Kerr-McGee secures drilling, development with VAULT

Visualization center had role in decision to drill Constitution,Ticonderoga

Jay Schempf

Petroleum News Contributing Writer

Like many major oil companies and large independents, Kerr-McGee Oil & Gas Corp. uses computer-based visualization technology as a tool for its geoscientists and engineers to help choose where to drill the next well or how best to develop a new field or to better develop an existing one.

The company’s visualization center, housed at its Houston, Texas, headquarters, figured largely in its decision to drill the exploratory wells for its deepwater Constitution and Ticonderoga fields, discovered in early 2003 and early 2004, respectively, in the Central Gulf of Mexico. Constitution is centered in Green Canyon block 680 in about 5,000 feet of water, putting it some 190 miles southeast of New Orleans. The center of Ticonderoga is in Green Canyon block 768, where it lies in 5,250 feet of water about five miles to the north of Constitution.

According to Kerr-McGee officials, the VAULT center was vital to the company’s choice of drilling paths for discovery, delineation and development wells in both fields, which tap Pliocene reservoirs at depths of 12,500-15,000 feet. As operator, Kerr-McGee holds 100 percent interest in Constitution and 50 percent interest in Ticonderoga, which it shares equally with Noble Energy Inc.

To develop Constitution, Kerr-McGee is building a 554-foot-long, 98-foot diameter truss spar in Finland to be installed later this year in block 680. The topsides production module, now under construction in a Texas fabrication yard, will accommodate five dry tree wells and one subsea tieback. Ticonderoga will be developed initially with two subsea wells scheduled for tieback to the spar late this year.

Combined production from both fields, expected to begin in mid-2006, will range up to 70,000 barrels per day of crude oil and 200 million cubic feet per day of natural gas, with Constitution delivering 40,000 bpd of the oil and 75 million cubic feet per day of the gas. After preliminary processing, the crude oil will enter a gathering system connected to the Cameron Highway Oil Pipeline System which makes landfall in Texas. Gas production from the two fields will enter the existing Anaconda Gathering System through a 16-inch export line to be built this summer by GulfTerra Energy Partners LP.

‘Massive’ data-handling abilities

Kerr-McGee geological consultant Paul Jaeger and geophysical consultant Beth Kendall, the discovery team for both fields, said the ease provided by the VAULT’s “immersive” environment and its multiple touch panel control stations allowed technical teams to examine the geological linkage between the two fields, as well as the density of their potentially productive formations, in three dimensions. The system’s ability to support engineering software also helped to identify drilling options for optimum field development, they said.

The center’s theater seating and conferencing capabilities, combined with two breakout rooms for more detailed data examination, allowed geoscientists and engineering specialists to put together a package to present to management for the ultimate field development decision.

Promoting North Sea farm-ins

The farm-in aspect of the deal stems from a new wrinkle in UK licensing. Operating companies are not the only ones acquiring leaseholds in the UK North Sea these days.

Veritas, which provides integrated geophysical, geological and reservoir technologies to the petroleum industry around the world, acquired the block in the February 2003 UK offshore licensing round under a “promote” option. A previously licensed block, it contains the abandoned Bladon oil field. However, Veritas says the acreage still has “significant potential prospectivity” identified by data it acquired in a long-offset 3-D seismic survey conducted last year.

The block is located amid Kerr-McGee’s core operations in the Central North Sea, where its major producing assets are led by the Leadon field, with Kerr-McGee holding 100 percent operating interest in the field’s oil production of 10,700 bpd. The company also has significant non-operating interests in the Harding, Tullich, Maclure, Gryphon, and Skene fields, among others in roughly the same area, as well as both operating and non-operating interests in producing oil and gas properties in other UK North Sea quadrants.

Terence Jupp, vice president and managing director of Kerr-McGee North Sea (UK) Ltd., said the deal with Veritas supports the company’s increasing scope of activity in the Central North Sea.

“The acquisition also demonstrates our full support of the UK Department of Trade and Industry’s initiatives that are seeking to place high-potential acreage in the hands of operators who carry out active exploration programs,” said Jupp.

In February 2003, the department introduced the 24-month promote option, under which successful bidders have two years to “add value” to licenses — through technical evaluations — before electing to continue for an additional two-year period with a prerequisite work commitment. The move was an attempt to draw new players to the North Sea and to slow a production decline then perceived to have been inevitable. Recent price-driven drilling activity has encouraged the department and its counterparts in other area nations to anticipate modest additions to new North Sea oil and gas reserves.

The Veritas/Kerr-McGee agreement depends on certain contractual conditions being met, as well as on governmental and regulatory approvals. Financial details were not released.