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Gulf partners ‘rock on’ with Blind Faith Chevron, Kerr-McGee expect field development costs of $900M; offshore production facility takes on ‘hub-and-spoke’ look Ray Tyson Petroleum News Contributing Writer
Deepwater partners Chevron and Kerr-McGee, in deciding to move ahead with developing their Blind Faith field in the Gulf of Mexico, evidently believed a good deal more discoveries were to be had near the 100 million barrel-plus field, named in honor of the 1960s rock group formed by legendary guitarist Eric Clapton.
Rock legends aside, Chevron and Kerr-McGee danced to their own music in designing an offshore facility for Blind Faith capable of producing oil and gas at rates far exceeding what is expected of the field when it comes on stream in 2008.
In addition to some extra capacity, typically included in deepwater ventures to capture any production upside, space on the facility’s topsides will be set aside “to accommodate production from satellite discoveries or third-party tiebacks,” said Blind Faith minority stakeholder Kerr-McGee, the leading “hub-and-spoke” developer in the Gulf. Initial production to run 30,000 bpd Initial daily production from the $900 million Blind Faith project is expected to be about 30,000 barrels of oil and 30 million cubic feet of natural gas, the companies said Oct. 10, adding that they now believe the reservoir could hold in excess of 100 million barrels of oil equivalent, still modest by today’s deepwater reserve standards.
Nonetheless, the offshore facility is being designed to produce roughly 45,000 barrels of oil and 45 million cubic feet of gas per day, compared to the lower rates at startup, according to the companies. More significant, the facility’s topsides could be upgraded to handle 60,000 barrels and 150 million cubic feet per day, or twice the initial rate for oil and five times the initial rate for gas.
“This project is a key asset in our deepwater portfolio and is expected to provide significant new oil and gas resources in the Gulf of Mexico,” said Ray Wilcox, president of Chevron’s North America Exploration and Production Co.
Blind Faith, which straddles Mississippi Canyon blocks 695 and 696, is just 20 miles east of the BP-operated Thunder Horse field, the largest oil discovery to date in the Gulf with more than 1 billion barrels of reserves.
The Blind Faith discovery, announced in mid-2001, was originally held 77.5 percent by BP and 22.5 percent by Texaco, which later merged with Chevron to become a “super-major” — in the same fashion as ExxonMobil and later ConocoPhillips. Discovery well exceeded 25,000 feet The discovery well, drilled in nearly 7,000 feet of water by Diamond Offshore’s semi-submersible rig Ocean Confidence, exceeded 25,000 feet from the water line and encountered about 200 feet of net pay in rich Miocene sands between 20,900 to 24,300 feet. A successful appraisal well was drilled in 2004.
Despite the field’s potential, BP eventually pulled out of the Blind Faith project, leaving Chevron as operator with a 62.5 percent share of the field. Last year BP did a property swap with Kerr-McGee, giving the big exploration and production independent the remaining 37.5 percent of Blind Faith in exchange for various onshore Kerr-McGee assets in the Arkoma basin of southeast Oklahoma.
It is doubtful Kerr-McGee would have taken such a large position in Blind Faith had it not been for the area’s potential to support a hub-and-spoke development, a deepwater strategy that has well-served the Oklahoma-based independent over the years.
Currently, Kerr-McGee participates in five producing hubs in the deepwater Gulf: Nansen and Boomvang in East Breaks, Red Hawk and Gunnison in Garden Banks, and Neptune in Viosca Knoll. Additionally, hub construction is under way at the Constitution field in Green Canyon and is pending on several of its gas discoveries in the Eastern Gulf. Possible satellites at Blind Faith In fact, Kerr-McGee’s then vice president in charge of exploration and production, Dave Hager, said at a Friedman Billings Ramsey energy conference last November, well before Blind Faith was sanctioned as a commercial project, that there were possible satellite fields near Blind Faith which could be funneled through a central processing facility, or hub.
“This is a continuation of our hub-and-spoke exploration strategy of having the critical mass to put a … spot out there in the ocean with solid economics and possibly adding on satellite opportunities around that to enhance the economics,” Hager told analysts at the conference.
In a joint statement issued after the Blind Faith project was sanctioned, Hager, since promoted to chief operating officer, said field development at Blind Faith would create another “value-adding growth opportunity” for the company in deepwater Gulf.
“This is consistent with our business development strategy, which focuses on adding low-risk volumes and reserves through acquisitions and creative alliances,” he added.
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