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Newfield, Nexen shares climb on word of discovery Shell-operated Shark exploration well believed to have broken 25,000 foot barrier on Gulf of Mexico’s continental shelf Petroleum News
Exploration and production independents Newfield Exploration and Nexen saw their stock prices jump as word spread of a possible first “ultra-deep” gas discovery in the relatively shallow waters of the Gulf of Mexico’s continental shelf.
Nexen is a 40 percent owner of the Shell-operated Shark exploration well at South Timbalier 174, while Newfield’s look-a-like Treasure Island prospect is in close proximity to Shark.
Shell would not comment on Shark. However, industry sources said Jan. 21 that the well penetrated the elusive 25,000 foot barrier to become the first well to reach those depths on the continental shelf, where pressures and temperatures are said to be extreme. The well, drilled from Ensco’s 75 jackup rig, reportedly encountered pay on its way to touchdown around 26,000 feet.
In fact, sources believe the Shark well may have uncovered a significant reserve of up to 2 trillion cubic feet or more of gas and that Shell is preparing to drill a sidetrack off the main well bore to further test the prospect. Moreover, Shell reportedly ordered an exceptionally high pressure wellhead, indicating the possibility of a major gas discovery. Extension of structures in deeper waters The so-called ultra-deep zone is said to be an extension of giant structures that have produced large discoveries in deeper waters of the Gulf. Explorers have avoided the shelf’s ultra-deep zone primarily because of expense and other risks. Analysts had speculated it could cost up to $60 million and take at least six months to reach those depths at Shark. However, Shell is said to have reached its goal with relative ease, requiring only three months of drilling at a cost of less than $30 million.
Sources said there also may be a geologic connection between Shark and Newfield’s nearby Treasure Island acreage. Since partner BP decided against drilling an ultra-deep well there last year, Newfield has been shopping around for a new partner while continuing negotiations with BP, Newfield’s first choice to drill the well.
“We’re talking to several companies,” a spokesman for Newfield said. “This is a play type that the majors should be interested in.”
In addition to BP, ExxonMobil, BHP Billiton and possibly ChevronTexaco, Shark partner Nexen is said to be among companies bidding to drill a first ultra-deep well at Treasure Island. However, Newfield is anxious to drill before Treasure Island leases begin expiring in March 2005.
“Our primary goal is to get a well drilled to test the Treasure Island prospect in 2004,” the Newfield spokesman said. “We would have to strike a new deal with BP or with another party to come in and sign a similar deal.”
Under its initial agreement with Newfield, BP had to spud a well by the end of 2003 or relinquish its 75 percent interest in the 27 blocks that make up Treasure Island to 25 percent owner Newfield. Although BP obviously missed the deadline, Newfield said it is trying to negotiate a new deal with the major.
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