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Kerr-McGee forecasts more oil from Gulf on strong results from Nansen field
Ray Tyson Petroleum News Houston Correspondent
Deepwater player Kerr-McGee has raised its 2004 third-quarter oil production forecast for the Gulf of Mexico by as much as 10 percent because of a surprisingly strong performance from the company-operated Nansen field on East Breaks Block 602.
Earlier projections had called for Kerr-McGee’s total production in the Gulf of Mexico to average between 52,000 and 56,000 barrels per day during the current quarter ending Sept. 30. That outlook has now been increased to a range of 58,000 to 62,000 barrels per day, a daily 6,000 barrel spike on the upside of the range that presumably is coming largely from Nansen. Performance from deeper oil sands “Performance from the deeper oil-bearing sands continues to exceed our expectations,” Rick Buterbaugh, Kerr-McGee’s vice-president of investor relations, said Aug. 25 in a third quarter interim conference call. “Therefore we have increased our projected oil volumes in the Gulf for the third quarter.”
In fact, Nansen is performing so well on the oil side that Kerr-McGee and 50 percent partner Devon Energy have “intentionally delayed” the re-completion of wells into shallower gas zones until this year’s fourth quarter, Buterbaugh said.
“This increases the overall value of the Nansen field, but accordingly reduces the near-term gas volumes,” he explained. Proved reserves jump to 200 million BOE The original project was sanctioned in 2000 on a gross proven reserve base of 55 million barrels of oil equivalent and a gross proven plus probable resource of about 120 million barrels of equivalent. But following development drilling, the addition of Navajo field satellites, and better than anticipated production performance, Kerr-McGee said it now expects to produce more than 200 million barrels of equivalent proven and probable resources.
Production through the Nansen truss spar at mid-year 2004 was averaging about 30,000 barrels of oil per day and 165 million cubic feet of natural gas per day.
“Individual wells and reservoirs have generally performed well above expectations,” Kerr-McGee spokeswoman Debbie Schramm said.
Kerr-McGee achieved first production at Nansen in early 2002. The field, located in 3,700 feet of water, was developed with the world’s first truss spar. Production is derived from nine Nansen dry-tree wells on the spar and six sub-sea wells of which three produce the Nansen field and three produce the Navajo satellites. Having less luck at Boomvang field and elsewhere However, Kerr-McGee is having less luck bringing into production two recently drilled and completed satellite development wells at its Boomvang field, located just nine miles from Nansen in East Breaks. Installation of a sub-sea pipeline to service the wells has been delayed a month because of damage to a pipe laying vessel enroute to the field, Buterbaugh said. He said first production from the wells is now expected during the fourth quarter.
The company also has encountered gas production snags or temporary delays elsewhere, including the Wattenberg field in northeastern Colorado, the Greater Natural Buttes area in northeastern Utah and the Skene field in the North Sea, where gas production will be shut during September to upgrade a compressor that should extend the field’s life.
Kerr-McGee is experiencing some higher condensate at Wattenberg and therefore lower gas yields, Buterbaugh said. In the Greater Natural Buttes area, gas volumes are “constrained” due to plant maintenance at the main station, he said, adding that the plant turnaround was expected to be completed by Sept. 1.
Adding insult to injury, roughly 1,000 barrels per day of oil equivalent were lost in the third quarter from Kerr-McGee’s Red Hawk and Neptune fields due to pipeline shutdowns as hurricanes Bonnie and Charley swept through the Gulf of Mexico in early August. Ahead of schedule at China’s Bohai Bay On a brighter note, Buterbaugh said oil production from China’s Bohai Bay is ramping up ahead of schedule with the first two cargoes successfully offloaded from the FPSO, or floating production, storage and offshore loading system. The company also was expecting the millionth barrel of production on Aug. 25, just five weeks after field startup.
Moreover, current oil production of 25,000-30,000 barrels per day from Bohai Bay is expected to increase to 35,000 barrels per day in the fourth quarter as additional development wells come on steam, Buterbaugh said. Also, he said gas production from the company’s Red Hawk field in the Gulf of Mexico, launched in mid-July, already has ramped up to a full rate of 120 million cubic feet per day.
All the ups and downs in production have caused Kerr-McGee to alter its forecasted oil-gas mix for the third quarter while maintaining previous guidance of 333,000 to 360,000 barrels per day of combined equivalent production for the period.
The company is now projecting slightly higher oil production of 156,000-170,000 barrels per day and slightly lower gas production of 1.060-1.140 billion cubic feet of natural gas per day during the current quarter.
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