Petroleo Brasilerio (Petrobras) Tuesday was given a thumb's up by the Minerals Management Service (MMS) to develop the first floating production storage offloading (FPSO) facility in the deepwater Gulf of Mexico (GOM). The FPSO, to be located in the Cascade-Chinook area in the Walker Ridge area of the Lower Tertiary trend, would be built about 165 miles offshore Louisiana in 8,200 feet of water.

MMS approval followed an environmental and technical review, which found that the project would have no significant impact. MMS had granted preliminary approval to the FPSO project in 2006 (see Daily GPI, Dec. 7, 2006).

"The Cascade-Chinook project will be the first production from deep discoveries in the Lower Tertiary trend of the Walker Ridge and Keathley Canyon areas of the Gulf," said MMS GOM Regional Director Lars Herbst. "This is an important step for Petrobras and all oil and gas operators exploring in deepwater Gulf of Mexico. The FPSO and many associated first-use technologies lead the way in providing the infrastructure necessary to produce safely in the Gulf's ultra-deepwater."

The Cascade prospect in the Lower Tertiary was discovered in 2002 by Devon Energy Corp., BHP Billiton and Petrobras (see Daily GPI, June 4, 2002). In 2006 Devon, Chevron Corp. and a predecessor company of StatoilHydro completed the deepest extended drill stem test in history on the Jack No. 2 well at Walker Ridge Block 758 (see Daily GPI, Sept. 6, 2006).

Although production still may be years away, Chevron geologists in 2005 estimated that the Lower Tertiary held 3-15 billion bbl of oil. If 15 billion bbl of oil were discovered in the trend, it would increase U.S. oil reserves by 50%. Most of the initial Lower Tertiary data remains confidential until more appraisal work is completed by the producers. However, leases drawing the highest bids in MMS GOM lease sales in the past two years were in the Lower Tertiary trend (see Daily GPI, Oct. 4, 2007; Aug. 18, 2006).

Petrobras, Brazil's state-owned oil company, is considered a top global FPSO developer. Under its proposal for the Walker Ridge facility, Petrobras would install an FPSO capable of processing oil and natural gas, storing crude oil in tanks located in the facility's hull and able to offload crude to shuttle tankers for transportation to shore. Processed natural gas could be transported to shore by pipeline. Petrobras' FPSO would be equipped with a disconnectable turret, which, in the event of a tropical storm, would move off location until the storm had passed.

Oil and gas operators in the GOM submit development operations coordination document packages to the MMS for approval that outline the operational plan to develop projects, including timelines for drilling wells and installing production facilities as well as geological and geophysical information. The documents also identify any specific environmental issues that must be addressed, including safety and pollution prevention. The specific environmental issues were addressed through a site-specific environmental assessment by MMS that analyzed the potential environmental and socioeconomic impacts of the oil and gas activities associated with the Cascade-Chinook project.

The next step is an MMS review of Petrobras' deepwater operations plan, which outlines the specific details and capabilities of the FPSO facility and associated new technologies. Once Petrobras gains approval for the operations plan, production could begin, MMS said.

In preparation for the first use of an FPSO in the GOM, MMS worked with the U.S. Coast Guard to identify and clarify responsibilities in a memorandum of agreement (MOA) signed by both agencies in February. MMS regulates oil and natural gas activities that include exploration, drilling, well completion, development, production, pipeline transportation, storage, well servicing and workover activities. The Coast Guard regulates offshore facilities, mobile offshore drilling units and vessels engaged in oil and gas activities such as tank vessels and offshore supply vessels. Through the MOA, responsibility is assigned to each agency for regulating or approving specific systems associated with the FPSO.

©Copyright 2008 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.