February 1999 Vol. 220 No. 2  Production

J. John Grow,  Engineering Editor

Deep water: still a good investment

With the price of oil near ten-year lows, deepwater projects are still held as moderately good investments for oil companies. At least most O&G experts still believe that deepwater exploitation is plausible. This column looks at what Shell plans with deepwater projects, a recent GOM development, first production from Baldpate field and a record-setting perforating depth.

Deepwater projects will continue. Shell plans to continue about 20 deepwater projects worldwide this year while increasing deepwater gas production and selectively adding acreage in the GOM.

Shell currently has about 20 deepwater projects under way or pending worldwide, officials said at the World Energy Council gathering in Houston.

Shell Deepwater Development has the biggest number of deepwater federal leases in the Gulf of any producer (about 20% of the total acreage leased so far). But that doesn’t necessarily mean the GOM will be favored over other international prospects.

Production costs must be kept low to provide an adequate profit margin on deepwater operations. Shell has done that by reducing development time for deepwater projects to an average 60 months (from award of a lease to initial production) compared to a 150-month time cycle in the late 1970s. Deepwater projects are keyed more to price expectations 5 to 10 years in the future, when they’ll come onstream.

Deepwater operations are still attractive, even at today’s lower commodity prices, because of much larger fields being found in the GOM deep waters and other areas. Shell has been actively drilling in water depths beyond 6,500 ft for more than 15 years. It produces more gas and oil in water depths beyond 1,600 ft than any other company. It also has more people, in more locations, studying the world’s oceans than any other producer. That includes a team of more than 2,000 deepwater specialists — environmental and safety experts, oceanographers, geologists, geophysicists and engineers.

First 15,000 psi subsea well. TOPS’ Gyrfalcon development, located in GOM’s Green Canyon Block 20, was originally drilled by Shell Offshore, March 1997, in 880 ft of water in Shorts field. The subsea facilities installation team includes Cameron Division, Cooper Cameron; FSSL Controls; Kvaerner Oilfield Products; Sonsub International; and Cal Dive International(CDI).

Cameron will provide the subsea tree which will be hydraulically controlled. CDI’s MSV Uncle John will install the flowline and Coflexip Stena Offshore will supply steel-tube umbilical.

Total Offshore Production Systems (TOPS), a JV formed by Reading & Bates Corp., and INTEC Engineering, Inc., focuses on providing complete field developments and services to operators for contract field developments through a single entity. TOPS was structured in 1996 with the intent of pursuing deepwater offshore developments, on a worldwide basis, with a group of preferred contractors and manufacturers.

Baldpate first production from field in GOM. Amerada Hess has begun crude and natural gas production from the first well in Baldpate field, Garden Banks Block 260, in the GOM. Production from the first well is being increased from an initial rate of 2,000 bpd and 8 MMcfgd. Six additional wells are planned to be brought onstream by the end of first quarter 1999. Also, there are plans to tie in two wells from Penn State Satellite, Garden Banks Block 216 to Baldpate facilities later this year.

Production is expected to peak during first half 1999, at a gross rate of 50 Mbpd and 150 MMcfgd. Facilities for Baldpate field include a compliant tower which is the world’s tallest free-standing structure offshore (1,902 ft tall, installed in 1,650 ft of water).

Industry’s 50-in. perforating barrier shattered. Schlumberger Oilfield Services takes a significant step forward in oil well perforating technology. PowerJet, Schlumberger’s new-generation, high-performance shaped charge system, has set a new API record, shattering industry’s 50-in. perforating barrier by shooting 54.1-in. into an API RP43 section-1 test target with a 4-1/2-in. HSD gun. This beats the previously held record by nearly 5-in. and firmly establishes a new option in perforating systems and shaped charge performance.

Well production is enhanced by penetrating deeper into hard formations at higher shot densities; shooting farther past formation damage and intersecting more natural fractures helps to significantly increase O&G production.

Since the early 1950s, Schlumberger has led the way in well perforating technology. In 1966, the first casing perforating charge with powdered metal liners was introduced. In 1980, Ultrajet premium charges offered industry a 15 to 20% increased depth of penetration. In 1995, industry’s deepest perforator (penetrating 47.3-in.), the 51J Ultrajet, was introduced.

PowerJet charges are currently available for 2-1/8-in. Enerjet guns (HMX and HTX); 21D8-in. Enerjet Expendable guns; 111D16-in. Pivot Guns and most HSD guns.

Proved reserves increase in 1998. Mobil replaced 165% of its O&G production with new proved reserves in 1998. Over the past three years, the company has replaced, on average, 148% of its production. Excluding purchases and sales, replacement for 1998 reached 169%, at an average finding and developing cost of about $3.70/bbl; and over the last three years about 130% of production was replaced at about $4.20/bbl.

Mobil’s proved reserves at year-end were 7,585 million barrels of oil equivalent (MMboe), up 408 MMboe from 1997. Production was 625 MMboe for 1998 resulting in a reserves to production ratio (reserve life) of just over 12 years.

Copyright © 1999 World Oil
Copyright © 1999 Gulf Publishing Company