When it comes to longer cycle investments in the oil and gas industry, offshore developments come to mind along with their hefty price tags.

But Anadarko Petroleum Corp. is working to buck the trend by building on its winning track record of successfully tying back new discoveries to existing infrastructure, cutting costs and time.

“Anadarko plans to continue leveraging its premier infrastructure position in the Gulf of Mexico [GoM] and drill approximately seven development tiebacks during the year,” Anadarko spokeswoman Stephanie Moreland told SEN in an emailed statement. “At Constellation, the first development well was spud in April, and the subsea facilities contract was recently awarded. First production is expected in 2018, and the well is expected to be tied back to the 100% Anadarko-owned Constitution spar.”

The Woodlands, Texas-based company aims to not only accelerate its subsea tieback opportunities but also speed execution of such projects.

The goal is to turn “what we believe to effectively be mid-cycle opportunities into shorter and shorter cycle opportunities to continue to deliver the high-margin oil volumes that we have in the U.S. Gulf,” Ernie Leyendecker, executive vice president of Anadarko’s international deepwater and exploration, said during the recent UBS Global Oil and Gas Conference.

As the oil and gas industry worked to rebound from a budget-crippling downturn in 2016, Anadarko deepened its subsea tieback inventory by about 20 with its $2 billion acquisition of Freeport McMoRan Oil & Gas deepwater GoM assets. The deal also expanded the company’s infrastructure.

So far, Anadarko has identified at least 30 subsea tieback opportunities to leverage with its 10 hubs, or operated floating facilities, sprawled across the GoM. Three of the facilities were acquired in 2016—Holstein, Horn Mountain and Marlin.

“We have quite a number of tieback opportunities that are considered development wells or subsea, low-risk development wells, exploration opportunities. We are really in a great position in the U.S. Gulf of Mexico,” Leyendecker said.

Deepwater GoM represents one of the three key focus areas for Anadarko—the others being its onshore assets in the Delaware and Denver-Julesburg basins. Anadarko aims to produce about 160,000 boe/d from its GoM assets, which include Lucius and Heidelberg among others, through 2019.

Anadarko’s GoM developments could generate a five-year expected free cash flow of about $6 billion.

Subsea tiebacks have a starring role with competitive rates of returns.

The average rates of return is more than 75% at $55/bbl oil, Daniel Brown, executive vice president of Anadarko’s international and deepwater operations, said during the company’s first-quarter 2017 earnings call. The company has more than 30 tieback opportunities “in the cupboard” that it can execute, he said, adding “we actually have a deeper bench than that, but that’s our high-graded list.”

“We also have platform opportunities that have very high rates of returns that you’ll see us executing on as we move forward,” Brown said. “Costs within the Gulf of Mexico are sort of stable and perhaps somewhat even deflationary if you think about the rig cost out there. So obviously, as you think about tiebacks, the reservoir that you’re drilling into, the length of tieback distance from the platform is going to vary. So the individual cost for a specific project will vary.”

Costs for tiebacks are lower compared with standalone developments.

“The expected internal rates of return that the tiebacks give us compete very favorably with our two large onshore positions,” Anadarko CEO Al Walker said on the call. “So the rate of return because of the costs being minimal for a tieback into an existing infrastructure is part of the equation here for why it makes so much sense from a portfolio perspective.”

This “hub and spoke philosophy” not only adds value and enhances rates of return across the GoM, it “also provides future optionality as we continue to make new discoveries and appraise existing ones,” Moreland said.

While economics is a major factor in determining whether to pursue a tieback option, Anadarko also considers facility usage, flow assurance, fluid compatibility and future opportunities around each facility, Moreland said. “We take a regional approach to developing the resources near our facilities and try to ensure we make the best economic decision.”

The development option, however, is not without challenges.

Flow assurance, fluid compatibility, facility usage and brownfield costs are among these for Anadarko. “We take the facility design life and the ability to extend the life of the facility to accommodate the life of the tieback into consideration,” Moreland said, later adding the company has a team dedicated to evaluating flow assurance issues.

Anadarko is also working with other industry players to advance subsea technologies, including in the area of HP/HT drilling.

“The focus of the effort is on the mobile offshore drilling unit, blowout preventer and riser, completion, intervention, and subsea production equipment,” Moreland said. “The partners are working together to develop standardized, state-of-the-art subsea systems designed to meet the challenges of producing from reservoirs with pressures of up to 20,000 psi and temperatures of 350 degrees at the mudline.”

—Velda Addison

Comments