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 May 2015 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

Technology

Furuno Debuts Updated Echo Sounder

Furuno has introduced a new IMO Echo Sounder, FE800, offering an 8.4-inch Color LCD display with built-in dual-frequency capability. It also features a new system

Entries Sought for SHIPPINGInsight Award

Entries are now being accepted for the 2015 SHIPPINGInsight Award, which will be presented at the SHIPPINGInsight Fleet Optimization Conference & Exhibition, Oct.

Lamprell to Implement Software for Automated Manufacturing

U.A.E based offshore jackup rig builder Lamprell Energy Ltd., will implement SSI's EnterprisePlatform software solution to allow its engineering team to automate manufacturing processes.

Environmental

Hyde Marine to Present on BWTS at Nor-Shipping

Company to Share Seamless Integration of Ballast Water Treatment System (BWTS); Experience in Retrofits for Small Footprint Installations at Nor-Shipping Maritime

6,000 Gallons of Diesel Spilt in Alaskan Gulf

Unified Command responding to cleanup aboard vessel in Seldovia, Alaska   A Unified Command consisting of representatives from the U.S. Coast Guard, U.S. Department of the Interior,

US Orders Owner to Clean Up Ruptured Pipeline

Federal order ensures continued action on Santa Barbara County oil spill   The U.S. Environmental Protection Agency and the U.S. Coast Guard issued a joint federal

News

Lifting of US Crude Oil Export Ban Possible within Year

The U.S. Congress could lift the 40-year old ban on domestic crude oil exports within a year as a drop in gasoline prices and the potential return of Iranian

Duke Energy to Help Develop Jeffersonville Port Site

Duke Energy Indiana has selected a 140-acre parcel of land inside the Port of Indiana-Jeffersonville in Clark County for the utility's 2015 Site Readiness Program.

UNOLS Seeks Nominations for Council Positions

The University-National Oceanographic Laboratory System (UNOLS) is an organization of academic oceanographic institutions working in cooperation with agencies of the U.

Offshore Energy

Lamprell to Implement Software for Automated Manufacturing

U.A.E based offshore jackup rig builder Lamprell Energy Ltd., will implement SSI's EnterprisePlatform software solution to allow its engineering team to automate manufacturing processes.

Five Years on from Macondo

An interview with NOIA’s Randall Luthi provides unique perspective on where the offshore energy business has been, where it is now, and where it could be headed next.

Offshore O&G: Weathering the Storm

Vessels are stacked as Gulf oil operators retrench and day rates fall. In the Gulf of Mexico, vessels serving offshore oil-and-gas exploration and production are

Underwater Engineering

Executive Changes at Transocean

Transocean Ltd. today announced that, as mutually agreed with the company, Esa Ikaheimonen is stepping down as Executive Vice President and Chief Financial Officer effective immediately.

VIKING’s Top Safety Offerings at Nor-Shipping

Marine safety equipment leader VIKING Life-Saving Equipment will appear in force at Nor-Shipping 2015, displaying both innovative products and services that

Keel Laid for Russia’s Next Generation Icebreaker

The world’s biggest nuclear-powered icebreaker keel laying ceremony took place of at the Baltic Shipyard on 26 May 2015. Heads of Atomfflot, the Baltic Shipyard

 
 
Maritime Careers / Shipboard Positions Maritime Contracts Maritime Security Navigation Port Authority Salvage Ship Electronics Ship Repair Ship Simulators Shipbuilding / Vessel Construction
rss | archive | history | articles | privacy | 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: 0.2469 sec (4 req/sec)