Operators have found deepwater hydrocarbons. Now they have to get them to market.

Far to the south on the Mexican border with the United States, the Discoverer Deep Seas drillship spudded ChevronTexaco's US $34 million Toledo prospect well in a record 10,011 ft (3,053 m) of water reaching for hydrocarbons that can't reach markets for at least 5 years.

Pre-drill estimates for Toledo reached as high as 500 million bbl of oil. ChevronTexaco abandoned the Alaminos Canyon 951 prospect as an apparent non-commercial well, but it hasn't finished drilling in the area. It has already started drilling its Tiger prospect in Alaminos Canyon 818 in 9,000 ft (2,743 m) of water using the Discoverer Deep Seas.

Unocal's Trident discovery is 10 miles (16 km) to the west of Toledo in blocks 907 and 943 with at least 100 million, and Shell's Great White discovery lies another 3 miles (4 km) west-northwest in Block 857 in 8,700 ft (2,652 m) of water with an estimated 500 million bbl of oil.

Great White isn't the only shark in Shell's tank. It also plans to drill the Hammerhead prospect in Alaminos Canyon blocks 899, 942 and 943 and it has a prospect in blocks 690 and 691.

In addition, Total would like to drill its Gotcha prospect in Block 856, immediately west of Great White (and possibly part of Great White) and the Unocal-contracted Discoverer Spirit will drill the Tobago prospect on Block 859 immediately north of Trident. The North Brontosaurus prospect is in Alaminos Canyon 731, about 10 miles (16 km) northeast of Trident.

Diamondback prospect is in Alaminos Canyon 651, 695 and 739. The prospect is about 20 miles (32 km) east-southeast of Baha and 40 miles (64 km) east-northeast of Trident.

"There are about eight major structures in that area, and they probably all will be drilled by the end of 2004," said Valerie Brett, senior analyst for the Gulf of Mexico region for Wood Mackenzie.
The economics of reaching markets from this point are prohibitive. The discoveries are on the Perdido Foldbelt, a series or northeast-southwest trending anticlines, some 125 miles (201 km) east of the south Texas mainland. The nearest pipelines are some 50 miles (80 km) north of Trident at ExxonMobil's Hoover-Diana complex, and ExxonMobil still is hooking up satellites to keep those pipelines full.
Several people have speculated that this could be the site for the Gulf of Mexico's first floating production, storage and offloading (FPSO) vessel, but if a decision has been made, the operators aren't talking about it, and the MMS hasn't received an application.

Shell's Baha discovery is lies about 25 miles (40 km) north of the discoveries, in Alaminos Canyon 557 and 600, but that reservoir may have a blown seal and may not be a commercial candidate. That would rule it out as a relay point or a contributor to pipeline capacity to the north.

To complicate the situation further, some block operators partially own nearby blocks operated by other companies. "They need to sort out ownership and interests. Some structures overlay more than one block," Brett said.
For example, ChevronTexaco owns 22% of BP's Diamondback and BP and ChevronTexaco both own a portion of Shell's Great White discovery.

If that isn't enough, the southern part of Trident is on a block along the doughnut hole, an area with temporarily shared ownership by both the United States and Mexico, and at least one of the structures being drilled continues south into the doughnut hole.

Mexico shot a lot of seismic in the area last year, and it has studied deepwater drilling for a couple of years, but it hasn't operated any deepwater wells yet, and it probably needs to climb a learning curve before it can take on world-record water depths. The potential certainly is in place, and state oil company Pemex has identified at least one prospect, Maximino, on its side of the border, according to an AP report.
Mexico hasn't raised a public protest over potential draining of its resources, but the US-side discoveries aren't even close to the production point, yet. "Realistically, you won't see anything before 2009 or 2010," Brett added.

An FPSO could be the fastest route to market, but that takes 4 to 5 years to build after all the parties get together and sanction the project. A semisubmersible production platform with a pipeline would require a similar time frame.

A development with a common hub similar to Canyon Express or Na Kika would benefit everyone, she said. Marathon's Camden Hills, on the Canyon Express line, lies in 7,300 ft (2,226 m) of water, and Canyon Express currently is the longest deepwater line at 57 miles (91 km). New technology may be required for a pipeline nearly 2,800 ft (854 m) deeper and at least as long as Canyon Express.
More discoveries with substantial reserves will bolster the argument in favor of a pipeline serving several fields rather than multiple FPSOs.

The other side of the Gulf of Mexico faces similar infrastructure needs, but the solutions appear more clear cut with economic odds favoring a hub serving at least two operators and pipelines tying into existing infrastructure. No one is talking about an FPSO in this area. The hydrocarbons dictate that decision. Most of the discoveries in and near the eastern Gulf of Mexico have been gas discoveries.

Anadarko Petroleum Corp. is planning its next big hub project on the border between the eastern and central Gulf, possibly in cooperation with Kerr-McGee; probably in the southeastern Mississippi Canyon area or the northeastern Atwater Valley area.

Among Kerr-McGee's Merganser in Atwater Valley 37 and Vortex in Atwater Valley 261 discoveries and Anadarko's Jubilee discovery in Atwater Valley 349 and Atlas in Lloyd Ridge 50, the two companies have more than the 500 Bcf in dry gas reserves required for a commercial venture, according to Jim Emme, vice president of exploration and development for Anadarko.

Following the Merganser discovery, Kerr-McGee Chairman and Chief Executive Officer Luke Corbett, said, "Consistent with our business plan, we will continue exploring this new core area, with the goal of creating an Atwater Valley operating hub similar to our Nansen and Boomvang complex in East Breaks."
Kerr-McGee has 15 more prospects in the area among the 60 blocks it holds in Atwater Valley.

Anadarko is forming a group of active operators in the area (currently only Kerr-McGee) to determine the feasibility of installing a joint platform owner-operator arrangement similar to its Marco Polo complex.
In the Eastern Gulf project area, the company claimed another gas discovery at its Spiderman prospect in Desoto Canyon 621 as a potential tieback candidate to the new platform. Pre-drill estimates totaled 70 million boe (420 Bcfe). Anadarko plans appraisals at Jubilee and the west side of Spiderman, Emme said. Anadarko also has the Mondo (Lloyd Ridge 47) prospect and found 50 ft (15 m) of net pay at the Atlas Northwest (Lloyd Ridge 5) prospect in the same area. Its Hawkeye prospect in Lloyd Ridge was a duster.
In all, Emme said, the company has identified 17 prospects on 15 of its 38 blocks in the central-eastern Gulf area with potential reserves of 2 billion boe. Some 20 exploration plans have been filed with the MMS within a 30-mile (48-km) radius of the possible site for a joint hub.

Marathon Oil Co.'s Barracuda prospect in Desoto Canyon 927 was dry, but it filed an exploration plan for its Mammoth prospect in Desoto Canyon 665, immediately south of Spiderman. Petrobras plans a wildcat in Lloyd Ridge 48 between Anadarko's Atlas discovery and its Mondo prospect.

If all goes well, partners in a joint hub project could give the go-ahead within 2 years, Emme said.
Spinnaker Exploration and Dominion Exploration and Production Inc. are Anadarko's partners in Spiderman, which Spinnaker calls Spiderman/Amazon.

Spinnaker also anticipates a discovery at its San Jacinto prospect 6 miles (9 km) west of Spiderman in Desoto Canyon 618 and at its Niobrara prospect in Desoto Canyon 577.

Adding to the potential for an Eastern Gulf hub, Murphy Oil Co. and ChevronTexaco are 50-50 partners in the South Dachshund prospect in Lloyd Ridge and Murphy also has the Bull Dog, Great Dane and Perro prospects near Spiderman.

The companies have three pipeline options within a reasonable distance of the southeast corner of Mississippi Canyon. But the choices essentially are BP, Total or a new pipeline.

The closest connection is to a pipeline not yet built. BP's Thunder Horse is 28 miles (45 km) away in Mississippi Canyon 822. There, if capacity is available after handling an anticipated 200 MMcf/d from the Gulf of Mexico's largest hydrocarbon discovery, the new platform could hook into BP's Okeanos gas line. That, in turn, flows into the main trunkline from the Na Kika platform in Mississippi Canyon 474 to a near-shore platform in Main Pass 260. That trunkline has a capacity of 425 MMcf/d, but it also picks up gas from several nearby fields.

The other BP choice is a 35-mile (56-km) pipeline directly to the Na Kika platform.
Another 4 miles (6 km) to the north, gas production from a southeast Mississippi Canyon hub might tie into Total's Canyon Express system gas pipeline system at its southernmost tip at Marathon Oil's Camden Hills field in 7,300 ft (2,226 m) of water in Mississippi Canyon 348, currently the deepest production in the world. That 500 MMcf/d-capacity line would take gas to Williams' Canyon Express platform in Main Pass 216. That line also has to handle production from two other fields, Total's Aconcagua and BP's King's Peak.

Considering the high depletion rates in the Gulf of Mexico, any of those pipeline systems might be ready for new gas supplies by the time the new, remote fields come of stream.

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