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Down to three options Mounting discoveries in Eastern Gulf of Mexico raise prospects for multiple production hubs Ray Tyson Petroleum News Houston Correspondent
Eastern Gulf of Mexico operators, as natural gas discoveries continue to mount in the region, have narrowed their original 48 development options for a central production facility to just three alternatives. But they disagree whether the hub should be located in the northern or southern portion of the development area, or possibly in the middle.
Nonetheless, the key players are now in general agreement that a final plan should be in place by year-end and production launched in the 2006-2008 time frame.
“It’s somewhat complex with a number of companies involved,” said Dave Hager, Kerr-McGee’s head of exploration and production. “I will tell you that we will reach a development solution sometime this year.”
Some operators are even discussing the possibility of building more than one hub in the remote Eastern Gulf where water depths exceed 7,000 feet.
“There’s certainly enough gas out there to justify more,” said Mark Pease, Anadarko Petroleum’s vice president of onshore and offshore operations. “There continues to be discoveries out there.”
However, recent discoveries and confirmations in the northern portion of the Eastern Gulf sale area, reopened to oil and gas leasing in late 2001, clearly have changed plan dynamics in terms of hub location.
For one, the Spiderman and recently announced San Jacinto discoveries in DeSoto Canyon alone hold estimated combined reserves of around 500 billion cubic feet of natural gas equivalent, said Roger Jarvis, chief executive officer of Spinnaker Exploration, a partner in both discoveries.
“Any additional success in this area adds weight to development options to the north,” he said. “We believe increasingly that this area of the Gulf should be developed with its own hub. We’re not ruling out a facility to the south. But we’re going to have to have a compelling economic argument to go down there.”
Spinnaker and partners now will move on to test two prospects north of the Spiderman-San Jacinto, each with possible reserves of 150 to 300 billion cubic feet of gas equivalent, Jarvis said.
“Anything we add to this area now should be highly economic, really gravy attached to these two larger fields,” he added. “We think there is a lot of potential in the Eastern Gulf.”
Kerr-McGee, a partner in the San Jacinto discovery and its estimated reserves of 90 to 180 billion cubic feet of gas, said it plans to drill a wildcat at its West Raptor prospect on DeSoto Canyon Block 445 later in this year’s second quarter. West Raptor could hold 20 to 40 million barrels of oil equivalent reserves, the company said.
“If successful, this could also be part of the Atwater Valley development area,” Hager said. Kerr-McGee already holds a stake in the Merganser and Vortex discoveries, located in Atwater Valley just out side the western boundary of the Eastern Gulf sale area. Devon Energy has an interest in both discoveries, while Australia’s BHP Billiton operates Vortex. Anadarko chief advocate for southern hub Anadarko appears to be the chief advocate for a southern hub, where its 100 percent Jubilee, Atlas and Atlas Northwest discoveries are located. The company, which holds title to 38 exploration blocks and 17 identified prospects in the Eastern Gulf, also happens to operate Spiderman to the north with a 45 percent interest.
“With additional discoveries up north, we’re now looking at a couple of other options,” Pease said. “And we’ll just have to work through the economics of those options. We can do a smaller hub just with the volumes down in the south. If you decided to split and go north with the Spiderman volumes, what you end up with is two smaller facilities.”
Some 20 exploration plans have been filed with the U.S. Minerals Management by various operators since the region was reopened to leasing.
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