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MMS: GOM Operators Going 'Further Out and Further Down'

Oil and natural gas producers operating in the Gulf of Mexico (GOM) are going "further out and further down" in their quest to secure new energy reserves, a journey fueled by technology, the Minerals Management Service (MMS) director said last week.

The deepwater GOM -- defined as waters at least 1,000 feet deep -- now is responsible for producing 72% of the total offshore oil and 38% of the total offshore natural gas, said MMS Director Randall Luthi, who spoke at the Offshore Technology Conference in Houston. Luthi and his MMS GOM management team unveiled the agency's latest deepwater report, "Deepwater Gulf of Mexico 2008: America's Offshore Energy Frontier," which chronicles the activities by the energy industry in the deepwater over the past 16 years.

"As we look at the data, it's clear that deepwater advancement is occurring in all areas -- leasing, drilling and production," said Luthi. "At the end of 2007, there were 130 producing projects in deepwater -- that's double the amount from five years ago."

According to the MMS, the U.S. GOM accounts 25% of total U.S. energy supplies, with current production estimated at around 1.3 million b/d of oil and 7.7 Bcf/d of natural gas. As technology has become more targeted and more efficient, producers have been tallying a phenomenal amount of discoveries, said Luthi.

Last year there were 142 deepwater wells drilled in the GOM -- 94 exploratory wells and 48 development wells -- in waters more than 1,000 feet deep, according to MMS. Of the 48 development wells drilled, 60% were in waters deeper than 5,000 feet. The MMS also counted eight new deepwater discoveries last year -- one in 7,400 feet of water. Drilling is deeper now, but the technology is getting better by the day, Luthi noted. For instance, 13 rigs now are under construction that will be able to drill into waters 12,000 feet deep at depths of up to 40,000 feet.

"The easy oil and gas is unavailable or flat out gone," said Luthi. And with oil at record high prices, "never has there been a greater need to move forward. Never has there been a greater time for more forces to marshal their efforts. In my opinion we have to do everything we can on every front" to increase oil and gas resources.

The GOM is "absolutely key to U.S. security," said Luthi. However, he noted that as more development moves to the deepwater, "it's not an easy path, but nothing worthwhile ever is. The industry has been steadfast about wanting to develop more further out and further down."

Luthi pointed to the MMS approval last month of the first floating production and storage offloading (FPSO) facility in U.S. waters. Petroleo Brasilerio (Petrobras) was given approval by the MMS to develop the FPSO for the Cascade-Chinook area in the Walker Ridge area of the Lower Tertiary trend, about 165 miles offshore Louisiana in 8,200 feet of water (see NGI, May 5).

"If the technology proves effective, we expect to see more companies coming forward on these," said Luthi. "The use of these will help to develop deepwater wells effectively."

MMS' Lars Herbst, regional director of the GOM region, noted that the deepwater GOM "is and will continue to be one of the most important areas for the production picture" in the United States. He noted that last year 54% of all GOM leases were located in waters 1,000 feet deep or more. In the 2007 Western GOM Lease Sale 204 and Central GOM Lease Sale 205 almost 70% of the tracts receiving bids were in water of 1,312 feet or more.

"In July 2007 we hit a record with 15 rigs drilling in waters 5,000 feet or more," Herbst noted. By comparison, there was one well drilled in water 7,500 deep in 1998, and in 2000, there were nine wells drilled in waters 7,500 feet deep or more. "We expect this activity to continue., with new rigs capable of drilling and producing in waters deeper than ever before."

This year nine deepwater facilities are scheduled to ramp up in the GOM, including the long anticipated Thunder Horse facility, which will be operated by BP plc. MMS also expects to see more hub concepts, similar to the Independence Hub, which produces gas for 10 satellite fields in the deepwater.

"The number of projects under development shows the industry commitment to the deepwater frontier," said Herbst. Most of the interest now is on the Lower Tertiary fields in the Garden Banks area of the deepwater GOM. "But that will be 2010 and beyond. The water depths and the technology are such that it takes 10-15 years from the time when they are leased before we expect to see them being producing."

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