GULF OF MEXICO

David Paganie • Houston

Shell hits oil in deepwater

Shell has made an oil discovery at the Appomattox prospect in Mississippi Canyon block 392. Transocean's semisubmersible Deepwater Nautilus drilled the well.

The discovery was drilled in 2,200 m (7,217 ft) of water depth to TD of 7,643 m (25,077 ft) and encountered 162 m (530 ft) of oil pay. A follow-up appraisal well was drilled to 7,910 m (25,950 ft) and encountered 116 m (380 ft) of oil pay. A second sidetrack was undertaken and further drilling in the area is planned for later this year to confirm the field's resource potential. Partner Nexen says the well results exceed pre-drill estimates.

Appomattox is the third discovery in the area following early discoveries at Shiloh (Shell 80%, Nexen 20%) and Vicksburg (Shell 75%, Nexen 25%), which were drilled in 2003 and 2007, respectively. Development planning for Appomattox is under way, and may include Vicksburg located about 10 km (6 mi) east of the discovery in DeSoto Canyon block 353. Shell operates Appomattox with an 80% working interest and Nexen holds the remaining 20%.

Meanwhile, delineation of the Vito discovery continues, with the first appraisal well encountering more than 600 net ft (183 m) of "high-quality" oil pay in subsalt Miocene sands, partner Anadarko says. The sidetrack, drilled to 31,000 ft (9,449 m) TD in 4,050 ft (1,234 m) of water, is in Mississippi Canyon block 940, more than 1 mi (1.6 km) from the discovery well in Mississippi Canyon block 984. The discovery well was drilled in mid-2009 and encountered more than 250 net ft (76 m) of oil pay, Anadarko reports.

A second appraisal well is planned for later this year. Vito, estimated to hold greater than 200 MMboe, could be developed as a stand-alone project, pending further resource evaluation.

Anadarko holds a 20% working interest in the block and was the initial operator of the Vito discovery. Shell operates Vito with a 55% interest and Statoil holds the remaining 25%.

In other GoM deepwater news, Chevron has signed a letter of intent with Pacific Drilling for the drillship Pacific Santa Ana. The vessel will apply dual gradient drilling technology, Pacific Drilling says.

The vessel, under construction in South Korea, is to be capable of drilling in 12,000 ft (3,658 m) of water and to more than 35,000 ft (10,668 m) of well depth.

Central lease sale results

Central Gulf of Mexico Oil and Gas Lease Sale 213 attracted $949.3 million in high bids, up year-over-year, but still well short of the highs seen in 2007 and 2008. The sum of all bids was $1.3 billion. Seventy-seven companies submitted 642 bids on 468 tracts comprising over 2.4 million acres offshore Louisiana, Mississippi, and Alabama.

MMS Gulf of Mexico Regional Director Lars Herbst concluded from the lease sale results that while strength in deepwater continues, there was increased interest in shallow waters. A total of 151 tracts in water depths of less than 656 ft (200 m) received bids. This is up about 59% from last year's Central Gulf lease sale. It also represents 32% of all tracts receiving bids, an increase of 5% from last year. McMoRan continues to lead the deep-shelf push by scooping 17 shallow-water leases for $9.5 million.

The highest bid received on a tract was $52,560,000 submitted by Anadarko and Mariner Energy for Walker Ridge block 793. Anadarko exposed the greatest sum of high bids totaling about $128 million. The company was the apparent high bidder on 48 deepwater tracts, most of which are near its Miocene and Pliocene plays. Several are considered to be on trend with the company's Lucius and Vito fields.

Rounding out the top high bidders include Maersk ($97 million), Shell ($89 million), Chevron ($79 million), and Mariner ($62 million).

The next lease sale is scheduled for Aug. 18.

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