David Paganie, Houston
Deepwater discoveries
Deepwater drilling success continues. Total hit pay with well No. 2 drilled in 7,800 ft of water in Alaminos Canyon block 856.
The discovery well was drilled to a total depth of 15,625 ft and encountered 85 ft of oil pay.
This second successful well confirms the commercial extent of the structure in AC 856, says Total. The operator adds that development options are being evaluated.
The discovery well is adjacent to the Great White discovery drilled in Alaminos Canyon block 857.
Total is operator of the block with a 70% working interest, and Nexen holds the remaining 30%.
Hess struck oil as well. The operator drilled a successful well on its Pony prospect in Green Canyon block 468 in 3,440 ft of water.
The well was drilled to a total depth of 32,448 ft and encountered 475 ft of oil saturated sandstones in Miocene age reservoirs, based on wireline log evaluation, says Hess.
The operator plans to appraise the discovery by drilling a sidetrack well approximately 4,000 ft to the northeast. Well results will be used to refine estimates of net pay, says Hess.
The operator maintains that results to date are consistent with pre-drill expectations. Total hydrocarbon resources on the Hess acreage is estimated in the range of 100-600 MMboe. Hess has a 100% working interest in this well.
Hydro commits to deepwater E&P
Hydro signed two contracts with Transocean to secure enough capacity for a six-year deepwater GoM drilling program to begin in 2007.
The first contract awarded to Transocean is for use of its semisubmersible,Henry Goodrich. The rig’s two-year program is expected to begin in February 2007, following completion of its current commitment offshore eastern Canada.
The semi will be upgraded with capacity to drill in up to 5,000 ft of water in preparation for the $265-million contract.
Hydro issued a second contract to Transocean for use of a newbuild Enterprise-class drillship. The rig will undertake a $694 million, four-year drilling program for the operator upon delivery in mid-2009.
Construction of the $615-million drillship will take place at DSME’s yard in Okpo, South Korea. The rig will come equipped with Transocean’s patented dual activity drilling technology, variable deckload of more than 20,000 metric tons, and other enhanced equipment, allowing for drilling to 40,000 ft total depth in up to 12,000 ft of water.
The combined value for both contracts awarded to Transocean is $950 million.
Modec gets Shenzi
Modec International signed a contract with BHP Billiton to provide a TLP facility for development of the Shenzi field.
Under the contract, Modec will carry out project management, design, engineering, procurement, construction, and pre-commissioning activities.
Modec says theShenzi platform will be the fifth and largest Moses-designed TLP, built with a payload capacity of 15,500 tons and displacement of 43,500 tons.
The TLP will be equipped with capacity to process 100,000 b/d of oil and 50 MMcf/d of gas, from up to 20 subsea production and water injection wells.
The floater will be installed in mid-2008 in approximately 4,300 ft of water, with first production expected mid-2009.
The Shenzi field comprises Green Canyon blocks 609, 610, 653, and 654, about 120 mi from the Louisiana coast. Other partners in the field include Hess Corp. and Repsol YFP.
M&A
Energy Partners Ltd. (EPL) and Stone Energy Corp. entered into a definitive merger agreement to combine the two companies in an acquisition valued at approximately $2.2 billion. The transaction is expected to close in 4Q06.
EPL out bid Plains Exploration and Production’s offer of $1.46 billion. Stone subsequently terminated its merger agreement with Plains on June 22.
Combined, EPL and Stone would have year-end 2005 pro forma reserves of 167 MMboe and production of 22 MMboe with a shelf life of approximately 7.6 years. EPL’s acquired acreage is in shallow waters, with the exception of Stone’s recent purchase of a working interest in deepwater Mississippi Canyon block 108/109.
Meanwhile, Anadarko has agreed to acquire Kerr-McGee and Western Gas Resources Inc. in separate all-cash transactions totaling $23.3 billion (including debt). Anadarko says these transactions increase its position in two of the fastest growing oil and natural gas producing regions in North America - the Rockies and deepwater GoM.
The Kerr-McGee acquisition is valued at approximately $18 billion (including debt). The company’s year-end 2005 proved reserves (excluding pending GoM shelf divestitures) totaled 898 MMboe. Its production in 2006 is expected to reach around 92 MMboe. Anadarko says it expects to recover more than 3.1 Bboe on Kerr-McGee’s properties.
The company’s core properties include 504 deepwater GoM blocks, comprising seven operated and three non-operated producing fields, three operated and five non-operated discoveries in various stages of development, and four additional prospects that will be drilled this year.
The transaction, subject to approval of Kerr-McGee shareholders and other regulatory conditions, is expected to close by the end of the third quarter.
M&A activity continues among fabrication and construction firms as well. New Iberia, Louisiana-based Dynamic Industries Inc. (Dii) acquired the assets of Mid-Fab (formerly Unifab) of New Iberia, Louisiana, increasing its construction and fabrication acreage from 107 to 274 acres.
Mid-Fab, on 370 acres in the Port of Iberia, Louisiana, has over 25,000 sq ft of covered fabrication area, a 200-ton overhead crane, seven Manitowoc Crawler cranes, pipe mill, pile rack, and a main load-out slip measuring 300 ft x 300 ft x 300 ft. The fabrication yard specializes in construction of offshore structures, modules, and drilling rig components.
Included in the purchase is a 35,000-sq ft dedicated roll mill shop, increasing its total facility space from 187,500 sq ft to nearly 513,000 sq ft, and covered shop space in excess of 218,000 sq ft.
Dii says, while already having the largest offshore crew in the Gulf, it will continue to expand its presence throughout Venezuela, Angola, Trinidad, Nigeria, Mexico, and in other countries.
Dii is a fabricator of equipment modules and other structures used in oil and gas production. Additionally, the company designs, procures, builds, refurbishes, and retrofits offshore jackets and decks, and performs repair and refurbishment work for offshore drilling rigs
Louisiana vs. MMS
Louisiana Governor Blanco filed an official complaint against the MMS in the US District Court for violations in Western Gulf Lease Sale 200, scheduled for Aug. 16, 2006. Blanco’s intent is to stop the lease sale from taking place.
In a statement issued by the Governor’s office, Blanco says, “I have taken this action to ensure the long-term protection of our coastal environment, the communities in south Louisiana, and the nation’s critical energy infrastructure.”
The complaint filed with the court alleges that the MMS, in moving forward with the scheduled lease sale, violates the National Environmental Protection Act, the Coastal Zone Management Act, and the Outer Continental Shelf Lands Act.
“We (Louisiana) cannot continue future OCS leasing until the state receives a federal commitment to ensure its ability to protect these national assets, both environmental and economic,” says Blanco.
The Lease Sale 200 includes 3,865 unleased blocks in approximately 20.87 million acres in the OCS Planning Area offshore Texas and in deeper waters off Louisiana. The MMS estimates the lease sale could result in the production of 136-262 MMbbl of oil and 0.810-1.440 tcf of gas.
OCS legislation hits Senate floor
US Senate Energy & Natural Resources Committee Chairman, Pete Domenici, introduced new OCS legislation in the Senate called the Gulf of Mexico Energy Security Act. The bill sets new parameters for leasing in certain parts of the GoM.
The legislation is co-sponsored by Majority Leader Frist and Senators Cochran, Cornyn, Hutchison, Landrieu, Lott, McConnell, Sessions, Shelby, and Vitter. At print, debate on the Senate floor was scheduled to begin the week of July 24.
According to the committee, the bill includes:
Lease areas
• Directs leasing in the 181 Planning Area, excluding areas east of the Military Mission Line, areas in the new Eastern GoM Planning Area within 125 mi of the Florida coast, and areas in the new Central GoM Planning Area within 100 mi of the Florida coast
• Directs leasing in the 181 South Planning Area, excluding areas east of the Military Mission Line and areas in the new Eastern GoM Planning Area.
Leasing prohibitions
• No oil and gas leasing, pre-leasing, and other activities within 125 mi of the Florida coast in the new Eastern GoM Planning Area until June 30, 2022
• No oil and gas leasing, pre-leasing and other activities within 100 mi of the Florida coast in the new Central GoM Planning Area and east of the western boundary of the 181 Planning Area until June 30, 2022
• No oil and gas leasing, pre-leasing and other activities east of the Military Mission Line until June 30, 2022, after which the Department of Defense may veto leasing
• Secretary of the Interior to establish within one year of enactment a regulation that provides for an option to exchange leases in areas unavailable for lease within 125 mi of the Florida coast in the new Eastern Gulf Planning Area for available leases in other parts of the Gulf.
Revenue sharing
• Revenue sharing on new areas of production made available by this agreement beginning in FY 2007 and each fiscal year thereafter (181 Planning Area on the eastern Gulf side and 181 South Planning Area): 37.5 % to Gulf producing states, 12.5 % to Stateside LWCF, and 50 % to Federal Treasury
• Revenue sharing on new leases after date of enactment in existing planning areas beginning in FY 2016 and each fiscal year thereafter (GoM planning areas): 37.5% to Gulf producing states, 12.5 % to Stateside LWCF, and 50 % to Federal Treasury.
According to the committee, the bill also calls for a $500 million annual net spending cap on revenue. Net is spending in excess of receipts coming in from new areas opened up under this bill.
Meanwhile, by a vote of 232 to 287, the House of Representatives passed the Deep Ocean Energy Resources (DOER) Act. The bill’s contents were summarized in the July issue ofOffshore.
The hull of theIndependence Hub semisubmersible production facility arrived at Kiewit Offshore Services’ yard in Ingleside, Texas, for integration with its topsides. Dockwise’s Mighty Servant 3 delivered the hull on June 19. Installation of the Atlantia-designed semi is planned for later this year. The hull will support a total payload (deck, topsides, equipment, and risers) of approximately 19,000 tons. The facility is designed to process 1 bcf/d of gas. It will be connected to 10 fields through 16 flowlines and 12 umbilicals. Gas will be exported via one 20-in. pipeline. Once installed in Mississippi Canyon block 920 in 8,000 ft of water, the semi will be the deepest floating production facility in the world. The Anadarko-operated Independence Hub is owned by Enterprise Products Partners, L.P. (50%) and Helix Energy Solutions (50%), on behalf of the Atwater Valley Producers Group, which is comprised of Anadarko, Dominion, Kerr-McGee, Hydro, Devon, and Energy Resources Technology.