|
EXPLORERS USA 2005: Independents join forces in deepwater Gulf Share high costs, benefits of exploration and development in risky deepwater Gulf of Mexico; participate in some of largest finds Ray Tyson Petroleum News Houston Correspondent
Independent exploration and production companies, largely through teamwork and a strong stomach for risky play, are learning to overcome the high cost of doing business in the deepwater Gulf of Mexico, once the exclusive domain of the major oil companies.
There is perhaps no better example than the Atwater Valley Producers Group, consisting entirely of independent producers who joined forces on what should be the deepest production in the Gulf of Mexico when the project comes online in 2007.
Group members Anadarko Petroleum, Kerr-McGee, Devon Energy, Spinnaker Exploration and Dominion Exploration and Production approved a $665 million budget for a central processing facility called Independence Hub and a pipeline called Independence Trail to service at least eight of their natural gas discoveries located in a remote area of the eastern Gulf of Mexico.
To further share project costs, marine construction company Cal Dive International took a 20 percent stake in the hub, while Enterprise Products Partners, a leading provider of midstream energy services, will own, install and operate the 140 miles of 24-inch pipeline that will deliver production from the hub into the Tennessee Gas Pipeline.
The 105 foot deep draft, semi-submersible Independence Hub platform, anchored in water depths of around 8,000 feet, will be capable of processing 850 million cubic feet of gas per day. The facility also will have excess payload capacity to tie back production from up to 10 additional fields. Independents production innovators Oklahoma-based Kerr-McGee, among the earliest and more successful independent explorers in the Gulf of Mexico, can at least share credit for initiating the cost-saving “hub-and-spoke” approach to deepwater exploration and development, beginning with the company’s Nansen-Boomvang complex in East Breaks, a project Kerr-McGee shares with another Oklahoma company and the largest independent in the United States, Devon.
In 2004, Kerr-McGee started production from its fifth operated hub through the world’s first cell spar at the Red Hawk field. Development began on its sixth operated hub, Constitution, with first production expected in mid-2006.
Meanwhile, Kerr-McGee’s other hub-and-spoke systems continue to grow. Boomvang added three sub-sea wells; the Dawson Deep field is being developed as a tieback to Gunnison; and Neptune began production from the Nile field in early 2005. In 2004, the company discovered Ticonderoga, which is to be tied back to Constitution.
“Kerr-McGee is focused on proven world-class hydrocarbon basins, in areas where significant discoveries have already been made but we still see the opportunity for a company like Kerr-McGee to come in and find additional meaningful discoveries and, if we have success, to have some running room around those discoveries” said David Hager, Kerr-McGee’s senior vice president of worldwide exploration and development.
Anadarko is another large independent which has adopted the hub-and-spoke style in the Gulf of Mexico, starting with its first deepwater discovery, Marco Polo in Green Canyon. The Marco Polo production facility, which came on stream in July 2004, was designed to serve as a hub to accommodate future production from satellite discoveries, which now include K2, K2 North and possibly Genghis Khan. The facility, which is owned by GulfTerra and Cal Dive and operated by Anadarko, was constructed to handle 120,000 barrels of oil a day and 300 million cubic feet of gas per day. Also party to major deepwater discoveries Exploration and production independents also have been party to major deepwater discoveries in the Gulf of Mexico, including Devon and Unocal, for example, in the “ultra-deepwater” Walker Ridge area, as well as other targets in the emerging lower tertiary trend, including St Malo, Cascade and Jack. Devon alone holds interests in more than 250 blocks, or almost 600,000 net acres, in the Alaminos Canyon, Keathley Canyon and Walker Ridge areas.
Other independents also have taken positions in some of the largest discoveries in deepwater Gulf of Mexico. For example, Australia’s BHP Billiton holds a 44 percent stake in the BP-operated Atlantis field in Green Canyon, while Canada’s EnCana has a 25 percent interest in Tahiti, also located in Green Canyon, as well as a 6.25 percent stake in St. Malo in Walker Ridge, a 25 percent interest in Jack in Walker Ridge, and a 25 percent stake in Sturgis in Atwater Valley. Thunder Hawk an independents’ prospect The all-independent team of Dominion, Murphy Oil, Spinnaker and Pioneer Natural Resources appear to have scored big at their Thunder Hawk prospect on the northeastern flank of the BP-operated Thunder Horse complex in Mississippi Canyon, the largest discovery ever recorded in the Gulf of Mexico. A sidetrack off the discovery well at Thunder Hawk encountered a respectable 300 feet of net oil pay in two reportedly high-quality reservoir zones. But the jury was still out on Thunder Hawk as the team prepared to drill an appraisal well in March. Preliminary reserve estimates ranged from 50 million to 150 million barrels of oil equivalent.
The same four independents teamed up in the March Central Gulf of Mexico oil and gas lease sale, out bidding two others to capture a prime block on the southwestern flank of Thunder Horse for $20.2 million, the second highest bid submitted in the sale.
In fact, independents placed the 10 highest winning bids in the entire Central Gulf lease sale, both in deepwater and in the relatively shallow waters of the gas-prone continental shelf, where a sale-high bid of $21.2 million was placed by Dominion and small independent Stone Energy for a block in West Cameron offshore Louisiana. Independents, mostly working in teams, submitted all eight bids on what turned out to be one of the most heavily contested blocks in Sale 194.
In addition to submitting the 10 highest bids in Sale 194, independents also were the clear leaders when it came to submitting total high bids in the sale. Dominion led the pack with $52.3 million in apparent total high bids that captured 25 blocks, followed in ranking by independents LLOG, Murphy, Spinnaker, Energy Partners, Focus Exploration and Remington Oil. Oil majors ChevronTexaco and ExxonMobil took eighth and ninth place, followed by another active independent, Magnum Hunter.
|
