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

Technology

Maersk to Install Transas ECDIS on 100 Vessels

Maersk Line, the world's largest container company, has selected Transas Marine for ECDIS implementation on more than 100 vessels, Transas announced today. The

KVH Outlines Ship-to-Shore Connectivity

The next generation of connectivity between ship and shore will be dominated by the development of applications to help ship owners and managers reduce costs by enhancing operational efficiency,

MARIN, Cruden, Tree C Technology Forge Small Ship Simulator

Severe vibrations and shocks of up to 9G over an average of 1000 hours per year. That’s what instructors of fast small ships such as the Fast Raiding, Interception

Environmental

Methanol Powered Ferry Launched in Baltic Sea

Swedish ferry operator Stena Line has announced that it has converted the Stena Germanica to run on methanol, an industry first.   The company spent $24 million on converting the ship to methanol.

U.S. Oil Train Traffic mostly from Midwest to East Coast

U.S. oil trains delivered more than 13.5 million barrels of crude oil from the Midwest to the East Coast in January, according to government data that gives a first

MAN Demonstrates Two-Stroke Methanol Engine Concept

MAN Diesel & Turbo successfully demonstrated its ME-LGI concept engine in front of customers and partners at its Diesel Research Center in Copenhagen on March 17th, the company announced today.

Energy

Methanol Powered Ferry Launched in Baltic Sea

Swedish ferry operator Stena Line has announced that it has converted the Stena Germanica to run on methanol, an industry first.   The company spent $24 million on converting the ship to methanol.

U.S. Oil Train Traffic mostly from Midwest to East Coast

U.S. oil trains delivered more than 13.5 million barrels of crude oil from the Midwest to the East Coast in January, according to government data that gives a first

Rotterdam Gate LNG Terminal Expansion Started

Dutch gas network operator Gasunie and tank storage service provider Vopak said on Monday that the expansion of their Gate liquefied natural gas (LNG) terminal in Rotterdam has begun.

News

WOW at USMMA

The United States Merchant Marine Academy Hosts 7th Annual Women on the Water Conference. Last week, The United States Merchant Marine Academy (USMMA) in conjunction with the U.

Methanol Powered Ferry Launched in Baltic Sea

Swedish ferry operator Stena Line has announced that it has converted the Stena Germanica to run on methanol, an industry first.   The company spent $24 million on converting the ship to methanol.

U.S. Oil Train Traffic mostly from Midwest to East Coast

U.S. oil trains delivered more than 13.5 million barrels of crude oil from the Midwest to the East Coast in January, according to government data that gives a first

Offshore Energy

Severn Provider Ready for Offshore Markets

The naming ceremony took place today for Severn Offshore Services Ltd.’s new multipurpose wind farm vessel, Severn Provider, built at Damen Shipyards Gorinchem in the Netherlands.

Keppel FELS Delivers 11th Jackup to Mexico

Keppel FELS Limited (Keppel FELS), a wholly owned subsidiary of Keppel Offshore & Marine Ltd (Keppel O&M), has delivered a KFELS B Class jackup rig to Mexican national oil company,

North Sea Oil: Harkand wins Maersk Oil North Sea Deal

Harkand won a multi-million contract with Maersk Oil North Sea Ltd for the provision of DSV services in the North Sea region. The 12-month contract will be serviced by Harkand’s two DSVs,

Underwater Engineering

Keppel FELS Delivers 11th Jackup to Mexico

Keppel FELS Limited (Keppel FELS), a wholly owned subsidiary of Keppel Offshore & Marine Ltd (Keppel O&M), has delivered a KFELS B Class jackup rig to Mexican national oil company,

US Navy to Roll out Underwater Spy Satellites

The robotic series that remade crusade in skies will shortly extend to a low sea, with underwater view “satellites,” drone-launching pods on a sea building and unmanned ships sport submarines,

Statoil: Polarled Pipe-Laying Kicks Off

On 26 March, the Solitaire pipe-laying vessel started on the first stage of the Polarled installation project. The 482-kilometre long pipeline will transport gas

 
 
Maritime Contracts Maritime Security Maritime Standards Navigation Offshore Oil Pod Propulsion Port Authority Salvage Sonar Winch
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: 0.2810 sec (4 req/sec)