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More discoveries wanted for hub Kerr-McGee looking at 15 prospects in what would be the deepest, most remote Gulf of Mexico development with water depths in range of 8,000 feet Petroleum News Houston Staff
Exploration and production independent Kerr-McGee is trying to string together enough discoveries to support what could be the deepest and most remote development in the Gulf of Mexico.
In addition to its Merganser and Vortex discoveries, Oklahoma-based Kerr-McGee says it needs a few more finds to create a “hub-and-spoke” type development in an area of far east Atwater Valley where water depths hover around 8,000 feet.
“I’m confident that we can, with drilling a couple more prospects, come up with a development solution for the area,” Dave Hager, Kerr-McGee’s senior vice president of exploration and development, said April 30 in a conference call with analysts.
The good news is that Kerr-McGee now believes it can launch development with natural gas reserves of less than 1 trillion cubic feet of gas equivalent, a lower threshold than the high end of previous estimates.
In fact, with Merganser and Vortex alone, the project likely already meets Kerr-McGee’s minimum commercial standard, the company said. But that is not sufficient considering the financial risks associated with the ultra-deep, the company added.
“We really need a couple more wells to determine what is optimal,” Kerr-McGee CEO Luke Corbett said. “We will drill a couple more wells before the end of the year.” Distance, fluid type also factors The actual distance between discoveries also would play a role in what development concept is selected, as well as the “fluid type” of liquids in the predominantly dry gas reservoirs so far found, the company said.
Kerr-McGee would not disclose exactly where the next exploration wells would be drilled, but did say there are 15 prospects in the area from which to choose. Merganser is situated on Atwater Block 37, about a dozen miles northwest of Vortex on Block 261.
Last year Kerr-McGee and long-time deepwater partner Ocean Energy, recently merged into big independent Devon Energy, doubled their acreage position to more than 60 blocks in Atwater Valley through a property swap with Australia’s BHP Billiton.
Kerr-McGee and Ocean exchanged 33 percent of their interests in 20 Atwater Valley leases and 50 percent in two leases in adjacent Lloyd Ridge, for 50 percent of BHP’s interest in 32 leases and 25 percent of BHP’s interest in two leases, all in Atwater Valley.
That deal provided Kerr-McGee and Ocean with a much larger base to build on their Merganser discovery and its estimated reserves of 200-to 400 billion cubic feet of gas equivalent. Reserve estimates for Vortex have not been disclosed.
On announcing the Merganser find in April 2002, operator Kerr-McGee said it had a goal of creating an Atwater Valley operating hub similar to its operated Nansen and Boomvang complex in East Breaks, in which several fields and satellites are tied together.
The effort will be more challenging in Atwater Valley, which is farther from shore than Nansen-Boomvang and in 7,900 feet of water versus 3,500 feet. Merganser, the apparent centerpiece of an operating hub in Atwater Valley, is 180 miles southeast of New Orleans and a long way from the nearest pipeline system in the gulf.
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