Effective deepwater development depends on a calculated approach along with innovation and flexibility.

In 1947, Kerr-McGee completed the first commercially productive oil well out of sight of land, marking the start of exploration and production in open waters. 55 years later, Kerr-McGee and others in the industry are drilling hundreds of miles offshore in water depths greater than 9,000 ft (2,750 m).
Deepwater plays in high-potential trends around the world provide some of the most promising opportunities in the search for oil and gas. And with rapid advancements in deepwater technology, exploration and production in the challenging deepwater environment is becoming more efficient and cost-effective. As the energy needs of the world increase, the industry must continue to explore deepwater frontiers to meet the growing demand.
Recognizing the global opportunities, Kerr-McGee established a long-term deepwater strategy 5 years ago that focuses on successful growth by applying deepwater expertise and technological advancements to develop its worldwide acreage inventory.
Production of oil and gas from increasingly deeper waters requires technological innovations, and Kerr-McGee continues to participate in the development of production systems that address the challenges of deepwater operations.
Its first deepwater venture was the Pompano project, which began production in 1994 from a fixed platform in 1,300-ft (400-m) waters in the Gulf of Mexico. In 1996, the world's first production spar was anchored at Neptune field in 1,930-ft (590-m) waters, followed in 1998 by installation of the first articulated compliant tower at the Baldpate field in 1,650-ft (500-m) waters. The Conger field began production in December 2000 as part of an ambitious development that uses the highest-pressure multiwell subsea production trees installed in the Gulf - set in 1,460-ft (450-m) waters and rated for pressure of 15,000 psi.
The expertise gained in these deepwater fields led to another technological innovation - the development of the Nansen and Boomvang fields in the deepwater Gulf using the world's first truss spars. Extensive research at the Neptune spar contributed to the design of this new spar, which offers better performance at lower cost. The truss design replaces the lower portion of the cylindrical hull used at Neptune with a tubular structure to reduce weight and cost. Operating in nearly 3,700-ft (1,130-m) waters, the Nansen spar set a water depth record for Kerr-McGee and provided the industry with another cost-effective development option for deepwater production. The truss spar design is being used for seven new deepwater developments, including Kerr-McGee's Gunnison field in the Gulf.
The company's pioneering deepwater technology is complemented by experience with operating the Gryphon A, the first purpose-built floating production, storage and offloading (FPSO) vessel in the North Sea. The company recently started production at the Leadon field in the North Sea using another FPSO vessel. It believes there will be advantages to using this type of system in certain deepwater development scenarios. With the recent decision by the US Minerals Management Service (MMS) to consider use of FPSOs in the Gulf of Mexico, it plans to take advantage of its experience as it considers future developments in the deepwater Gulf.
Prospect inventory
Efficiency is vital to the success of high-cost deepwater developments. To enhance cost-effectiveness, Kerr-McGee concentrates on developing core areas. For example, the Nansen, Boomvang and future Gunnison developments - where the nearest producing facilities are dozens of miles away - can serve as processing hubs for future discoveries. The company plans to add value to these developments from its prospect inventory as well as third-party production that can brought to the facilities for processing and pipeline connection.
Through its experience in the Gulf of Mexico, Kerr-McGee has learned that a high-quality prospect inventory is essential to success. A large inventory allows a company to optimize its exploratory prospects by drilling the best of the best and provides flexibility in drilling schedules to take advantage of rig availability.
In order to grow operations, the company continually high-grades its prospect inventory by identifying and acquiring new acreage from which it selects drilling prospects. In 2001, Kerr-McGee increased its gross undeveloped acreage inventory by more than 50% to 83 million acres worldwide. Most of this new acreage is in high-potential deepwater basins. The company has more than 63 million gross acres in its deepwater inventory, nearly doubling its total from 2000.
As the largest independent leaseholder in the deepwater Gulf and a major independent player in other international deepwater basins, Kerr-McGee has near-term and long-term opportunities to balance its drilling program.
The Gulf of Mexico continues to offer the best near-term potential for deepwater activities. Better availability of rigs and an expanding infrastructure allow timely development in this area, increasing the value of discoveries. In 2001, for the first time in 12 years, the MMS opened a small portion of the eastern Gulf to exploration and production activities. Kerr-McGee applauded this step and encouraged the US government to consider further expansion of lease opportunities in the Eastern Gulf.
In addition to the Gulf, the growing deepwater sector is concentrating on the prolific Atlantic Margin plays along the American and African coasts. Kerr-McGee expects these areas will provide new, longer-term opportunities and is actively pursuing opportunities offshore Canada, Brazil, Gabon, Benin and Morocco.
Planning for success
A quality deepwater portfolio in itself will not add value to a company - a quality team of deepwater experts must manage it. Kerr-McGee believes it has the geological and technological expertise to capitalize on its extensive inventory of international deepwater prospects for global deepwater success as well as the construction and production expertise to develop and operate in this environment.
Since a single deepwater well may cost US $20 million to $30 million to drill, it is critical to limit the number of wells in order to maximize the value of a development. To do this, Kerr-McGee plans for success prior to drilling the first exploratory well. When it identifies a promising deepwater prospect, an integrated team looks at the big picture - the entire potential exploration and development program. Carefully positioned, the exploratory and appraisal wells can become part of the eventual field development, saving time and millions of dollars otherwise spent on new production wells.
Vendors and contractors join the teams as the projects move forward, and the project goals become the goals of individual employees and contractors. Again, the Nansen and Boomvang projects are examples of the planning-for-success concept. The company's preplanning resulted in increased efficiencies in rig operations, exploratory and appraisal wells that are being used as development wells, and expedited development. Many of the team members were veterans of the Neptune project, and their shared knowledge and experience helped in the design of the new truss spar. The bottom line is that the operator rapidly developed two fields simultaneously, with the start of production at Nansen just 28 months after field discovery.
With its continuously growing technological expertise, large acreage position in high-potential basins around the globe and skilled employees, Kerr-McGee believes it can successfully look to the deep water for future growth by developing technological, cost and quality advantages in exploration and production operations.

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