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Another rare production test planned Second test for Gulf’s risky Lower Tertiary: Chevron to test on Walker Ridge; Devon to test Cascade By Ray Tyson Petroleum News Contributing Writer
A second rare and no doubt expensive production test is in the works for next year to help determine the commercial worthiness of several new frontier oil discoveries in the Gulf of Mexico’s highly praised but remote and financially risky Lower Tertiary trend.
It was learned in August that Chevron planned to conduct a “full-scale” production test next year at its operated Jack discovery in Walker Ridge. Jack is on the same Lower Tertiary trend as two other undeveloped Walker Ridge discoveries, Cascade and St. Malo.
Devon Energy chief executive Larry Nichols, whose company holds interests in all three discoveries, has now disclosed that Devon and partner BHP Billiton are looking to conduct a separate Lower Tertiary production test at Cascade.
“We have gotten very confident that we’re not only going to be able to do one but two production tests,” Nichols said Nov. 3 at the Merrill Lynch energy conference in New York. “Chevron will do one on Jack, and BHP and Devon will do one on Cascade.”
Billions of dollars in partner investment to develop Jack, St. Malo and Cascade could hang on the outcome of the two tests. St. Malo, perhaps the largest of the three discoveries with more than 450 feet of net oil pay, is located between Jack and Cascade.
“These will be the first (Lower Tertiary) production tests … and they will answer a lot of unanswered questions that confirm the economics of the play, or the lack thereof,” Nichols said. Production tests could run $30 million or more Explorers hardly ever resort to deepwater flow testing to determine a reservoir’s productivity, largely because of the huge expense and the time required to prepare for one. A full-scale production test, such as the ones planned for Jack and Cascade, could run $30 million or more, according to analysts.
Industry argues that flow testing in deepwater today is largely unnecessary with today’s sophisticated seismic technology and downhole tools that can provide accurate readings on fluids, pressures and other reservoir characteristics.
However, with billions of dollars in development riding on such a high-stakes venture as the untested Lower Tertiary, “you want to make sure you’re right,” Devon President John Richels said last September. “That’s not just for us. That’s for everyone playing in the trend.”
In addition to Chevron, Devon and BHP, Petrobras, EnCana, ExxonMobil and Eni hold varying interests in some or all of the three Lower Tertiary discoveries. Discoveries remote, deep Jack, St. Malo and Cascade are far removed from the Gulf’s nearest pipeline system. Water depths in the area run around 7,000 feet and well depths can reach 30,000 feet from the ocean surface. The Jack discovery well alone reached a total depth of 29,000 feet, followed by an appraisal well that was headed to 30,000 feet.
“The Lower Tertiary is the only part of the United States that is really underdeveloped,” Nichols said at the Merrill Lynch conference, explaining that it wasn’t until about five years ago that industry had the necessary seismic studies and rig capability to drill to such extreme depths in the Gulf.
“We have drilled five different prospects with three of them being successful,” Nichols noted. “So, no one in industry has actually produced one of these.”
As risky as it is, the 140-mile Lower Tertiary trend is believed to hold from 3 billion to 7 billion barrels of oil potential.
“There are 300-to 500-million-barrel type fields that could be larger,” Nichols said, adding that Devon has seismic studies on 23 additional Lower Tertiary prospects, excluding the current three discoveries. “We’ve already identified those.” Cascade, Jack tests planned for 2006 Nichols said the production tests at Cascade and Jack are planned for the first and second quarters of 2006, with results ready to announce in late summer or early fall of 2006. “If they work, we have a very large inventory and this could be the resource play of all resource plays,” he said.
Shell, BP and Marathon own the Walker Ridge Stones discovery, also located on the Lower Tertiary trend, between St. Malo and Cascade. However, it was unknown whether these companies would participate in the Jack or Cascade production tests.
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