First production launched at Medusa

First production has finally begun from the Medusa oil and gas field in deepwater Gulf of Mexico, operator and 60 percent owner Murphy Oil said Dec. 1. Field startup was delayed for several months because of the effects of storms and other delays.

The Medusa development, located in 2,200 feet of water on Mississippi Canyon blocks 538 and 582, consists of a spar facility capable of handling 40,000 barrels of oil per day and 110 million cubic feet of natural gas. Agip’s Eni Petroleum holds a 25 percent interest in Medusa, and Callon Petroleum a 15 percent stake.

In early September, cash-strapped Callon worked out an unusual deal with Murphy and newcomer Oceaneering International that apparently helped the small independent meet its financial obligations at Medusa.

The three companies formed a limited liability partnership, a separate business entity that would hold a 75 percent interest in the $225-million Medusa production spar. Agip, which did not participate in the joint venture, retained its 25 percent in the both the spar and the underlying reserves.

Under terms of the LLC, Callon would contribute its 15 percent interest to the new company and retain 10 percent ownership. In return, it was to receive $25 million in cash plus additional proceeds through financing. Murphy would contribute about 20 percent of its stake to the LLC and get about $100 million and retain operatorship.

Oceaneering, known primarily as a service company providing deepwater equipment, was to invest $45 million to acquire a 50 percent ownership position in the LLC. Because the LLC involves the spar only, the company would have no direct stake in reserves or field production.