processing equipment was installed on the platform. Production operations on offshore platforms are subject to regulation by four major federal agencies, these being the Environmental Protection Agency, the Coast Guard, the Corps of Engineers and the Department of Interior through the United States Geological Survey. Deliveries of natural gas were commenced pursuant to a gas sales contract to the purchaser, Transcontinental Gas Pipeline Corporation, on June 16, 1972. Interstate sales of offshore natural gas are regulated by the Federal Power Commission. Early in 1974, one of the wells on the platform was temporarily shut in because of a suspected tubing leak. A caliper survey of the tubing was run which indicated corrosion. An additional caliper survey was recommended to be run on a high water producing well, and this survey was made in March of 1974. A study of the results of these surveys indicated severe corrosion problems with some of the tubing having deteriorated in the two wells that had been surveyed. In addition, water production was increasing and indications were that the wells could not be produced efficiently and remain in compliance with the requirements of the USGS relative to water disposal. On April 16, 1974, Cities Service Oil Company wrote to its three co-owners (with copy to the gas purchaser, Transcontinental Gas Pipeline Corporation) advising them of the results of the recent caliper survey, stating that water production was currently at 1700 barrels per day and increasing and that one well had a severe corrosion problem. Recommendation was made that additional diagnostic tests, TDT-GR and tubing caliper logs be run on all wells. After these are run and the data analyzed, a workover program should be planned for any or all wells that require remedial work. We further advised that a workover would require that the platform be shut in until all workovers are complete. Transcontinental, by letter dated April 19, 1974, advised that "our demand is just as great in the summer time as in the winter." Cities Service was asked to keep Transcontinental advised of its plans so that it might be in a better position to adjust its curtailment program. The company proceeded with its plans for a workover program and Transcontinental was kept advised. The recommended additional tests were run in early May, 1974. Analyses of the data obtained indicated that each of the six producing wells needed workover operations. This called for the replacing of over 45,000 feet of tubing in the wells. Efforts to obtain the desired 3-1/2" tubing were commenced in the latter part of April, 1974, but because all tubing was in short supply, Cities Service was able to obtain only 40,881 feet of 3-1/2" tubing by November, 1974, and had to use 2-7/8" inspected used tubing in two of the wells. A premium price was paid to obtain the available tubing. During the same period that tubing was being sought, efforts were being made to find an available workover rig that would fit the A-76 platform. The first suitable rig that would be available was the Walker-Huthnance Rig #23. This rig was made available on August 29, 1974. Block A-76 was shut in for the period from August 30, 1974 to January 20, 1975, for the workover operation. It took about 92 days to work over all six wells. After the workover was completed on all six wells, it was found that one of the wells was producing mostly salt water, The time consumed in performing these workovers was reasonable. consumed for each specific event during the workover operation. An analysis of these times indicates that the workovers went according to plan, except for weather delays, the necessity of reworking well A-5 and repair of a crane. Taking all of these factors into consideration, it would be unusual that a program this extensive could be accomplished in less time. Workover operations are a normal part of ordinary and usual production operations. The workover on Block A-76 was performed in the normal course of business. In addition, as required by USGS regulations, Cities Service gave notice that it was going to conduct this particular workover operation on August 23, 1974. Such notice was approved by the USGS District Supervisor of the Texas District on August 27, 1974. This notice describes the name and location of the wells on which remedial work is to be performed, and a complete description of the work. A number of problems could have developed if the workover had not been performed. If a hole in the tubing develops, the subsurface safety valve is not effective due to pressure being exposed to the tubing-casing annulus. If this occurs, the well cannot be shut in by this subsurface valve located 100 feet or more below the surface of the ocean floor and the operator is in non-compliance with OCS Order No. 5. If casing deterioration had reached the stage at which tubing leaks allowed pressure to develop on the casings, then the casings could fail. Failure of the casings with uncontrolled gas flow would create serious hazards and the loss of valuable energy resources. If the casing did not fail, then the tubing would have continued to degenerate to the point that it would become impossible to recover it from these directional wells. This condition would cause the wells to be lost and recoverable gas reserves would remain in the ground unrecovered unless sufficient recoverable gas remained to justify drilling new wells. This workover operation resulted in a current loss of earnings to the co-owners of $2.5 million and workover costs in excess of $2 million. By Order dated January 8, 1975, the Federal Power Commission instituted an Investigation of Revised Curtailment |