Armed with New Technology, Oil Drillers Revisit Gulf of Mexico

Posted by Eric Haun
Monday, August 04, 2014

Advances in drilling technology are reviving the prospects of oil companies in shallow parts of the Gulf of Mexico, helping to squeeze more from older fields while the U.S. shale bonanza lures others onshore.

Apache Corp and a handful of smaller independent companies are using seismic surveying and horizontal drilling - techniques perfected during the onshore fracking boom - to tap mature fields and find hidden reserves on the shelf.

The methods appeal to investors hungry for the quick profits that cannot be delivered by deepwater drilling, where a dozen years of planning and billions of dollars in investment can be required to get oil pumping.

The technology, already used successfully by Apache in the North Sea, has revealed oil and gas reserves that were previously hidden in water less than 500 feet (150 meters) deep.

"3D seismic has not only helped us in acquiring new leases with new reserves on them, but also in sharpening targets for development drilling in our existing fields," Andy Clifford, president of Saratoga Resources Inc, told Reuters.

Replacing reserves and increasing production has long been a challenge on the Gulf of Mexico shelf. The easy-to-find oil has already been drilled, resulting in a drastic fall in production.

But the use of seismic data, much more precise than previous mapping techniques, is tempting geologists to take a second look for new fields and re-evaluate older deposits to see what might be left behind.

After an unusually harsh winter, higher prices for natural gas - abundant on the shelf - are an added incentive to drill.

"We are re-shooting all of our large fields to make sure that we haven't missed anything," said Matt McCarroll, chief executive of Fieldwood Energy LLC, a private equity-backed company that bought shelf assets from Apache and SandRidge Energy Inc last year.

Total proved reserves in the Gulf of Mexico are currently about 4.9 billion barrels of oil equivalent (boe), according to the U.S. Energy Information Administration.

But Stephen Trammel, an analyst at market research firm IHS, said some estimates peg reserves at nearly 10 times this amount.

With a market value of $1.8 billion, Energy XXI Ltd is worth a fraction of Apache or any of the oil majors, but has grown to become a big presence on the Gulf shelf since it deployed horizontal drilling and seismic tools.

Energy XXI's proved reserves, which are mostly to be found off the Louisiana coast, jumped by 50 percent in 2013 alone.

John Schiller, the company's founder and chief executive, said Energy XXI had extracted 5 percent of its reserves in the Gulf of Mexico and expected technology to squeeze out a further 5 percent.

"That's a meaningful number when we talk about 6 billion barrels of oil in place underneath our top 10 fields," he said. Even at a 5 percent recovery rate, the company would be able to produce 300 million barrels of oil.

'Invisible' No More
Horizontal drilling, which allows companies to set up miles-long pipes through a single rock formation, can deliver up to 20 times the production of wells tapped by vertical drills.

The technology is not entirely new. Companies in the Gulf of Mexico have been drilling horizontally for about two decades, though with limited results compared with developments onshore.

When twinned with recent advances in seismic tools, the biggest advantage of horizontal drilling today is its ability to identify the maximum amount of oil and gas in rock formations.

New seismic tools involve using sound waves that allow drillers to "see" oil and gas trapped in rocks through high-resolution 3D images.

"The best place to find oil and gas is where you know it already exists," said Michael Breard, a research analyst at Hodges Capital, a Dallas-based investment advisory firm.

Production in the shallow waters of the Gulf of Mexico more than halved in the last decade to 534.8 million boe in 2013. Trammel said he expects production to turn the corner, and soon.

Apache is among the companies likely to drive that growth. Despite selling assets worth more than $10 billion in the last year, primarily to focus on shale, it has kept 50 percent of the unexplored portions of shelf properties it sold to Fieldwood.

Thomas Voytovich, chief operating officer of Apache's international operations, says new drilling techniques have led the company to previously "invisible" parts of the Gulf.

"We are not going to be doing anything in the deep water in the foreseeable future," he said. "Most of the prospects that we are developing right now are literally in jack-up rig territory, which is 300 feet or less."

Jack-up rigs - mobile platforms with a floating hull - were the one bright spot in rig contractor Diamond Offshore Drilling Inc's recent quarterly results. Revenue from its deepwater business declined.

Shallow-water wells are also cheaper. Using infrastructure left over from earlier drilling, they can be installed for about $10 million; a deepwater well would cost upward of $50 million.

The returns, so far, have been good. Each of Saratoga's three horizontal wells are yielding double to triple the initial production of vertical wells. Seismic technology is helping the company to drill deeper, said Clifford.

"It's all about getting more bang for your buck," he said.

(By Swetha Gopinath and Sayantani Ghosh; Editing by Robin Paxton)

Maritime Reporter August 2014 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

Technology

AN/SPY-1 SSSA Completes Critical Design Review

The Critical Design Review (CDR) stage for AN/SPY-1 radar Solid-State Switch Assembly (SSSA)'s high voltage modulator completed Aug. 26, confirming that the

TESSCO Installs Chesapeake Bay Police Boat Video System

Leading networking company, TESSCO Technologies Incorporated, informs it has worked closely with the Maryland Department of Natural Resources (DNR) to successfully implement,

General Dynamics Wins US Navy Award for F/A-18 Mission Computers

General Dynamics Advanced Information Systems, a business unit of General Dynamics, was awarded a $16.2 million contract by the U.S. Navy to produce Type-3 Advanced

Offshore

Nordic American Offshore on Track Says Chairman

Herbjørn Hansson, 
Executive Chairman
 of Nordic American Offshore Ltd., informs shareholders as follows after the company's listing on the New York Stock Exchange

Vroon’s VOS Famous Launched

Vroon’s newbuilding ERRV, VOS Famous, was launched in China yesterday. This 50-m ERRV (emergency response and rescue vessel) is under construction at Nanjing East Star Shipyard.

LQT Delivers Accommodation Facility and Helideck in Gulf of Mexico

LQT Industries , a full-service provider of accommodation facilities, design-build construction services, and support services to the oil and gas industry, has

Environmental

USCG Cutter FIR Participates in Puget Sound Oil Spill Exercise

The crew of Coast Guard Cutter Fir, a 225-foot buoy tender homeported in Astoria, Oregon, participated in a Spilled Oil Response System exercise near Blake Island, Washington, Wednesday.

TESSCO Installs Chesapeake Bay Police Boat Video System

Leading networking company, TESSCO Technologies Incorporated, informs it has worked closely with the Maryland Department of Natural Resources (DNR) to successfully implement,

US Pollution Risks: Federal & State Summaries

The US Pollution Risks publication, recently published for its members by the UK P&I Club, compiles summaries of all the Federal and state requirements on liability,

Energy

Gazprom Supplying Gas to Europe as Contracted

Alexey Miller reported to Vladimir Putin that European consumers were receiving gas supplies entirely in line with contractual obligations. The total accumulated

ZeoGas hires Foster Wheeler to Plan Gulf Coast Project

Foster Wheeler AG announced today that a subsidiary of its Global Engineering and Construction Group has entered into a Collaboration Agreement with ZeoGas LLC.

LQT Delivers Accommodation Facility and Helideck in Gulf of Mexico

LQT Industries , a full-service provider of accommodation facilities, design-build construction services, and support services to the oil and gas industry, has

News

USCG Cutter FIR Participates in Puget Sound Oil Spill Exercise

The crew of Coast Guard Cutter Fir, a 225-foot buoy tender homeported in Astoria, Oregon, participated in a Spilled Oil Response System exercise near Blake Island, Washington, Wednesday.

AN/SPY-1 SSSA Completes Critical Design Review

The Critical Design Review (CDR) stage for AN/SPY-1 radar Solid-State Switch Assembly (SSSA)'s high voltage modulator completed Aug. 26, confirming that the

Gazprom Supplying Gas to Europe as Contracted

Alexey Miller reported to Vladimir Putin that European consumers were receiving gas supplies entirely in line with contractual obligations. The total accumulated

Offshore Energy

LQT Delivers Accommodation Facility and Helideck in Gulf of Mexico

LQT Industries , a full-service provider of accommodation facilities, design-build construction services, and support services to the oil and gas industry, has

Ricardo to Support Kongsberg WFMS Development

Ricardo and Kongsberg have signed a framework agreement that will see Ricardo support the development of the Kongsberg Wind Farm Management System (WFMS) as well

Aiming to Make Less Fuel Go Further: Maersk Drilling

Maersk Drilling says it is engaged in an energy efficiency project for its newbuilds together with Maersk Maritime Technology. The project involves an Energy Management System (MSPS),

Underwater Engineering

Phoenix International Awarded US$75-M Subsea Navy Contract

US Department of Defense inform that Phoenix International Holdings Inc., Largo, Maryland, is being awarded a $75,000,000 indefinite-delivery/indefinite-quantity,

Kongsberg AUV Pioneer Recognized by MTS Award

Kongsberg inform that Bjørn Jalving, Executive Vice President Subsea at maritime, offshore and subsea technology developer Kongsberg Maritime recently has been

Upcoming Expo 'Offshore Marintec Russia'

ExpoForum Convention and Exhibition Centre in St. Petersburg, October 7-10  will host the International Specialised Offshore Exhibition and Conference 'Offshore

 
 
Maritime Careers / Shipboard Positions Maritime Contracts Maritime Security Navigation Port Authority Salvage Ship Repair Ship Simulators Shipbuilding / Vessel Construction Sonar
rss | archive | history | articles | privacy | terms and conditions | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.2576 sec (4 req/sec)