GULF OF MEXICO

Jennifer E. Smith
Houston

• This map shows the Garden Banks blocks captured in the Vill Geospace 3D FTG survey for Burlington Resources, Oryx Energy, and Statoul. To the north and northeast are the closest projects in the area. [43,697 bytes]

Rig sinking highlights shortage of crews

With the price of oil so low, it may surprise some exactly how tight the market is for trained rig crews in the Gulf of Mexico. When Broughton Offshore's only rig, the jackup Mr. Bice, sank offshore Louisiana, Cliffs Drilling snapped both shifts of Broughton Offshore's crew up quickly. "They almost hugged my neck to find already trained crew available," owner Carlos Broughton stated. Broughton said that if the rig is salvageable at all, it could be a year or more before it is ready for work again.

Burlington, Oryx, Statoil focus on 10-block area Bell Geospace is beginning a 3D full tensor gradient survey of an 18-block area in the Garden Banks area of the Gulf of Mexico. This survey is part of a larger one begun in March, which aims for 300 blocks of 3D FTG data. When completed, the survey will be added to the 500 blocks of Gulf of Mexico information collected in 1995 and 1996.

Bell Geospace leapt ahead of its planned program, however, to collect information requested by Burlington Resources, Oryx Energy, and Statoil. The companies contracted for a survey of blocks 677, 720, 721, and 764. Bell Geospace said that in order to cover these blocks, it also had to survey partial blocks of Garden Banks 632, 633, 634, 718, 676, 678, 719, 722, 763, 765, 766, 807, 808, and 809. This information is not exclusive because it is part of the larger survey (see map).

Royalty-in-kind test project begins

The US Minerals Management Service in July offered some of Wyoming's lease production for competitive bid in the first royalty-in-kind (RIK) pilot project. The project will no doubt be watched closely by onshore and offshore industry alike. This is the first of three royalty-in-kind pilots to be launched. The goal is to test this proposed method of collecting royalties as a percentage of production, rather than as money. The government will then sell its percentage through a marketer.

RIK is one of the ways that has been suggested to simplify the royalty question. A House of Representatives bill which would require RIK in most cases recently cleared the House Resources subcommittee. However, whether it will pass is an open question, as the Department of the Interior has in the past predicted the proposal will cost the treasury money rather than saving it.

The second project will begin this fall and offer gas production from offshore Texas. The third will cover Gulf of Mexico gas production, a topic of special interest to many US producers. No specifics are in place for this project except that it should begin by fall 1999. The MMS says this RIK project will involve the most volume.

In all three pilots, the MMS is establishing the following criteria for success:

• The system should be simple, accurate, and certain for lessees and government.
• It should bring in an equal or greater amount of revenue for government.
• It should reduce paperwork.
• It should be consistent with the terms of existing leases.

Production worth more "in the ground"

Taylor Energy has shut in production to await higher prices and has yet to resume flow. The small Gulf of Mexico producer shut in 5,500 b/d of oil production when West Texas Intermediate crude prices were at $12.60. At Offshore press time, WTI was up to $13.88/bbl, and Taylor Energy production had not yet begun again.

Patrick F. Taylor, president and CEO, said, "[At these prices] my reserves are worth more to me in the ground than at the wellhead." He said that selling the reserves of his company at these prices was "imprudent" but could give no exact dollar amount at which he would again begin production.

Taylor Energy is a small private company and has no shareholders to answer to. Taylor said this naturally makes it somewhat easier for Taylor Energy to shut in production than for a larger public company. However, he suggested that perhaps more companies should at least shut down a percentage of their production as part of a cooperative effort to bring the price of oil back up. Touching on the promised OPEC cuts, Taylor said that only reduced production can bring up the price of oil.

E&P Briefs:

• Since installing the West Cameron 504B platform in January, Coastal Oil & Gas has increased total field production in West Cameron Block 504 by 36 MMcf/d of gas and 44 b/d of condensate. This is an increase to 40 MMcf/d of natural gas and 90 b/d of condensate.
• Operator Basin Exploration said a well on West Delta Block 61 was drilled to TVD of 13,400 ft and encountered 320 net ft of pay in multiple Miocene-aged sands below 7,500 ft. Production casing has been set. Basin also said the West Delta 78 well it operates with 48% is under evaluation, and that it flowed 2,000 b/d during short-duration production test.
• Operator IP Petroleum's West Cameron Block 172 well found gas and condensate. It will be completed and temporarily suspended pending development. First production is expected by early 1999.
• Sidetrack drilling on the Llano prospect, located on Garden Banks 386, found several hydrocarbon-bearing sands in the Lower Pliocene and Miocene-aged sections. Several wells may be drilled into the Lower Pliocene and Miocene layers this fall to further appraise the discovery. If feasible, the Llano prospect may be tied back to operator EEX's Cooper facility on Garden Banks 388.
• Forest Oil said Eugene Island 43 No. 1 well is onstream at 16.7 MMcf/d of gas and 400 b/d of condensate through a 27/64-in. choke at flowing tubing pressure of 3,700 psi from 80 ft of perforated interval. Forest operates with 50%; Sonat holds the rest.
• Deepening of Vermilion 159 No. 3 well found another 93 ft of pay logged between 13,982 ft and 14,702 ft. This brings the net pay in the well to 173 ft of net pay in five sands. Production should begin early next year. McMoRan Oil & Gas holds 48% working interest, but its net revenue interest is 33.8%.

Copyright 1998 Oil & Gas Journal. All Rights Reserved.