Jaime Kammerzell • Houston
Sales and regulations
The US Minerals Management Service has published the final notice of Lease Sale 192 for offshore oil and gas. The MMS estimated the sale, held August 18 in New Orleans, Louisiana, could result in produc-tion of 136 to 262 MMbbl of oil and 0.81 to 1.44 tcf of natural gas.
The sale area covers 3,907 available blocks on 21.2 million acres of federal land offshore Texas and Louisiana. The blocks are 9-210 mi offshore in 4-3,425 m of water.
Some noteworthy changes to the initial notice of Lease Sale 192 include new deep-water royalty suspension price thresholds of $39/bbl oil and $6.50/ million Btu/d for gas, a revision of the shallow water deep gas royalty suspension provisions, and the availability of Mustang Island blocks 793, 799, and 816, which have been deferred from recent Western GoM sales for leasing, subject to a revised lease stipulation for operations in the naval mine warfare area. The stipulation requires exploration, development, and production activities to be conducted from outside the lease.
In other MMS news, the agency will begin accepting oil and gas royalty in actual production instead of the traditional cash royalty payment. A newly announced five-year royalty in kind (RIK) business plan is aimed at enhancing management of the US oil and gas royalty assets. Under the new RIK regulations, the government has the flexibility to use its royalty share as it wishes, either selling the production or using it for a federal project.
RIK, administered by MMS, is paid by delivery of oil and gas production to the government for competitive sale in the marketplace. Companies must pay a royalty to the federal government for producing oil and gas on property owned by the government. The royalty payment is based on the value of the oil and gas produced.
"The new MMS Five Year Royalty in Kind Business Plan provides the blueprint to successfully increase revenues and decrease administrative costs associated with managing our oil and gas royalty assets," Secretary of the Interior Gale Norton said.
The RIK program eliminates inexact attempts to assign royalty value. The government sees paying the royalty with production instead of dollars as a more economical and fairer approach.
Deepwater, deep shelf
Kerr-McGee Corp. has begun first production from the first of two subsea wells at the deepwater Red Hawk field in the Gulf of Mexico. Red Hawk, discovered in 2001, is on Garden Banks block 877 in 5,300 ft of water, Kerr-McGee's deepest field development to date.
Kerr-McGee expects field production to peak at 120 MMcf/d of gas when both wells come onstream.
Shell Exploration & Production Co. has begun producing natural gas from its Coulomb development, which consists of the two deepest wells in the world in terms of water depth. The wells are in Mississippi Canyon blocks 657 and 613 and tied back via a 27-mi flowline to the BP-Shell Na Kika Floating Development System in Mississippi Canyon block 474. (Read more about the Coulomb project on page 36.)
Shell Exploration & Production Co. has started production from its Glider field in Green Canyon block 248, in 3,400 ft of water, 165 mi south-southwest of New Orleans. The Glider field is the first subsea tieback to the Brutus TLP. The Glider subsea system consists of two wells, tied back 7 mi to Brutus via a single 6-in. buried and insulated flowline, which is Shell's first use of this flow assurance method.
Also producing initial deepwater oil and gas is the GulfTerra Energy Partners and Cal Dive International jointly owned Marco Polo TLP in Green Canyon block 608. The Marco Polo TLP is 160 mi south of New Orleans in 4,300 ft of water and is designed to process 120,000 b/d of oil and 300 MMcf/d of natural gas.
Anadarko is the operator of both the TLP and the Marco Polo field, which the company discovered in April 2000. Anadarko has tied back all six production risers and has completed three of six pre-drilled development wells. The operator expects the field to reach 50,000 b/d once all six wells are online.
The Marco Polo TLP will also process production from the K2 field in Green Canyon block 562 and the K2 North field in Green Canyon block 518 after the operator completes the subsea tiebacks, scheduled for 2005.
Spinnaker has started production on its the High Island block 201 No. 1 well in 47 ft of water, 34 mi southeast of Galveston, Texas. The company completed the well with a flowline to Spinnaker's High Island block 199 platform. The well is producing at 29 MMcf/d.
Forest Oil Corp. also announced initial production, but this one is a deep shelf discovery at West Cameron block 112. The company drilled the West Cameron block 112 No. 1 well to 15,350 ft TD. It is producing at a rate of 33 MMcf/d of natural gas and condensate with a flowing tubing pressure of 9,625 psi.
Also in West Cameron, Newfield Exploration has made a deep shelf discovery at block 77, 10 mi offshore Louisiana in 40 ft of water.
The West Cameron block 77 No. 1 well encountered 120 ft of net gas pay in two zones between 16,800 ft and 17,600 ft. Newfield deepened the well to 19,603 ft and encountered an additional zone that appears to have possible pay over a large gross interval. The operator will evaluate the zone in the completion stage. Newfield expects first production from the field in early 2005.
Remington Oil and Gas has also made a new field discovery in the West Cameron area. The company drilled block 383 No. 1 well to 5,745 ft and tested it at 6.7 MMmcf/d. Production is expected to begin in 3Q 2004. Remington operates West Cameron block 383 No. 1 with a 50% working interest. Magnum Hunter Resources and Forest Oil each own a 25% working interest.
