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ExxonMobil, Anadarko May Team Up in Deepwater

ExxonMobil Corp. and Anadarko Petroleum Corp. are considering options to jointly develop two mega-discoveries in the deepwater Gulf of Mexico (GOM).

Earlier this month ExxonMobil announced three oil and natural gas discoveries in deepwater Keathley Canyon (KC), including the Hadrian North prospect (see Daily GPI, June 9). The supermajor operates and has a half-interest in KC 918, KC 919, KC 963 and KC 964. Petrobras America Inc. holds the remaining stake in KC 918. Eni Petroleum US LLC and Petrobras America each hold a one-quarter stake in KC 919, KC 963 and KC 964.

The Anadarko-operated Lucius discovery, which was announced in late 2009, also is in the KC leasehold (KC 875) (see Daily GPI, Dec. 11, 2009). Anadarko has a half-stake in the block; partners include Plains Exploration & Production Co. (PXP) with a one-third interest and Apache Corp. with nearly 17% interest. A sidetrack appraisal well south of Lucius appeared to confirm a "major discovery" (see Daily GPI, Jan. 28, 2010).

Together the discoveries, which are about 250 miles southwest of New Orleans, hold an estimated 1 billion boe, with Hadrian at about 700 million boe and Lucius estimated at 300 million boe. The discoveries are in different U.S. deepwater blocks with different owners and operators, but sharing a production platform could make sense both cost-wise and for efficiency. Jointly coordinating separate discoveries is known as unitization.

However, there's no official word if and when the producers will agree to coordinate their development, said Anadarko spokesman John Christiansen.

"Although there's nothing to announce at this time, given the substantial resources and close proximity of Hadrian to our Lucius field, unitization is certainly something that makes sense," he told NGI. Management plans to update its plans for the Lucius discovery in its second quarter earnings announcement in July. He said Anadarko was "very encouraged" by the Hadrian North discovery.

An ExxonMobil spokesman responded with virtually the same reply, noting that it was a "good assumption" that the company would develop the area in a coordinated manner -- but no names were mentioned. Earlier this month ExxonMobil Exploration Co. President Steve Greenlee said the producer planned to work with its Hadrian partners and "other lessees in the area to determine the best way to safely develop these resources as rapidly as possible."

Energy analysts said coordinating Hadrian North and Lucius operations would make the most sense, budget-wise. It also would be the most efficient way to recover the most oil and gas reserves, said Jefferies & Co.'s Subash Chandra.

Joint development might reduce costs by as much as $1.5 billion because of shared production facilities and pipelines, noted RBC Capital Markets analyst Leo Mariani. In "extremely deep water...you have to put in very expensive structures to produce these different fields."

The Hadrian prospect is in early stages. Anadarko also is in preliminary stages to develop Lucius. Anadarko was on location at the prospect early this year, conducting completion operations and preparing to conduct an extended well test. Development planning and preliminary front-end engineering also is ongoing.

Wood Mackenzie Ltd.'s GOM analyst Mohammad Rahman told NGI that Hadrian should ramp up around 2015, with Lucius perhaps a year earlier. Adjusting the two production schedules could be a win-win for the producers. "The faster, the better," he said. And Hadrian North and Lucius could be earlier to develop than other discoveries in KC because the formation has microscopic pores within the rocks that could allow oil and natural gas to more readily flow.

However, the operators' other partners would have to be on board with any joint development, the analysts noted. A PXP spokesman said unitization of the two discoveries was a "viable" option.

Anadarko and ExxonMobil share their KC discoveries with several big-name producers, including BP plc, which made a "giant" discovery in the Tiber prospect two years ago, its second after the Kaskida discovery (see Daily GPI, Sept. 3, 2009). Chevron Corp.'s Buckskin No. 1 discovery well in KC 872 is in about 7,000 feet of water (see Daily GPI, Feb. 6, 2009).

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