Chevron plans to conduct a rare and no doubt expensive production test on one of its lower tertiary oil discoveries in the “ultra-deepwater” Gulf of Mexico, evidently to better understand the commercial viability of the promising but financially risky play.
Moreover, billions of dollars in partner investment to develop Walker Ridge discoveries Jack, St. Malo and Cascade could hang on the test’s outcome.
Jack was selected for the production test, and a “full-scale” test of the Chevron-operated discovery is scheduled for the second half of 2006, Devon Energy President John Richels disclosed in an Aug. 3 conference call.
Devon holds a 25 percent stake in Jack, as well as interests in St. Malo and Cascade, also said to be considered for the lower tertiary production test. Another big exploration and production independent, EnCana, is a 25 percent stakeholder in Jack.
Chevron, which owns 50 percent of Jack, would not discuss the upcoming production test for “proprietary” and “confidentiality” reasons, Chevron spokesman Mickey Driver said Aug. 10.
“We’re hoping that the (Jack) well will test and demonstrate that it can produce at commercial rates over a long-term period without significant draw downs,” Devon’s Richels said. “So a good result would be commercial rates.” Explorers hardly ever resort to deepwater flow testing to determine a reservoir’s productivity, largely because of the expense and the time required to prepare for one. A full-scale production test, such as the one planned for Jack, could run $30 million or more, according to analysts.
Industry argues that flow testing in deepwater is largely unnecessary with today’s sophisticated seismic technology and downhole tools that can provide accurate readings on fluids, pressures and other reservoir characteristics.
Nevertheless, for more than a year lower tertiary partners in Walker Ridge have toyed with the idea of conducting a production test. With billions riding on such a high-stakes venture as the untested lower tertiary, “you want to make sure you’re right,” Richels noted last September at an oil and gas conference. “That’s not just for us. That’s for everyone playing in the trend.”
Shell, BP and Marathon own the recently announced Stones discovery on Walker Ridge 508, located between St. Malo on Block 678 and Cascade on Block 206. Stones is situated on the same lower tertiary trend thought to extend at least 140 miles from Walker Ridge southwest into Keathley Canyon. However, it was unknown whether these deepwater players would participate in the Chevron-operated production test at Jack.
Jack in nearly 7,000 feet of water
The selected Jack discovery well, located on Walker Ridge Block 759 was drilled to a total depth of about 29,000 feet in nearly 7,000 feet of water. About 20 miles southwest of St. Malo, Jack penetrated more than 350 feet of oil pay, a respectable first encounter with the lower tertiary zone on Block 759.
Much of the drilling activity at Walker Ridge during the 2005 second quarter was focused on appraisal drilling at Jack and Cascade. A planned second appraisal well at St. Malo was delayed until next year because of drilling rig availability, Devon’s Rachel said.
“These wells will provide the technical teams with data that is crucial for determining future development plans,” he explained, noting that the Jack appraisal well was nearing its expected target depth of roughly 30,000 feet.
Companies hold varying interests in the Big Three discoveries in Walker Ridge. For example, Unocal holds a 28.7 percent interest in St. Malo, while Devon holds a 22.5 percent interest, Petrobras a 25 percent interest, Chevron a 12.5 percent interest, EnCana a 6.25 percent interest, ExxonMobil a 3.75 percent interest and Eni a 1.25 percent interest.
Because of Walker Ridge’s remoteness and expected high development costs, many of the companies with prospect interests in the area are said to favor a joint development using a common production hub. One option includes a so-called FPSO, or floating production, storage and offloading facility.
FPSOs, useful where pipelines and other infrastructure are sparse or non-existent, are typically used for isolated fields around the globe but have yet to make their debut in the Gulf of Mexico. The produced oil is generally transported ashore via marine tankers.
Even before the partners’ decision to proceed with a lower tertiary production test at Jack, “we believed these (Walker Ridge) discoveries had commercial potential,” Richels emphasized. “We’ve seen nothing that really detracts from that thinking. And we think we’ll continue to see success.”
