July 2000 Vol. 221 No. 7  Offshore

Robert E. Snyder,  Editor

Gulf of Mexico, international news

Deepwater activity continues strong in the Gulf of Mexico. Operator Kerr-McGee Oil and Gas Corp., with 50% interest, and partners Canadian Oxy (30%) and Cal Dive International, Inc. (20%), announced an oil discovery on the Gunnison prospect on Garden Banks Block 668. The 17,000-ft well, located in 3,150-ft water, found some 275 ft of net pay. The well was drilled by Noble’s Amos Runner, which is now drilling a down-dip appraisal sidetrack. Several additional appraisals are being considered.

In other company news, the Gulf of Mexico Newsletter says Vastar Resources’ board of directors is recommending that its stockholders accept BP Amoco’s revised $83/share offer. BP Amoco acquired 81.9% of Vastar through its acquisition of ARCO. Acquisition of the remaining 18.1% is structured as a merger of a wholly-owned indirect subsidiary into Vastar and will not involve a tender offer.

The integration will move BP Amoco into the position of the GOM’s leading deepwater operator. It already operates 456 blocks in 1,500 ft of water, or deeper. Vastar operates 114 deepwater blocks. The combination will make BP Amoco operator of 570 GOM deepwater blocks, surpassing Shell’s 525, giving BP "top spot in the deepwater food chain," the Newsletter says.

ExxonMobil Corp. and Italy’s Eni, through its subsidiary Agip Petroleum Exploration Co. Inc., have entered into an agreement covering deepwater blocks in the GOM. Agip can earn 25% of ExxonMobil’s interest in up to 259 blocks by participating in the drilling of a minimum of 12 exploration wells over the next five years. The leases are offshore Texas, Louisiana and Mississippi in water depths ranging from 3,000 to 8,000 ft. ExxonMobil owns 100% interest in about two-thirds of the blocks and 50% in the remainder. Drilling is expected to commence later this year with ExxonMobil as operator.

And Dominion Exploration & Production, Inc., a subsidiary of Dominion, announced that it now has a 60% interest in the Devil’s Tower discovery in the GOM and will operate the deepwater project after completion of the first appraisal, which was scheduled in May. Dominion E&P, formerly CNG Producing, had a 30% interest in Devil’s Tower when the discovery in Mississippi Canyon Block 773 was announced in February. It acquired the additional 30% from Mariner Energy.

The project is located in 5,610-ft water, 140 mi SE of New Orleans. Mariner will retain a 20% interest. Other partners are Pioneer Natural Resources (15.8%) and Westport Oil and Gas Co. (4.2%).

International activity. During May, several important offshore discoveries were announced in the international arena. BP Amoco unveiled the discovery of an estimated 2 Tcf gas off the SE coast of Trinidad – the country’s first deepwater find, and BP’s third major gas find offshore Trinidad in the past three years. The 11,700-ft Manakin 1 discovery is located in Block 5b, 135 mi east of Galeota Point in 730-ft water. It was the second of a four-well program using Diamond’s Ocean America semi.

Cairn Energy announced a gas discovery offshore Gujarat in western India. Well CB-A-1, in Block CB-OS-2, tested a structure between Hazira and North Tapti fields, flowing at 28.1 MMscfd – estimated reserves are 400 bcf. With further appraisals, the objective is to bring gas into the Gujarat market before the end of 2001. Cairn is operator with 75%; partners are Tata Petrodyne Ltd (15%) and ONGC (10%).

Gulf Indonesia Resources Ltd. announced an oil discovery in the Northwest Natuna Block I Production Sharing Contract area located in the Natuna Sea, 38 mi north of the company’s production facilities. The well Gulf calls Ande Ande Lemut 1 reached a TD of 4,186 ft in April, logging oil pay and oil samples from four sands.

Marathon is trading its interest in the Sakhalin project off Russia’s east coast, north of Japan, with Shell Sakhalin Holdings. The Gulf of Mexico Newsletter says Shell will receive Marathon’s 37.5% stake in Sakhalin Energy Investment Co. in exchange for all of Shell’s 28% interest in Foinaven, west of the Shetlands, and a 3.5% overriding royalty on 100% of the production from eight blocks in the GOM, including Ursa field. In addition, Marathon will receive a reimbursement of expenditures made on the Sakhalin project this year.

The deal is subject to a number of conditions, including successful negotiations with remaining Sakhalin consortium members to allow Shell to provide both upstream and LNG services to Sakhalin Energy. Definitive agreements are expected to be signed in September. The deal will increase Shell’s stake in Sakhalin Energy to 62.5%; Mitsui & Co. holds 25%, and Mitsubishi Corp. 12.5%. Sakhalin has been producing oil since mid-1999. The next development phase will tap gas reserves, including an LNG plant.

Malampaya and CGS. Brown & Root Energy Services, a unit of Halliburton, said it has installed the 91,000-mt Malampaya Concrete Gravity Substructure (CGS) in 140-ft water, 30 mi offshore Palawan Island in the Philippines. Shell Philippines Exploration B.V. is the contractor to the Philippines government to develop the license area defined by Service Contract 38. In 1998, Shell awarded contracts to Brown & Root to design, procure, install and commission the Malampaya Platform.

The CGS is 112 m ´ 83 m ´ 16 m high and has four, 11-m-dia. shafts extending 40 m from the top of the caisson roof. It will be able to store 385,000 bbl of condensate, flowing continuously from the topsides during gas production. A shuttle tanker will off-load the liquid. In March 2001, the 10,500-mt topsides will be installed over the CGS to supply gas to power plants by October 2001.

The CGS was constructed at Green Beach, Subic Bay, in a specially built graving dock. To allow access to the open sea, a 12-m-deep channel was dredged. On May 16, seawater was started into the graving dock, and the CGS was floating by May 28. On June 1, after towout to the site, the structure was ballasted, allowing a controlled descent to the seabed.