Chevron Corp. reported Thursday that it encountered significant oil pay in Paleogene age Wilcox sands at the Guadalupe prospect in the deepwater U.S. Gulf of Mexico. The discovery adds momentum to Chevron’s growing North America business as the company continues to unlock important Gulf resources with its deepwater exploration and appraisal program.
The company started drilling the well in June with the Discoverer India (UDW drillship). Drilled in 3,992 feet of water, the well reached a total depth of 30,173 feet. More tests are being conducted on the well, and additional appraisal activity will be needed to determine the resource’s extent, said partner BP plc in an Oct. 23 press statement. The well is located approximately 180 miles offshore Louisiana.
“This discovery further demonstrates Chevron’s exploration capabilities,” said George Kirkland, vice chairman and executive vice president for Upstream at Chevron, in an Oct. 23 press statement. “Guadalupe builds on our already strong position in the deepwater U.S. Gulf of Mexico, a core focus area where we expect significant production growth over the next two years.”
BP, which has made three discoveries in the emerging Paleogene trend in the deepwater Gulf, including Gila in 2013, Tiber in 2009, and Kaskida in 2006, said the Guadalupe discovery again highlights BP’s strength in exploration and the company’s commitment to the U.S. Gulf, said Richard Morrison, regional president of BP’s Gulf of Mexico business, in a press release.
BP Exploration & Production Inc. holds 42.5 percent working interest in the discovery well. Chevron U.S.A. Inc. is operator with 42.5 percent interest, and Venari Resources LLC holds 15 percent interest.
Chevron, which ranks among the top producers and leaseholders in the Gulf of Mexico, averages net daily production of 143,000 barrels of crude oil, 347 million cubic feet of natural gas, and 15,000 barrels of natural gas liquids this year, said Jeff Shellebarger, president of Chevron North America Exploration and Production Company, in a press statement. The company also expects to add to that volume with the production from the Tubular Bells and Jack/St. Malo projects by year-end.
CRACKING THE PALEOGENE: NEXT MAJOR GULF CHALLENGE
Cracking the code of the Paleogene play poses the next major challenge for oil and gas companies operating in the Gulf of Mexico. The deepwater Gulf still contains significant untapped oil and gas resources, but the industry must find ways to achieve the productivity it needs to justify the billion dollar investment required to tap these resources, a panel of industry officials told attendees at Hart Energy’s Gulf of Mexico Offshore Executive Houston conference last week.
To crack the Paleogene, Statoil intends to take the most promising technologies and tailoring them for the Gulf of Mexico to bridge the technology gap, said Ola Gussias, technology manager for U.S. Offshore at Statoil, during a roundtable discussion on striking the right balance in deepwater. The company is working on a thru tubing submersible pump system, which it will debut at the 2015 Offshore Technology Conference. The concept is not new, but the pump and system are, and offer great potential for the deepwater Gulf. Statoil also is pursuing ECD management to reduce drilling risk, mud losses and costs while improving the speed of operations. The company is currently testing this technology on a rig it’s operating.
Statoil has found that transferring to the Gulf technology developed for use elsewhere is not necessarily straightforward. But the company does have experience in high pressure, high temperature wells from the Norwegian Continental Shelf that is applicable to the Gulf.
BHP Billiton sees the biggest material game changing opportunities in the Gulf in and around the Miocene, said Stephen Pastor, asset president of conventional at BHP. To tap these opportunities, BHP is pursuing near-field exploration opportunities to take advantage of the cost benefits of existing infrastructure and applying technologies such as 4D seismic, enhanced oil recovery and water injection.
Over the next decade, Venari sees exploration and production in the Gulf moving further west and south as advances in seismic technology allow industry to see parts of plays not visible with technology five years ago. As a result, anticipates more infrastructure and subsea tiebacks in these areas, said Brian Reinsborough, president and CEO of Venari.
Despite cost increases, investor appetite for the deepwater Gulf remains strong due to its great oil potential and high margin business, said Reinsborough.
The industry could and needs to do a better job of predicting costs for large projects. Instead of over-engineering like it tends to do, oil and gas companies should seek to standardize operations where possible. Oil and gas companies also tend to drill too many wells, and need to strike a fine balance in understanding fields properly while not destroying a field’s value. The industry needs both innovation and standardization, said Reinsborough. He points to Anadarko Petroleum Corp.’s spar developments in the Gulf has an example of standardization from which industry could learn.
Water depth in itself no longer poses a significant challenge in terms of deepwater exploration.
“The rigs and the drilling capacity are there,” said James H. Painter, executive vice president, execution and appraisal, with Cobalt International Energy Inc.
Instead, the Gulf’s geological challenges such as high pressure and high temperature will be the toughest to solve. Other problems that industry must address include structural and process costs associated with deeper wells, rising costs for field development, and deepwater currents.
Despite the challenges, officials remain confident that industry will find a way to solve these problems.