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October 2008

Vol. 13, No. 42 Week of October 19, 2008

Big strike in Gulf of Mexico

Deepwater ‘Freedom’ wildcat exposes more than 550 feet of net oil pay; Noble, BP, Marathon, Samson partners in deepwater venture

Ray Tyson

For Petroleum News

Majority owner Noble Energy and partners BP, Marathon Oil and Samson Offshore have parlayed their $20 million, deepwater Gulf of Mexico exploration lease into an oil discovery that’s proving to be much larger than initially anticipated.

Formation logs from the Freedom discovery well on Mississippi Canyon Block 948 indicate more than 550 feet of net hydrocarbon pay in multiple high-quality reservoirs, which is more than twice the thickness 37.5 percent owner Noble Energy had originally expected.

“We are very excited with the results of this well, which is our largest discovery to date in the deepwater Gulf of Mexico,” noted Charles D. Davidson, Noble Energy’s chairman, president and chief executive officer.

The Freedom discovery well, located 160 miles southeast of New Orleans, La., in about 6,100 feet of water, was drilled to a total depth of roughly 29,280 feet into Middle and Lower Miocene reservoirs using Transocean’s Deepwater Horizon semi-submersible rig, which is leased to BP.

Appraisal well next

BP, the operator with a 25 percent stake in the discovery well, said an appraisal well will be necessary to determine the size and reach of the discovery and whether it is commercial. However, the company believes the Freedom prospect extends into Mississippi Block 992, in which BP holds a 67.75 percent majority interest and Australia’s BHP Billiton, the prospect operator, holds a 32.5 percent stake.

“This discovery further strengthens BP’s resource base and portfolio of potential development projects in the Gulf of Mexico ... and we look forward to working with our various partners towards efficient development of these discovered resources,” said Andy Inglis, BP’s chief executive of exploration and production.

The Freedom discovery announcement on Oct. 14 follows discoveries by BP at its Tubular Bells and Kodiak prospects, located in the same general deepwater area as Freedom. Kodiak, on Mississippi Block 771 in about 5,000 feet of water, contained around 500 feet of hydrocarbon-bearing sands, also in Middle and Lower Miocene reservoirs, ranking it among the larger deepwater oil discoveries in the U.S. Gulf based on pay thickness alone.

Noble will operate

Noble Energy, a large exploration and production independent based in Houston, will take over operation of the Freedom discovery block, also known as Gunflint. During its second-quarter 2008 earnings conference call, Noble Energy said Gunflint had a potential resource exceeding 100 million barrels of oil equivalent, much less than Noble Energy’s latest estimate.

Exploration rights to the Freedom prospect were originally acquired by Noble Energy and Samson Offshore (25 percent) in the March 2006 Central Gulf of Mexico federal oil and gas lease sale (198) for $20.2 million, among the highest 10 single bids submitted in the entire sale. The sale attracted a total of $588.3 million in apparent high bids on 405 offshore exploration blocks, an astounding 66 percent increase over the previous year’s roughly $354 million Central Gulf performance on 428 blocks.

With two significant U.S. Gulf development projects at Isabela-Galapagos and now Freedom, combined with an extensive exploration portfolio containing more than 1 billion barrels of net “unrisked” resources, “the deepwater Gulf of Mexico will be a significant contributor to our reserve and production growth in the coming years,” Noble Energy’s Davidson said.

Marathon Oil holds the remaining 12.5 percent interest in Freedom. “We’re encouraged by the results of the Freedom discovery well, which adds to Marathon’s strong Gulf of Mexico portfolio,” said Annell Bay, Marathon senior vice president for worldwide exploration.

Marathon said it plans to participate in about three “significant” exploration wells a year through 2012, along with a number of development wells associated with its Gulf of Mexico Droshky discovery, which is expected to be sanctioned later this year, the company said. Marathon holds a 100 percent working interest in the Droshky discovery located on Green Canyon Block 244.






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