Outstanding!
Posted on 08/17/2003 9:19:10 AM PDT by Dog Gone
A trio of oil companies are planning to drill wells an extraordinary six miles deep, and possibly more, in the shallow waters offshore Louisiana and Texas in search of the ancient geologic layer that has yielded billions of barrels in deep water farther offshore.
Before the year is out drilling is expected to begin on the first well, with a target depth of approximately 32,000 feet.
This spot is in an oft-drilled part of the Gulf where any well over 15,000 feet is considered rare.
Wells that deep are costly and prone to nasty surprises for drillers, but they offer something increasingly rare in the shallower waters of the Gulf -- the chance for a giant discovery.
"We're trying to connect the dots. It's a new frontier," said Steve Campbell, spokesman for Newfield Exploration of Houston.
The chief of exploration for BHP Billiton, the Australian mining company, recently told a group of analysts in Houston that the place to find a new Gulf of Mexico is under the old Gulf of Mexico.
Oil and gas exploration companies are looking ever deeper because the finds at shallower depths can't staunch the decline of the output in fields in the shallower waters of the Continental Shelf.
"It's exciting. They could add another 30 years of life to the Gulf," said Bill Provine, vice president for investor relations at Rowan Companies, a drilling contractor whose equipment is designed for these deep holes.
The plan is to drill within a range starting at 25,000 feet and possibly all the way to 35,000 feet within one of the most heavily-explored places on earth, "the heart of the Gulf play as we know it today," said Campbell. But they are looking, mostly for natural gas, some two miles deeper than the existing production.
Reaching this new frontier will mean setting drilling records.
According to the federal Minerals Management Service, only 7 percent of the wells in the Gulf of Mexico have been drilled below 15,000 feet and only 2 percent below 18,000 feet.
By comparison to these new wells, the deepest well ever drilled in the Gulf of Mexico, not including water depth, is 30,217 feet, according to the MMS.
That was in the Green Canyon area, which is in the deep waters of the Gulf, where many of the big finds have been in the past decade.
Now exploration and production companies are trying to capitalize on what they learned in the deep waters. With these new wells they are chasing the same formations that when located in much deeper water farther from shore, have produced big finds like the billion-barrel Thunder Horse field.
On the Texas side of the Gulf, Australian mining company BHP Billiton has partnered with Newfield to do a deep drilling search using 30 lease blocks acquired in the March lease sale.
"We have targeted the sections that are very deep. We think there are material prospects there. It is a new play for us, and the industry as well," said BPH Billiton spokesman Patrick Cassidy.
At a presentation for financial analysts in Houston, company officials said the industry has been going in two directions in search of new plays.
One direction is into ever-deeper water, into deeper statigraphic layers.
The other direction is the shallow-water shelf, which has to date produced the equivalent of 40 billion barrels of oil, but is virtually untested below 20,000 feet well depth.
On land, the trend seems to be deeper as well. Provine says there are some very deep wells being drilled in South Texas and in the southern part of Louisiana.
Service company Weatherford International recently forecast that deeper drilling will be the factor that pushes the U.S. rig count to 1,200 by the end of next year. Recently, nearly 1,100 rigs have been in operation.
Newfield, BP and BHP think the rich formations may also exist closer to shore. But working in waters measured in the hundreds, rather than thousands of feet, means drilling through an extra 6,000 feet of sediment.
British energy giant BP has agreed to drill the initial test well in what is called the Treasure Island exploration concept, a joint exploration agreement with Newfield, in Louisiana's Eugene Island area in about 250 feet of water. Plans call for the drilling to start before Jan. 1.
They will be looking below a thick layer of salt that typically starts at 18,000 feet, but can start as deep as 22,200 feet.
BP declined to provide specifics. Even after drilling wells, some major oil companies decline to provide information like the depth because it might give away valuable information to competitors.
Rowan has been working with the companies which are planning to drill these record wells, although it has not yet been hired to do the job. They are discussing how to drill four wells with the shallowest being 28,000 feet and the deepest being 32,000 feet, said Provine.
The Gorilla-class rigs owned by Rowan are known for being powerful enough to reach such depths, and the company is building a new Tarzan class which theoretically should be able to drill to 35,000 feet.
While there are plenty of jack-up rigs capable of drilling in shallow waters, only about 30 in the Gulf are capable drilling really deep wells, according to Friedman, Billings, Ramsey & Co.
Provine says it takes a rig with three mud pumps, because of the high pressures needed to turn the mud motor which drives the drill bit.
At this point, they are not even sure that a well can be drilled that deep, said Campbell of Newfield.
The drillers don't know how hot the earth will be at those depths, or how high the pressures will be.
"It's a tremendous challenge we are tackling," said Campbell.
On the plus side, if they find what they're looking for, the maze of pipelines in the shallow Gulf could make it easier to put these wells into production.
There are also serious doubts about whether they'll find what they're looking for down below.
Such wells are considered high risk in part because of the difficulty seeing clearly with seismic imaging in that part of the Gulf, according to a deep shelf study by Friedman, Billings, Ramsey & Co.
A seismic survey uses sound waves to compare the density of the sediments below to draw a picture of the subsurface, with most of the loosely packed Gulf sediments readily lending themselves to the technique.
However, the more densely-packed sediments closer to shore make it harder to tell sand from shale, and gas sands from so-called wet sands. Also it is harder to measure the speed at which sound travels through the deep sediments, causing errors in conversions, thus allowing pay zones to "walk."
The statistics are daunting.
Even the less extreme so-called deep-shelf wells take three or four months to drill, cost about $20 million, and have another $20 million to $30 million per well in completion costs if there's a discovery, according to Friedman, Billings, Ramsey. Its study assumes a 20 percent success rate, although Newfield says it has been hitting 60 percent.
The six-mile well that is planned is hunting for the lower portion of Miocene era, and some even older geologic age formations below that.
"Those new plays are going to inherently carry more risk, but the Gulf of Mexico is an attractive place because we have material targets remaining. ... I don't want to diminish the potential for luck, but you make your own luck, and in many cases if you miss one target, you've got another target that you can continue to drill through," said BHP in the presentation.
Eager to encourage this type of drilling, the federal government has proposed royalty relief on the first 15 billion cubic feet of natural gas for wells drilled between 15,000 feet and 17,999 feet, and the first 25 billion cubic feet from wells drilled below 18,000 feet.
But these will only be marginal in stimulating more drilling, according to David Khani of Friedman, Billings, Ramsey.
The company's study values deep shelf royalty relief at about $12.5 million per successful well, which is small compared to existing deep water relief, which can be as much as $160 million per successful well.
I just bought some Lone Star Tech.(LSS)
The reason for this press release with as much detail as it has is to attract investors. Looks like it worked. 'Buy on rumor, sell on news.'
I agree, but Newfield doesn't have deep enough pockets to take on a project of this magnitude.
Since the advent of high temp oil muds, what has always been the limiting factor in depths of wells is the tensile strength and the connection strengths of the tubulars when exposed to downhole temperatures in excess of 400*.
Aside from that there's the surface problems associated with the string weight.
They're planning to utilize a mud motor which will alleviate the stress on the tool joints, but coming off bottom at 30,000' will see a hook load in excess of 500,000 pounds, even with a tapered string.
Three and a half, S-135 drill pipe has a tensile strength of around 450,000 pounds.
I'd be willing to bet that Weatherford or Quail is working on a special string of drill pipe to be able to do this.
This won't be a matter of having enough horsepower and pumps to handle surface pressures of 5,000 psi or so, that's easy; it will be a proving ground for a new tubular design.
Somehow, I doubt it.
You're wrong on this Right.
I'm a seasoned investor who jumps when opportunity knocks.
The steel tariffs will be relaxed soon adding profit to the bottom line.
I've made lots of money trading in LSS.
Bought both times it hit 10.
Made cumulative 5X in 2 years.
Here.......plug this in and see for yourself
http://stockcharts.com/def/servlet/SC.web?c=LSS,uu[m,a]daclyyay[df][pb50!b200!f][vc60][iUb14!La12,26,9]&pref=G
"Tight hole" means that the waitress down at the local coffee shop misses your correct depth by ten feet.
... drill pipe...
This won't be a matter of having enough horsepower ..., it will be a proving ground for a new tubular design.
What will also be interesting is to see if this can really be drilled as a tight hole.
You guys are talking code for something else, aren't you? You don't fool ME.
What they aren't is a low-cost operator. The MMS doesn't care about that because you're in the royalty owner position.
Agreed.
They have turned safety programs into their prime objective.
Safety on the job site is a necessary and worthwhile pursuit, but the prime motivator must still be to get the job done.
By what standard? Oh I forgot you work for the government and need not worry about profit.
A few years ago BP started a program called "Beyond The Best" to prove they were the "BEST" operator in all areas of drilling and production in every part of the world they operated in. About a year and a half into a five year project they found out how REALLY bad they are. Project seems to be on the back burner now.
Dadgummit, Dog! She caught us!
I guess we'll have to start posting in Pig Latin.
In the oilfield we have tight holes, 30' joints and 5 gal buckets of dope. ;-)
Outstanding!
Yes, and you Texas oilmen also have reamer tools, pipe rams, rod blowout preventers, and retrievable packers, not to mention the use of terminology such as "rate of penetration" and "reservoir pressure."
I'm leaving now. Please don't let me spoil your party. :-)
As far as I can see, though, they never said who was going to be the operator.
Nita, we have LOTS of expressions which the Admin Mod would delete if I posted them, but they're in reports in the offices every day.
We still use the same terminology the guys coming back from WWII called things, and they called it as they saw it.
Thinking like that is the reason you're paying $1.50 a gallon for gasoline today, and it's the reason we can't wean ourselves from the MidEast oil teat.
I inferred from this that BP was going to be in charge of drilling, i.e., operator. Assuming they've already started the permitting process, it should be pretty easy to look up. Or we could ask an engineer at the MMS!
Naw! We'd have to have a safety meeting before he could answer. The well would be finished before we knew.
HA!
We can not get off dependence from Middle East oil because the liberals will not open up areas that need drilling in the U.S. such as ANWAR and offshore drilling of California and Florida. We have proven that petroleum resources can be developed safely so we need to elect more conservatives to congress and the senate so we can develop these reserves.
Just before Christmas in 2001 I went to one of the twice monthly drilling meeting covering the GOM at 7:30 Thursday morning. There were about a hundred people in the room and the agenda was on each chair. Item one was “Christmas Tree Safety”. I asked the guy next to me why the hell we were discussing a production problem in a drilling meeting and he said he was wondering the same damn thing.
For the next 15 minutes or 25 highly paid man hours, we talked about how to keep your Christmas tree fresh and wet during the season!
That is a blanket indictment against all low cost operators, and it's just not true.
When you speak of the corrosive environment in the Gulf, I assume you're referring to the reduced cost of running low hardness production tubing as opposed to running chrome alloy tubulars.
In other words, you're talking about completion techniques.
That's a whole different ball game from the drilling end of it.
We could debate forever about the advantages and disadvantages involved in completion techniques, but the main point is that throwing money at a problem rarely solves a problem.
I agree with you completely that we MUST open up areas in the United States which can be produced for our own consumption.
The present mindset of large companies, like BP, Exxon, etc., however, only exacerbates the problems of lagging supply for our growing needs.
That's right. Each shift has to come in a half hour early to watch a safety video.
Oh, and each location has an underground tornado shelter which adds another $40,000 to location costs. I don't think any other operator in the world has taken it to that extreme yet.
I'll tell you one better than that!
A friend called me and asked me if I would be interested in going to work for BP.
I said, "Well, I don't think I can tolerate their safety program."
He said, "Yeah, it is pretty intense. Yesterday a lady came out of the Houston office to give us a class in personal hygiene."
I said, "You mean, like taking baths and washing your hands after you pee??!"
He said, "That was a part of it."
Needless to say, I didn't accept the offer.
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