GULF OF MEXICO

SemisubmersibleNoble Clyde Boudreaux was upgraded and refurbished at Signal International’s yard in Pascagoula, Mississippi. The rig left the dock in June 2007 for a 580-mi (933-km) journey to the Perdido site. Among other additions, the rig has been equipped with two derricks for dual activity.

Noble Clyde Beadreaux was refurbished and upgraded to withstand hurricanes. Its mooring system was reconfigured with 16 mooring lines for stability and for operations in 10,000 ft (3,048 m) water depth. The semi is expected to remain on location until around 2010.

The Perdido development includes Great White, Silvertip, and Tobago fields, all jointly owned by Shell (35%), Chevron (37.5%), and BP (27.5%).

Well results

Eni has drilled the last appraisal well on its Longhorn discovery in Mississippi Canyon block 502. The well, drilled in 740 m (2,442 ft) water depth to 4,228 m (13,951 ft) TD, encountered 127 m (419 ft) of net pay in multiple sands, the company says.

Development plans call for a subsea tie-back to a host platform. Project sanction is expected by Dec. 2007, with first production in 2009. Eni plans to explore the area surrounding Longhorn in 2008.

Eni operates Longhorn with a 75% working interest. Nexen Petroleum Offshore USA Inc. holds the remaining 25%.

Bois d’Arc Energy Inc. has hit pay with two exploration wells on the shelf. Well No. 8ST1 in Ship Shoal block 93 tested the Walleye prospect. The well was drilled to 12,786 ft (3,897 m) TVD and encountered 389 ft (88 m) of net pay in 11 commercial reservoirs, according to the company.

The second successful well, No. 1, in South Timbalier block 81 tested the Butch Cassidy prospect. The well was drilled to 20,029 ft (6,105 m) TVD and encountered commercial pay, the company says. Additional drilling may be required to determine the well’s commercial extent, according to the company. Bois d’Arc estimates these discoveries to hold approximately 32 bcfe of natural gas.

The company also has drilled a water flood injection well in Ship Shoal block 93 to 12,850 ft (3,917 m) TVD. Logging is under way.

McMoran Exploration Co. has completed a successful production test on the Flatrock discovery on OCS 310 at South Marsh Island block 212. The test indicated 71 MMcf/d of natural gas and 739 b/d of condensate on 37/64th choke with flowing tubing pressure of 8,520 psi (58.74 MPa).

Drilled to 18,400 ft (5,608 m) TD, the discovery found eight zones totaling 260 ft (79 m) of hydrocarbon bearing sands over a 637-ft (194-m) interval including five zones in the Rob-L and three in the Operc section. The production test was in the Operc section. First production is expected in 4Q 2007.

An offset, Flatrock B, is under way 1 mi (1.6 km) northwest of the discovery. A third well is scheduled before the end of 2007.

McMoran also is developing plans to re-enter the Blackbeard No. 1 well in South Timbalier block 168 in 70 ft (21 m) water depth. The well reached 30,067 ft (9,164 m) TD in mid-2006 and failed to reach its primary targets due to higher than expected pressures, according to Newfield, who relinquished its 23% stake in the well with the sale of its GoM assets to McMoran.

Contracts

ATP Oil & Gas Corp. has contracted Mustang Engineering to provide detailed engineering and procurement support for the topsides production facilities for theTelemark Hub drilling/production facility.

Also calledMirage, the hub will be in 4,000 ft (1,219 m) water depth in Mississippi Canyon block 941. Designed for 25,000 b/d of oil and 50 MMcf/d of gas and expandable to 100 MMcf/d, Mirage will have six dry-tree wellheads with three pairs of future subsea flowlines, according to Mustang.

Detailed design is expected to be completed by January 2008, with facility installation planned for later in the year.

Petrobras America has awarded FMC Technologies a $200-million contract to supply subsea systems for the Cascade and Chinook development project in the Walker Ridge area. The contract calls for the delivery of four horizontal subsea trees, three manifolds, control systems, and two subsea horizontal electric submersible pumping systems. The systems will be installed in an average water depth of 8,500 ft (2,591 m). Deliveries are expected to start in 4Q 2008.

Petrobras also has awarded Aker Kværner a $65-million contract to supply subsea power cables and control umbilicals for the Cascade and Chinook project. Aker Kværner is to supply 230,000 ft (70 km) of high-voltage power cables and static and dynamic steel tube umbilicals. Both the high voltage power cables and umbilicals will be installed at water depths up to 8,800 ft (2,700 m). The umbilicals will be made using Aker Kværner’s patented carbon fiber rod technology.

Project management, engineering, and manufacturing will be done at Aker Kværner’s Mobile, Alabama, facility. Delivery of the cables and umbilicals is scheduled for mid-2009.

First production

BHP Billiton has first oil from a single well in the Genghis Khan field in Green Canyon block 652. Drilling is under way on a second well, to be followed by two additional wells. One will test Green Canyon block 608.

Genghis Khan comprises the western flank of the Shenzi structure, which also is under development. Water depth is 4,300 ft (1,307 m). BHP Billiton operates Genghis Khan and Shenzi, holding a 44% interest in the six-block unit (Green Canyon blocks 608, 609, 610, 652, 653, and 654). Hess and Repsol hold 28% each.

“The development and production of Genghis Khan provides early learnings and synergy with our Shenzi project and expands our ownership of operated infrastructure in this region,” says J. Michael Yeager, chief executive of BHP Billiton Petroleum.

“This project allows us to optimize the development of the reserves at Shenzi-Genghis Khan, providing flexibility in selecting well locations, production facilities and the pace of development to capture the most value possible over the expected 25- to 30-year life of the field.”

Genghis Khan is one of three deepwater GoM fields that BHP Billiton planned to bring online by the end of 2007. The other two are Atlantis and Neptune. The first of nine Atlantis production wells has been brought online, and first production from Neptune has been pushed back to 1Q 2008.

Combined, these three projects will boost BHP Billiton’s net production in the region to more than 100,000 b/d of oil, according to the company. In the 12-month period ending June 30, 2007, the company’s production from the Gulf averaged approximately 12,000 boe/d.

StatoilHydro has first gas from its first operated deepwater field in the GoM - Q in Mississippi Canyon block 961. The field is tied back to the Anadarko-operatedIndependence Hub facility. StatoilHydro has a 50% working interest in Q. Production from Q will increase StatoilHydro’s GoM gas production by 40% in terms of volume, according to the company.

StatoilHydro is the second largest leaseholder in the deepwater Gulf. Noteworthy holdings include Tahiti, Jack, and Knotty Head. Chevron says first production fromTahiti is expected by 3Q 2009, 12 months behind schedule. The delay has been caused by the discovery of defective shackles in the spar’s mooring system, which has postponed installation, according to the company.

EPL has opened up the taps on its Cap Rock discovery in South Timbalier block 41. The well is producing approximately 1,900 b/d of oil and 18 MMcf/d of gas. EPL operates the well with a 60% interest. W&T Offshore holds the remaining 40%.

“Our success here validates our desire to further evaluate other identified opportunities at ST 41 as well as in our 100% owned ST 46 recent discovery block and additional 100% EPL-owned acreage in the area,” says Richard A. Bachmann, chairman and CEO of EPL.

Lease sale draws ultra deepwater interest

Approximately 40% of the tracts receiving bids in Central Gulf of Mexico Lease Sale 205 are in ultra deepwater - greater than 5,249 ft (1,600 m) water depth.

The lease sale attracted $2,904,321,011 in high bids, the second highest in US leasing history, according to the MMS. Eighty-four companies issued 1,428 bids on 723 tracts, for a total of $5,245,583,944. The sale offered 5,359 tracts comprising about 28.7 million acres offshore Louisiana, Mississippi, and Alabama.

The deepest tract to receive a bid was Amery Terrace in block 206 in 3,398 m (11,148 ft) of water. The highest bid received on a block was $90,488,445 submitted by Shell Offshore Inc. for Walker Ridge block 7. Shell submitted the highest number of high bids (69), total bids (94), highest sum of high bids ($554.6 million), and the highest sum of total bids ($650 million).

Developing the wining tracts could result in the production of 776 MMbbl to 1.3 Bbbl of oil and 3.2 to 5.2 tcf of natural gas, according to Interior officials.

According to analysts at Raymond James & Associates, deepwater winning bids this year are up an average of 300% at $4.3 million/tract; mid-water wining bids are up an average of 86% at $2.3 million/tract; while shallow water value/tract remains relatively flat.

Compared to deepwater leasing worldwide, this lease sale moves the Gulf ahead of competing regions on a cost/acre basis, according to Wood Mackenzie. Operators bid an average of $954/acre for a deepwater block in Sale 205. This tops all recent sales globally, according to the analysts. The 2006 deepwater leasing round in Angola averaged $758/acre.

Shell, Frontier to build deepwater/arctic drillship

Shell EP Offshore Ventures Ltd. and Frontier Drillships Ltd. have signed a joint venture agreement to build a new drillship concept for deepwater and arctic environments.

Called “Bully” rig, it will be capable of drilling with surface BOPs in 12,000 ft (3,657 m) water depths and will feature an ice class hull. The first vessel is expected to work in the GoM by early 2010 and to be operated by Frontier.

“Shell has a significant requirement for drillships in the short- to medium-term to enable us to undertake our deepwater and potential arctic drilling programs,” says Matthias Bichsel, Shell E&P executive vice president, development and technology. “This concept will lead to our drillship requirements being met at lower cost and with improved environmental performance. This, coupled with the ability to rapidly deploy the ‘Bully’ rig to Shell deepwater projects between areas like the GoM, Nigeria, Brazil, the Far East, and northwest Europe, brings tremendous advantages for managing our drilling prospects and their sequencing.”