Deep shelf gas play sparks drilling action.
The charisma and high-stakes drama in the Gulf of Mexico follows big producers into ever-deeper water, but deep drilling on the shelf still offers excellent opportunities with significantly lower initial investments.
With more than 50,000 wells drilled on the shelf, some people might think saturation has smothered the odds for big discoveries, but only 6% of those wells - about 3,100 - have penetrated below 15,000 ft (4,575 m), said Ken Butler, vice president of the Gulf Region USA for Unocal Corp.
That underexplored area offers opportunity for at least a few of the 160 shelf operators. Unocal is the fifth largest leaseholder of properties in 1,200 ft (366 m) of water and less, and it's the fourth largest producer with more than 50 years of experience.
That background gives the company some advantages. "We have lots of infrastructure, a physical base on which to grow," Butler said. It also holds the title of the shelf's low-cost driller at US $235/ft.
Through the years, the shelf has consistently come up with new plays to keep operators active. Now, it's the deep Miocene gas play. That should keep operators occupied for 5 or more years. The next play may be even deeper. The Gulf of Mexico has reservoir-quality rock as deep as 30,000 ft (9,150 m).
About the next potential high-production play on the shelf, Butler said, "I don't know, but there's always been something. Technology and ingenuity have always found something."
The deep shelf discoveries can be substantial. Unocal has made discoveries of 70 Bcf and 50 Bcf in the Mustang Island area as well as the prolific Muni discovery at Ship Shoal 295 that approaches 100 Bcfe.
In all, operators made 14 significant 15,000 ft (4,575 m) or deeper Miocene discoveries in 2000 and 2001 from the Mustang Island area off the south Texas coast to the west to West Delta South under Louisiana's Mississippi River Delta to the east. Sizes ranged from 10 Bcf to 200 Bcf in reserves, and 10 companies divided the discoveries.
It's certainly not over from Unocal's perspective. It plans to drill eight to 10 deep shelf exploratory wells this year aimed at reserves of 50 Bcf to 150 Bcf each at a cost of $50 million to $60 million, said Unocal Chairman and Chief Executive Officer Charles W. Williamson at the Credit Suisse First Boston 2002 Energy Summit in Vail, Colo.
Others will look, as well. Seismic data is moving pretty well, said Marc Lawrence, senior vice president of Fairfield Industries, which specializes in shelf surveys. It's moving well enough that it helped the company set a sales record last year.
Operators are trying amplitude vs. offset (AVO), longer offsets and anything else they can find to get a clearer subsurface picture and offset their drilling risk, he said. That demand keeps the company working on its prestack time migration campaign. Those surveys and that processing are going mostly to independents.
"At depth, we're finding big structural anomalies that haven't been drilled," Lawrence added.
The companies that apply all the useful technology in the toolbox are on the right track. The problems compound as wells get deeper. Pressures and temperatures are higher, and gases are more corrosive. Imaging technology also gets more difficult to use in the deeper sections.
Subsalt formations make good hydrocarbon traps and paths, but the formations change sound-wave velocities and distort subsea images.
Deep gas discoveries offer high-rate production, but only a handful of those wells have been found, Butler said, and discoveries require a lot of care and planning.
More sophisticated seismic processing helps, and Unocal uses long-offset data for a truer picture of underground features.
Unocal considers three areas of technology to be keys to success in these deep wells.
The first area of technology goes back to the basics. In drilling, the company must be good at planning and execution.
The second key area is high-quality, deep-penetration 3-D seismic information. That data is the window to the Miocene world.
The third critical technology - possibly the most critical - is the ability to accurately describe the petroleum system on a regional scale. In the Miocene play, a producer can't just look for seismic anomalies. It needs to look at the existence and movement of gas in a regional context and predict reservoir trends. The producer also needs to bring that regional knowledge to each prospect it drills.
"The player that succeeds will be the company that sees that petroleum system the best," Butler said.
There's no question the deepwater wells are more spectacular. Scale and size are more important for those deepwater wells, because they cost more and it takes longer to start earning a return from deepwater production.
On the shelf, the time frames are faster. When Unocal makes a shelf discovery, it can start seeing a return from that well within weeks or months, depending on the local infrastructure.
An operator with low drilling costs can get an acceptable return from a smaller reservoir. In a 15,000-ft (4,575-m) well, Unocal will save $150,000 compared with the cost to the next most efficient driller.
The US Minerals Management Service stepped in to help make the decision to drill deep wells on the shelf easier. For properties offered in the March Central Gulf Lease Sale and future sales through 2007, it suspended royalty payments on the first 20 Bcf of gas from wells drilled in less than 656 ft (200 m) of water to depths greater than 15,000 ft (4,575 m).

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