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Vol. 11, No. 37 Week of September 10, 2006
Providing coverage of Alaska and northern Canada's oil and gas industry

New horizon for industry

Deepwater test results open floodgate to U.S. Gulf’s massive Lower Tertiary play

Ray Tyson

For Petroleum News

Results from a rare and critical production test on one ultra-deepwater discovery, coupled with preliminary well data from the most recent find in the same geological trend but a distant 80 miles from the flow test, have quickly elevated the U.S. Gulf of Mexico’s emerging Lower Tertiary play to monumental importance for both industry and a nation increasingly dependent on foreign oil to meet its energy needs.

Also known as the deep Eocene or Wilcox trend, this unfolding play stretches several hundred miles from Walker Ridge westward through Keathley and Alaminos canyons, and is now believed to hold potentially billions of barrels of recoverable oil in untold dozens of individual prospects primed for exploration drilling based on the outcome of the production test on the Chevron-operated Jack No. 2 well.

For months industry patiently waited for word on the first-ever production flow test conducted on the Gulf of Mexico’s Lower Tertiary. And results from the Jack test well on Block 758 in Walker Ridge, home to at least four other significant discoveries in this portion of the immense formation, did not disappoint. Although companies that bought into the expensive test to better understand the “deliverability” or commercial potential of this risky horizon refused to discuss the findings of some of Jack’s important reservoir characteristics, such as rock porosity and permeability and oil quality, what they did disclose on Sept. 5 appeared to be sufficient to establish the Lower Tertiary as a premier U.S. Gulf play for years, if not decades, to come.

Well completed in 7,000 feet of water

The Jack No. 2 well was competed and tested in 7,000 feet of water, with more than 20,000 feet under the sea floor for a total depth of 28,175 feet, breaking Chevron’s 2004 Tahiti well test record in Green Canyon as the deepest successful well test in the Gulf of Mexico. More important, the well flowed at more than 6,000 barrels of oil per day, an impressive rate considering just 40 percent of Jack’s estimated 350 feet of hydrocarbon pay was tested. Chevron (50 percent) and Jack partners Devon Energy (25 percent) and Norway’s Statoil (25 percent) plan to drill another Jack appraisal well next year.

More than a half-dozen world records for test equipment pressure, depth, and duration in deepwater also were set during the Jack well test. For example, the perforating guns were fired at world record depths and pressures. Additionally, the test tree and other drill stem test tools set world records, helping Chevron and co-owners conduct the deepest extended drill stem test in deepwater Gulf of Mexico history.

“The results of the Jack test allow Chevron and its co-owners to better understand the deliverability of the emerging Lower Tertiary trend,” said Gary Luquette, Chevron’s president of North America exploration and production. Chevron is the largest leaseholder in the U.S. Gulf’s Lower Tertiary.

“The results of the Jack test are very encouraging,” Stephen Hadden, Devon’s senior vice president of exploration and production, added, noting that with 273 blocks under lease and 19 exploratory prospects already identified, Devon’s Lower Tertiary position in the U.S. Gulf alone, with an average pre-dill estimate of 300-to 500 million barrels oil equivalent per prospect, could more than double the company’s entire worldwide reserve base of about 2 billion oil-equivalent barrels. In addition to Jack, Devon holds varying interests in two additional major Lower Tertiary discoveries in Walker Ridge, Cascade and St. Malo.

BP releases Kaskida results

Another significant piece of the Lower Tertiary puzzle was put in place just days before results from the Jack test were released — preliminary well data from the BP-operated Kaskida oil discovery on Keathley Canyon Block 292. The discovery well not only encountered an eye-popping 800 feet of hydrocarbon-bearing sands, the companies said, but also confirmed the broad reach of the Gulf’s Lower Tertiary. The Kaskida prospect is 80 miles northwest of Jack.

Kaskida also represents the first Lower Tertiary discovery in Keathley Canyon, a remote area that accounted for five of the highest bids on exploration tracts offered in Western Gulf of Mexico Lease Sale 200 held in August, including BP’s sale-high $21 million for Keathley Canyon Block 58, in the same general area as Kaskida.

The Kaskida discovery well, about 250 miles southwest of New Orleans, is situated in about 5,860 feet of water and was drilled to a total depth of about 32,500 feet, including the water column. “Appraisal (drilling) will be required to determine the size and commerciality of the discovery,” cautioned David Rainey, BP’s vice president in charge of exploration in the Gulf of Mexico.

However, with more than 800 feet of initial pay and 20 percent of the prospect, “we believe Kaskida is our largest (Lower Tertiary discovery) to date,” added Devon’s Hadden. In fact, Kaskida’s 800-plus feet of pay is nearly has much as the roughly 1,000 feet of pay encountered at Tahiti, believed to be the U.S. Gulf’s second largest deepwater oil discovery next to the BP-operated Thunder Horse field in Mississippi Canyon.

Kaskida Anadarko’s first Lower Tertiary venture

Kaskida also was Anadarko Petroleum’s first venture in the U.S. Gulf’s Lower Tertiary. Anadarko, with a 25 percent stake in Kaskida, was said to be among an undisclosed number of other non-Jack owners who bought into the Jack production test results, which were held under tight wraps until after Western Gulf Lease Sale 200. Anadarko also is well positioned in the Lower Tertiary with more than 200 blocks, excluding the 34 blocks the company picked up in the August lease sale, some of them no doubt Lower Tertiary plays.

“Kaskida significantly enhances the prospectivity of Anadarko’s acreage position,” said Bob Daniels, Anadarko’s senior vice president of worldwide exploration. “Commercializing the Lower Tertiary play could substantially elevate Anadarko’s already robust deepwater Gulf of Mexico exploration and production profile.”

The Lower Tertiary has been a prolific producer in onshore Texas and Louisiana, producing around 8 billion barrels of oil equivalent, Devon’s Hadden said, adding that as the sediments flowed and dropped into the Gulf through river systems eons ago, they passed through the shallower continental shelf and eventually made their way to the Gulf’s deepwater region, “where they began to spread out unconstrained, forming large continuous sand deposits across the basin. This ultimately formed the Lower Tertiary reservoirs.” He noted that to date 99 percent of total Gulf oil production comes from Miocene age rocks or younger.

Lower Tertiary risky

Despite numerous discoveries and positive results from the long-awaited Jack production test, the Lower Tertiary remains fraught with risks, including huge salt dooms that cover much of the trend and can make imaging targets below the salt difficult. Moreover, because of the challenging environment associated with the deepwater, it no doubt will require billions of dollars in investment for the infrastructure to support the drilling, production and transportation of the oil to market. The wells alone will cost $80 million to $120 million a pop, according to Devon’s Hadden, who said owners of the Lower Tertiary discoveries Devon is involved with are weighing development options that could result in the U.S. Gulf’s first FPSO, or floating production, storage and offloading system.

And while industry thus far has posted some mouth-watering discoveries vs. dusters, the record is by no means perfect. Of the 19 exploratory wells drilled by various companies along the trend to date, 12 have resulted in potential commercial discoveries and eight were declared non-commercial, still a solid batting average of .630 on anybody’s scorecard.

In addition to Jack, Cascade and St. Malo in Walker Ridge and Kaskida in Keathley Canyon, the potential Lower Tertiary winners that have been announced so far are Great White, Great White West, Trident, Silvertip, Tobago and Tiger in Alaminos Canyon; and Stones and Chinook in Walker Ridge. The losers are Toledo and Baha in Alaminos Canyon; and Sardinia, Diamondback and Hadrian in Keathley Canyon. Results from the Tucker and Das Bump exploratory wells in Walker Ridge have yet to be announced.

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