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Eastern Gulf operators move ahead on deepwater gas hub Allison says companies have banked enough gas reserves to make a go of it Petroleum News
A central production facility to handle natural gas from at least five deepwater discoveries in the remote Eastern Gulf of Mexico has moved a step closer to reality. Not only do the owners believe they have enough reserves to make a go of it, they are now bidding among themselves to see who gets to spearhead the project.
“The operators and their partners will have a seat at the table,” Jim Emme, vice president of exploration for Anadarko Petroleum, said during a Nov. 6 press briefing in Houston, Texas. “Everyone wants this to happen.”
Anadarko, which holds title to 38 exploration blocks and 17 identified prospects in the Eastern Gulf, currently owns and operates Jubilee, Atlas and Spiderman, three of the discoveries that likely would be included in the joint venture. Anadarko announced the Spiderman discovery Nov. 13.
“We don’t think any one of these discoveries is big enough to be a standalone or hub,” Robert Allison, Anadarko’s chief executive officer, told analysts at the Nov. 6 Merrill Lynch Global Energy Conference in New York. “But if you combine these with some of the announced discoveries made by other companies, we believe we have a real commercial project. We are already in talks with other companies to make this happen.”
Kerr-McGee operates Merganser and BHP Billiton operates Vortex, the other Eastern Gulf gas discoveries that would be part of the group. Kerr-McGee also holds an interest in Vortex, while Devon Energy holds an interest in Merganser and Vortex. Other players that would be included in the group are Spinnaker Exploration and Dominion E&P, Anadarko’s partners in Spiderman.
Allison said that “to advance the effort,” Anadarko plans to drill a delineation well at Jubilee this fall to confirm the discovery and to better evaluate its potential. “We’re pretty confident Atlas and Jubilee will be produced,” he said. Reserves required for seat at the table Emme said a joint venture agreement with the other field owners is a year to 18 months away and that others could join the group. “But they’re not going to get a seat at the table unless they have potential reserves,” he added.
Anadarko said four of the discoveries, not including Spiderman, have combined gas reserves of at least 500 billion cubic feet, enough to satisfy requirements for a commercial development that would be a long way from infrastructure and situated in water depths exceeding 7,000 feet.
Because the Eastern Gulf is thought to be largely gassy, the odds of additional discoveries to feed a central hub probably are better than even. Some 20 exploration plans have been filed with the U.S. Minerals Management since the region was reopened to leasing in late 2001. Another sale is scheduled for next month.
Discoveries to be included in the joint venture are situated within a large circle with a radius of 30 miles from the proposed hub in Atwater Valley. However, the boundary could be expanded to accommodate future discoveries, Emme said. Spiderman likely will be added to hub One prospect that is outside the circle but likely would be added to the hub is Spiderman, located in DeSoto Canyon northwest of Anadarko’s Atlas discovery in Lloyd Ridge and northeast of the company’s Jubilee discovery in Atwater Valley. Spinnaker characterized Spiderman as a “significant discovery” with more than 140 feet of net pay encountered in two primary targets.
Despite the remoteness, deep waters and great distances between the discoveries and the proposed hub, development of a predominantly dry gas project would be relatively inexpensive compared to a hub project involving oil. That’s partly because pipelines that carry dry gas can be stretched over longer distances.
However, by agreeing to pursue a joint development, the owners have resigned themselves to the fact that none of the four eastern gulf fields is commercial by itself.
That was also the case in the northern deepwater sector of the eastern gulf, where BP and other operators were able to tie together three relatively small fields — King’s Peak, Aconcagua and Camden Hills — into a successful project that today feeds about 500,000-million cubic feet of gas into the Canyon Express pipeline system. None of these fields by itself was considered to be commercial.
However, discoveries in the southern portion of the eastern gulf promise to be more challenging to develop employing the hub concept. For one, the fields are spread across a much broader area than Canyon Express. The fields also are situated beneath ultra-deep waters ranging up 9,000 feet or greater, where extreme pressures on subsea pipelines and equipment can be menacing.
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