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Marathon backs off deepwater program String of dry holes prompts company to “de-emphasize” GOM exploration Petroleum News Houston Staff
A string of dry holes apparently has led Marathon Oil to back away from its deepwater exploration program in the Gulf of Mexico, a core producing area for the company.
Marathon CEO Clarence Cazalot reportedly told industry analysts April 2 in New Orleans, La., that Marathon was going to remain a deepwater player in the Gulf but would “de-emphasize” the region.
Earlier the Houston-based company had planned to drill three or four deepwater wells in the Gulf this year. But the first two wells — Komodo in the Central Gulf and Barracuda in the Eastern Gulf — came up empty and were plugged and abandoned. Those were preceded by disappointments at prospects Kansas, Paris Carver, Flathead and Timber Wolf.
Even its touted Ozona Deep discovery, with initial estimated oil reserves of up to 100 million barrels, has been called into question. Marathon said in its 2002 annual report that two sidetracks drilled last year showed Ozona Deep “to be a smaller, more complicated accumulation than anticipated.”
Marathon, under fire from analysts for its poor deepwater record in the Gulf, has provided few details on its future drilling plans there. Marathon held interests in 155 Gulf blocks at year-end, including 122 located in deepwater.
However, Cazalot indicated that the company would become less active in deepwater Gulf and more active in offshore areas of the world where Marathon has been more successful, primarily Angola and Nova Scotia.
But some analysts believe that Marathon’s faltering deepwater program in the Gulf may have a significant impact on company production down the road. Last year acquisitions accounted for 207 million barrels of the 390 million barrels of new reserves booked. Few U.S. discoveries And only 58 million of the 183 million barrels of additional reserves that came primarily through discoveries are located in the United States, mainly in Alaska, the Powder River Basin and Rocky Mountain region.
Marathon’s own estimates call for its worldwide daily production this year to average 390,000-to 395,000 barrels of oil equivalent, compared to about 413,000 barrels of oil equivalent last year. The projected decline was partly attributed to uncertainty over field development at Ozona Deep in the Gulf.
Company net production in the Gulf also fell last year to a daily average of 62,500 barrels of liquids and 103,000 million cubic feet of natural gas. Marathon attributed that drop to bad weather, well interventions and natural field decline. Deepwater Gulf last year accounted for 93 percent of Marathon’s total Gulf production.
Marathon has had deepwater successes in the Gulf, including its recent Camden Hills development in Mississippi Canyon on the eastern edge of the Central Gulf. It became part of the Canyon Express project connecting Camden Hills, Aconcagua and Kings Peak via a 500,000-million-cubic-foot capacity gas pipeline.
The company also had a successful appraisal well at the BHP-operated Neptune unit in the Central Gulf, a prospect that Marathon bought into. Neptune lies on the same Atwater Fold belt that spawned BP’s successful Mad Dog and Atlantis discoveries, now in development.
However, the Marathon-operated Komodo and Kansas prospects, also said to be located on the Atwater Fold and near Neptune, turned out to be disappointments for Marathon and its partners.
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