Offshore Source- February 2010 : Page 1
www.OffshoreSource.com News for the U.S. Offshore Energy Industry February 2010 Headlines: U.S. drilling takes dive in ‘09 Fewer oil and gas wells were drilled in the United States in 2009 than in 2008, but the pace of activ- ity grew during last year’s final six months, the American Petroleum Institute reported. However, completed wells were still down by 37% ..... Page 7 Central Gulf sale proposed The U.S. Minerals Management Service has proposed Oil and Gas Lease Sale 213 for the Central Gulf of Mexico be held on March 17 in New Orleans, Louisiana. The sale encompasses 6,800 unleased blocks covering more than 35.9 million acres offshore Louisiana, Mississippi, and Alabama ..... Page 9 Wind buoy test successful Catch the Wind Ltd. said field trial tests of the WindSentinel, a wind resource assessment buoy mounted with the company’s Vindicator Laser Wind Sensor (LWS), have been successfully completed by AXYS Technologies Inc. in the coastal waters of British Columbia ...... Page 13 Services Co. recently set a world record for cementing the longest solid expandable tubular liner for an operator in the Gulf of Mexico. The 6,935- foot (pre-expansion length) 7 5/8-inch liner was set and suc- cessfully cemented with a shoe depth below 20,000 feet. BJ faced bottomhole static temperatures of 368 degrees F ....Page 9 BJ sets world record in U.S. Gulf of Mexico BJ Volume 12—Number 2 JACKPOT! Davy Jones strike points to bonanza on U.S. Gulf shelf U.S. independent producer McMoRan Exploration Co. believes it has confirmed through a major discovery what much larger, better financed explorers have suspected and salivated over for years -- the presence of an extremely deep, massive and poten- tially lucrative natural gas play thought to underlie a significant portion of the U.S. Gulf of Mexico’s Outer Continental Shelf. In characterizing the recently disclosed Davy Jones discovery, McMoRan Co-Chairman James “Jim Bob” Moffett declared in a Jan. 11 conference call with financial analysts: “The whole landscape of the subsurface geology of the shelf is being reshaped.” Davy Jones itself, which could prove to be the largest gas dis- covery on the shelf in decades, appears to be but a small slice of a very big pie, known as the Wilcox sands. Moreover, on McMoRan’s 150,000-acre “ultra-deep” shelf position alone, the com- pany said it has a dozen more drill-ready prospects based on seismic studies and ini- tial data recovered from Davy Jones and an earlier McMoRan ultra-deep well, Blackbeard. McMoRan now plans to deepen the Blackbeard discovery well thousands of feet into the Wilcox, in light of successful drilling at Davy Jones, located in just 20 feet of water on South Marsh Island Block 230. To keep McMoRan’s ambitious explo- ration and development programs on track, the company is considering adding a third jack-up rig to its current drilling fleet, to Rowan Mississippi join the Rowan Mississippi and the Ralph Coffman. McMoRan believes that the prospects on its ultra-deep acreage contain mul- tiple trillions of cubic feet of reserve potential. A discovery with at least 1 trillion cubic feet of confirmed reserves is generally con- sidered to be a world-class field. Thus far McMoRan data indicate that the same Wilcox sands penetrated by Davy Jones in shallow waters of the U.S. Gulf shelf See DAVY JONES page 12 Report forecasts boom in AUVs Douglas-Westwood projects through its “most likely” scenario that 1,142 autonomous underwater vehicles (AUVs) will be required over the next decade, consisting of 394 large, 285 medium and 463 small units. Some 629 AUVs have been produced to date. The forecast, con- tained in the firm’s second edition of “The World AUV Market Report,” would result in a total market value of $2.3 bil- lion, of which $1.1 billion would come from military sector expenditure. However, the report’s “high case” sce- nario predicts that there may be a requirement for 1,870 units, correspon- ding to a total market value of $3.8 bil- lion over the 2010-2019 forecast period. The report segments AUV numbers by type and application. Oil consumption to remain steady U.S. oil demand reached a high of 20.8 million barrels per day in 2005, and oil consumption is forecast to remain “near” its current level of about 19 million barrels per day through 2035, the Energy Information Administration (EIA) said. “We do not think it will go back to what previous levels have been,” EIA Administrator Richard Newell said at a briefing on the agency’s new long-term energy forecast. Globally, crude oil demand is expect- ed to grow 1% a year over the period to 2035, rising to 111.7 million barrels per day from 2009’s level of 84.5 million barrels per day, the agency said. World oil consumption will reach 106 million barrels per day in 2030, the EIA said. EIA’s estimate is in line with the See U.S. OIL DEMAND page 15 Oil Patch Headlines • Exploration & Drilling • GOM Activity • Supplier News • Offshore At-A-Glance Discoveries • Ships & Rigs • Alternative Energy • Stock Watch • World News • Technology Report See Page 18 See Page 19
Headlines
Jackpot !
Davy Jones strike points to bonanza on U.S. Gulf shelf
U. S. independent producer McMoRan Exploration Co. Believes it has confirmed through a major discovery what much larger, better financed explorers have suspected and salivated over for years -- the presence of an extremely deep, massive and potentially lucrative natural gas play thought to underlie a significant portion of the U.S. Gulf of Mexico’s Outer Continental Shelf.
In characterizing the recently disclosed Davy Jones discovery, McMoRan Co-Chairman James “Jim Bob” Moffett declared in a Jan. 11 conference call with financial analysts: “The whole landscape of the subsurface geology of the shelf is being reshaped.” Davy Jones itself, which could prove to be the largest gas discovery on the shelf in decades, appears to be but a small slice of a very big pie, known as the Wilcox sands.
Moreover, on McMoRan’s 150,000-acre “ultra-deep” shelf position alone, the company said it has a dozen more drill-ready prospects based on seismic studies and initial data recovered from Davy Jones and an earlier McMoRan ultra-deep well, Blackbeard. McMoRan now plans to deepen the Blackbeard discovery well thousands of feet into the Wilcox, in light of successful drilling at Davy Jones, located in just 20 feet of water on South Marsh Island Block 230.
To keep McMoRan’s ambitious exploration and development programs on track, the company is considering adding a third jack-up rig to its current drilling fleet, to join the Rowan Mississippi and the Ralph Coffman. McMoRan believes that the prospects on its ultra-deep acreage contain multiple trillions of cubic feet of reserve potential. A discovery with at least 1 trillion cubic feet of confirmed reserves is generally considered to be a world-class field.
Thus far McMoRan data indicate that the same Wilcox sands penetrated by Davy Jones in shallow waters of the U.S. Gulf shelf Extend more than 100 miles south into deep water, where major discoveries such as Anadarko’s Shenandoah and BP’s Tiber have been made, and several hundred miles east and west of the Davy Jones discovery, where literally thousands of wells have been drilled and produced over the years from shallower hydrocarbon-bearing horizons.
“We’re now very confident about not just the Davy Jones and Blackbeard prospects, but all the other prospects that we tied together on this 3D seismic data base is just spot on,” Moffett said.
After announcing the Davy Jones discovery at 28,263 feet with pipeconveyed wirelogs to 28,234 feet, McMoRan planned to deepen the well to 29,000 feet to search for additional Wilcox sands. Blackbeard, located on South Timbalier Block 168 southeast and downdip of Davy Jones, would be extended down into the Wilcox below 34,000 feet, rivaling some of the deepest wells ever drilled on Planet Earth.
Rights to the Blackbeard prospect, drilled to 30,067 feet but abandoned in 2006 by then operator ExxonMobil because of problems with the high temperatures and pressures, were acquired by McMoRan from Newfield Exploration in August 2007, as part of a $1.1 billion property acquisition package that included other U.S. Gulf shelf properties. McMoRan then deepened the Blackbeard well to around 33,000 feet, short of the Wilcox. Still, Moffett said in October 2008 that the prospect could hold several billion barrels of oil equivalent.
The wireline log results from Davy Jones indicated a total of 135 net feet of hydrocarbon bearing sands in four zones in the Wilcox section of the Eocene-Paleocene. All of the zones were full to base with two of the zones containing a combined 90 net feet, McMoRan said, noting that the Eocene- Paleocene (Wilcox) suite of sands logged below 27,300 feet “appears to be of exceptional quality.” “The results from this well will be incorporated into our models as we continue to define the potential of this promising new exploration frontier,” Moffett said of its other Wilcox prospects.
Because of chemical changes that affect hydrocarbons under extreme heat and pressure, most of the Wilcox sands on McMoRan ultra-deep acreage are expected to produce dry gas, the company said.
In spite of McMoRan’s obvious confidence, the areal extent of the Davy Jones discovery and its ability to commercially produce has yet to be determined. This will require a flow test, plus the drilling of at least one “confirmation” well some distance from the initial well to “prove up” the discovery.
“That first confirmation well is going to be so dang gum important to us,” Moffett emphasized.
Nevertheless, McMoRan has begun laying the ground work for an aggressive development at Davy Jones, one that could see an initial 10 production wells to begin draining a massive reservoir on the 20,000-acre prospect. The gas would be fed via flowlines from the wells to a central production facility on the shelf capable of processing at least 1 billion cubic feet, based on McMoRan’s roughly 100 million cubic feet per day of estimated output per well.
This means Davy Jones could surpass the daily production and equal the facility capacity of the “ultradeepwater” Independence Hub, currently the largest natural gas producer in the U.S. Gulf at around 700 million cubic feet per day and 1 billion cubic feet of facility capacity.
Davy Jones development will carry a hefty price tag. Moffett estimates that each well would cost around $100 million to drill and from $50 million to $75 million to complete, meaning the initial well package, not including additional wells, materials, equipment and production facility, alone would cost between $1.5 billion and $1.75 billion. Fortunately, money to finance development is generally much easier to round up than for more risky exploration drilling.
“But my guess is that we will see a lot of presentations from the financial community that are willing to get involved in the development of this,” Moffett said. “We’re going to get these wells on production in the next year (to) a year and a half.” McMoRan operates the Davy Jones prospect and is financing
25. 7% of the exploratory costs and holds a 32.7% working interest and
25. 9% net revenue interest. Other working interests owners in Davy Jones are Plains Exploration & Production Co. With 27.7%, Energy XXI with 15.8%, Nippon Oil Exploration USA Ltd. With 12%, W.A. “Tex” Moncrief, Jr. With 8.8%, and an unidentified private investor with 3%.
Report Forecasts Boom In AUVs
Douglas-Westwood projects through its “most likely” scenario that 1,142 autonomous underwater vehicles (AUVs) will be required over the next decade, consisting of 394 large, 285 medium and 463 small units.
Some 629 AUVs have been produced to date.
The forecast, contained in the firm’s second edition of “The World AUV Market Report,” would result in a total market value of $2.3 billion, of which $1.1 billion would come from military sector expenditure.
However, the report’s “high case” scenario predicts that there may be a requirement for 1,870 units, corresponding to a total market value of $3.8 billion over the 2010-2019 forecast period.
The report segments AUV numbers by type and application.
Oil Consumption To Remain Steady
U. S. oil demand reached a high of
20. 8 million barrels per day in 2005, and oil consumption is forecast to remain “near” its current level of about 19 million barrels per day through 2035, the Energy Information Administration (EIA) said.
“We do not think it will go back to what previous levels have been,” EIA Administrator Richard Newell said at a briefing on the agency’s new long-term energy forecast.
Globally, crude oil demand is expected to grow 1% a year over the period to 2035, rising to 111.7 million barrels per day from 2009’s level of 84.5 million barrels per day, the agency said.
World oil consumption will reach 106 million barrels per day in 2030, the EIA said. EIA’s estimate is in line with the International Energy Agency’s longterm global energy forecast released in November, which estimated demand would rise to 105 million barrels per day by 2030.
IEA is the energy adviser to 28 developed countries.
U. S. energy consumption is expected to increase 14% by 2035, but the nation will rely less on oil and other fossil fuels, according to the EIA.
The fossil fuel share of U.S. energy demand over the next quarter century is expected to fall from the current 84% to 78%, the EIA said.
Ethanol is forecast to account for 17% of U.S. gasoline consumption by 2035, the agency said.
U. S. crude oil production is expected to rise from about 5 million barrels per day to more than 6 million barrels per day by 2027, due to additional offshore output and enhanced onshore oil recovery techniques, and remain at that level through 2035.
Higher oil production and nearly flat petroleum demand will help cut
U. S. fuel imports to just 45% of demand in 2035 compared with about 65% now.
The price of crude oil is forecast to rise to about $133 a barrel, in 2008 dollars, by 2035.
The United States will rely more on solar, wind and other renewable energy sources to meet its energy needs, the EIA said.
“Our projections show that existing policies that stress energy efficiency and alternative fuels, together with higher energy prices, curb energy consumption growth and shift the energy mix toward renewable fuels,” Newell said.
The EIA noted its forecast assumed no change in current climate change policies and regulations.
However, the United States is expected to eventually adopt policies that would reduce its greenhouse gas emissions, which should increase demand for alternative energy sources even more.
