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MMS' Oynes: Deepwater Gulf Suffers Few Lasting Effects from 2005 Hurricanes; Optimistic for 2006

Despite the widespread destruction of Gulf of Mexico infrastructure from Hurricanes Katrina and Rita last year, the lengthy and expensive restoration process and the ongoing risks of offshore operations, deepwater exploration and development is moving full steam ahead, said Chris Oynes, Minerals Management Service (MMS) regional director for the Gulf of Mexico, in an interview with NGI.

"I would say the impact on the deepwater Gulf by and large was somewhat minimal," said Oynes. "Yes, there were some high-profile projects [that were damaged or even destroyed]. Chevron's Typhoon platform, for example, was turned upside down. The damage to the topside on Shell's Mars facility also was very significant. But excluding Typhoon, which may have its own specific reason for why [it was damaged] that is still under investigation, the deepwater facilities, as floating structures, fared very well in Rita and Katrina."

Going forward "2006 generally should look like it's going to be a pretty good year," Oynes said, noting a couple significant projects would be going online and others would start construction. MMS expects steady growth in offshore spending and drilling over the next few years. "The capability for the Gulf to produce as much [oil and gas as it has in the past] is going to be there."

Oynes said the MMS intends to release in the next couple of weeks a detailed summary of offshore platform and pipeline damage from the 2005 hurricane season. But he said underwater damage assessment could take another 12 months to complete. "I think we've caught a lot of the major stuff, but it wouldn't surprise me if we find 10-12 other platforms that had underwater damage. Some of the diving hasn't even taken place yet. It's a major effort to do all that."

Regarding deepwater operations, Oynes said MMS is "very comfortable with the design standards that we require and the industry uses." The standards for shallow-water facilities, however, are under review. Potentially billions of dollars in damage may have been caused by drifting shallow-water rigs that were torn from their moorings. These 30-million-pound semisubmersibles were never designed to stay put for long, and drilling companies even equipped them with global positioning beacons so they can find them when they break loose and drift many miles away.

Four rigs operated by Noble Corp. drifted 75-123 miles off their original locations during Katrina and Rita. The semisubmersible rig Transocean Marianas, which is about 264 feet long, 197 feet wide and 122 feet deep, was torn from its drilling location during Rita and blown about 140 miles off location before being grounded at Eugene Island Block 133. Transocean's semisubmersible Deepwater Nautilus, which sustained damage to its mooring system during Katrina and was undergoing repairs, was sent adrift again during Rita following the failure of a tow line, but the crew was able to steer it to safety using the onboard thruster-assist capabilities. The rig was finally grounded 40 miles south of Grand Isle, LA.

Some experts speculated that Chevron's Typhoon may have been hit by a drifting drilling rig. The $256 million state-of-the-art Typhoon facility was located in 2,100 feet of water in Green Canyon 237, about 165 miles south-southwest of New Orleans. Today it rests on its side on the sea floor. Chevron said a total of 14 of its offshore structures were toppled during the hurricanes. The company still has a team of investigators looking into the cause of the Typhoon damage.

A total of 113 platforms and eight rigs were destroyed during Katrina and Rita, and 52 other platforms and 19 rigs suffered extensive damage. At least 58 pipelines were damaged. It is unclear how much of the damage could have been caused by drifting rigs.

A lot of damage can be done to surrounding facilities when the legs of the rigs break off and drag across the sea bottom. Drilling companies say hurricanes develop so quickly there is scarcely time to evacuate offshore personnel in time, much less tow drilling rigs hundreds of miles to safety at five to 10 miles per hour. But some observers believe the rigs need to be better secured while on location.

Some of the features of shallow-water mobile drilling units that are under review include standards for platform heights, which may be raised, and the number of anchor chains, which may be increased, said Oynes. "The industry is moving ahead with some design changes. The secretary of the Interior was [at a recent meeting on these issues in Herndon, VA] and said 19 MODUs set adrift was not an acceptable result and something has to be changed to solve this problem."

Oynes said the industry has decided to take two types of actions: long-term and short-term solutions. The long-term solutions include spending millions of dollars to alter drilling rig mooring systems, many of which are either nine-point or 12-point systems. "Those are going to be increased either from nine to 12 or from 12 to 16 depending on the rig," he said. "The theory being if you have more anchor points holding the rig down, then they would be able to survive the hurricane forces better and not move.

"But those are million-dollar investments to get the rigs back in the yard and refurbish and change those systems. You have to change all the chain systems for the mooring lines and determine how much horsepower they need depending on how much deck space they have. That is a major engineering effort."

Oynes said details on short-term solutions will be released at the next meeting in a few weeks. The short-term solutions will focus on what can be put in place before the next hurricane season.

"I don't think offshore activity in 2006 will be changed radically because of the 2005 hurricanes," said Oynes. There were 10 deepwater discoveries (greater than 1,000 feet) in 2005 and more ultra deepwater drilling activity than in 2004. There currently are nine rigs drilling in 5,000 feet of water or greater -- the ultra deepwater zone.

Despite 1.85 Bcf/d of natural gas and 402,259 bbl/d of oil remaining shut in currently, the start of production at BP's Atlantis and Thunder Horse facilities later this year should significantly boost offshore supply, he said. "These are very significant projects.

"Not to minimize the effects of the hurricanes, but in an overall broad sense 2006 generally should look like it's a pretty good year [for offshore exploration and development]. Of course, if we have more hurricanes that produce significant damage, well then I'll have to eat all those words."

"There are a number of major production projects coming to closure in the next couple of years and some new production projects that have been just initiated. The most well known are Chevron's Tahiti project and BHP, the Australian group, is going ahead with their Neptune project. So both on the exploration side and on the production side there's a lot of money being spent."

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