Pending merger of giant drillers signals long life for deepwater operations
A major re-capitalization in the offshore drilling and services sector is resulting from less-cyclical market price trends, say pundits; but deepwater and ultra-deepwater drilling and production are the logical extension of the first producing offshore oil well drilled in 1947
Recent mega-mergers within the offshore oil and gas industry, particularly among the ranks of marine drilling contractors, signals a major re-capitalization in the deepwater drilling business, and according to some Wall Street observers, may be the start of a new trend across the entire oil services sector.
For too long, say some investment nabobs, the stock market has considered offshore companies, even those involved in deep-ocean work, as cyclical, since they are a part of an industry whose overall product price structure has been recurrent in nature. But they point out that in recent years, the industry disposition has changed, since the market is now dominated by a long-term rise in prices to which, apparently, no end is in sight.
Since offshore reserves are the major worldwide source of oil and gas today, the ever-rising price of oil promises to produce similar long-term growth in worldwide deepwater drilling. After all, investment analysts point out, the majority of prospects in shallower water already have been drilled, though drilling to greater depths has reawakened prospects at least in the Gulf of Mexico. But deep water - roughly 1,000 ft (300 m) to 7,500 ft (2,400 m) in depth - comprises something like 70% of the earth’s surface. Currently, at least three regions - the U.S. Gulf of Mexico, the Atlantic Ocean off West Africa and Brazil’s steep coastline - are significant hotspots for deepwater and even ultra-deepwater (greater than 7,500 ft) drilling and production. What’s more, some marine areas in northwestern Europe and northern seas are expected to become future centers of increased deepwater drilling activity. Even now, most of the world’s potentially productive deepwater areas are virtually untested by the drill bit.
Broadening the beginning
If you stretch the point, the modern deepwater drilling and production environment got its start in the late 19th century when rotary drilling equipment and techniques were adapted to aid in the search for oil. A rotary rig drilled the 1901 Spindletop oil discovery on the Texas Gulf Coast, which historians today mark as the beginning of the Petroleum Age.
Of course, back then it would seem almost nobody would seriously consider the possibility of drilling over water when so many oil fields were being discovered at shallow depths below good oldterra firma. But according to the new book, Pioneering Offshore: The Early Years, the fact is that by the time the drilling started at Spindletop, some companies already were producing oil and natural gas from wells drilled over bodies of water.
In the late 1890s, prospectors tapped oil from beneath the Pacific Ocean surf off Southern California’s scenic coastline, writes the new book’s author, F. Jay Schempf. They used crude wooden piers on which were placed drilling machinery and derricks to tap shallow reservoirs that often betrayed their presence with discharges from underwater seeps that rimmed the tide line with oily residue. In other cases, oil finders followed producing trends westward, eventually going beyond the coastline (Figure 1).
The California offshore scene was followed in the early 1900s by drilling in the waters of Lake Erie, the Great Lake shared equally by the U.S. and Canada. Wells drilled from permanent platforms built out into the Canadian side of the lake yielded commercial gas and some oil. The gas was consumed in Ontario, the most industrialized Canadian province that faces the lake. For mainly environmental reasons, says the book, drilling on the U.S. side of the lake was never fully sanctioned, and it continues to be out of bounds today.
By the mid-1900s, however, oil companies were developing other U.S. water-covered areas. They began drilling gas wells in shallow Caddo Lake on the Louisiana-Texas border, using wooden platforms built of cypress pilings topped with pine boards. Shortly thereafter, in pursuit of oil trapped on the flanks of underground salt domes along the Gulf Coast, companies used similar wooden platforms to tap oil from beneath tidewater lakes located near coastal bays. According to the book, this included the Goose Creek field near Baytown, Texas.
Overseas, in Venezuela, companies in the 1920s began pursuing oil reservoirs that ran from under the rain forest out beneath Lake Maracaibo, which actually is an embayment that opens onto the Gulf of Venezuela and where even today offshore wells still produce significant oil (Figure 2). Also in the 1920s, in the area around the Caspian Sea between the Caucasus region and what is now Iran, the fledgling Soviet Union’s oil seekers planned to fill shallow bays with boulders upon which rigs could be placed to tap oil reservoirs that obviously extended offshore from existing fields on land. Actual over-water offshore drilling didn’t begin in the Caspian until the late 1930s, however, the book observes.
Taking baby steps
The 1947 Kerr-McGee offshore discovery well in the Gulf symbolized a major milestone in a progression of events that had begun a decade or so earlier. Though the outcome was auspicious, its beginnings had been based on little more than educated speculation.
According to detailed information contained in the book, other companies had drilled producing wells off Louisiana. In the 1920s, albeit only just offshore, a few companies used fixed wooden platforms built at offshore well sites to support land-type drilling rigs. With such equipment, operators slowly developed prospects on or near the coast, particularly along the state’s vast underbelly of bays, inland lakes, marshes, and swamps. Fed partially by streams and bayous kept full by the region’s extensive annual rainfall, these brackish water bodies linked via tidal exchange with the Gulf. Combined, this general area came to be known as the “transition zone.”
In the early 1930s the Texas Co., later Texaco (now Chevron), founded just after the Spindletop discovery, proposed augmenting fixed, wooden-piled drilling platforms with mobile steel barges that could hold some of the machinery necessary for exploratory drilling. In fact, Texaco’s drilling specialists went a bit farther by claiming they could explore the transition zone more quickly with equipment that could move, relatively intact, between well sites. To do so, they could transport a rig-equipped barge to the well site, flood it to the shallow bottom and stabilize it with a minimum of pilings. A superstructure erected over the top deck of the barge would raise the drilling equipment 10 feet or more, with the derrick and drill string centered over a slot notched into one end. Another barge moored alongside could hold the prime mover engines, fuel, fresh water, racked tubulars, bulk and sacked drilling fluid components. After drilling, crews could re-float and move both barges to the next well location with relative ease.
Investigating this drilling barge concept, Texaco patent lawyers learned that “Captain” Louis Giliasso, a U.S. citizen and merchant mariner-turned-Lake Maracaibo driller, already had claimed the idea.
“In 1933, following an exhaustive search, Texaco located Giliasso in Panama, where he ran a waterfront bar. Giliasso told them he had tried to sell the barge idea to several Lake Maracaibo operators, but all had doubted that a barge resting on a mud bottom could ever be re-floated. The ‘suction’ created, they said, would hold the barge fast to the bottom. Giliasso disagreed, but operators repeatedly rejected his appeals to test the concept. Eventually, he gave up and went into the saloon business. So, Texaco had no trouble flashing greenbacks and acquiring exclusive rights to Giliasso’s patent, including that of licensing the design to others.”
Texaco lost little time in transforming a couple of “dumb” steel cargo barges into the drilling and supply units, and then towing them into Lake Pelto on the Terrebonne Parish coast about 40 miles south-southeast of Houma, a tiny fishing and trapping settlement. The company ultimately drilled six producing wells in Lake Pelto, not once having bottom “suction” trouble with either barge (Figure 3). Texaco’s success spurred other operators to build their own versions of the barge-mounted rig, which came to be regarded as the industry’s very first mobile drilling unit.
Platforms still count
The book points out that while the so-called “inland barge rigs” lent a significant degree of mobility to exploratory drilling in the transition zone, their operating range was limited in one important way. Stability concerns restricted superstructure height and therefore confined the barges to relatively shallow water - 10 ft or less. Only piled platforms, it seemed, would suffice for deeper drilling locations.
In 1937 Pure Oil Co. (now Chevron) and its partner Superior Oil Co. (now ExxonMobil) reverted to using a fixed platform to develop a large prospect in the tidewater area off Calcasieu Parish, Louisiana. Water depth at the site was 14 ft, which was just beyond the upper drilling depth limit for existing barge rigs. The well site was about 1 mile from shore.
Pure Oil, as operator, hired Houston-based Brown & Root Inc. (now KBR Inc.) to construct the platform, with the largest deck area built thus far in Gulf coastal waters at 30,000 ft2. Brown & Root set more than 300 creosoted timber pilings with a land-type pile driver chained and tack-welded to a barge. Thick pine planks made up the deck, the book notes.
To withstand weather-heightened seas, the pilings had a 14-foot above-water clearance to stand higher than the average high-tide water level. At 28 ft from the bottom, this was the highest deck elevation thus far achieved in Gulf operations. But the companies later learned, the hard way, that the 14-foot gap above the water was not adequate. The crests of waves from a small storm severely damaged the deck section shortly after it was built, and though workers later repaired it, the existing pile length forced them to keep even the new deck at the same above-water height.
According to the book, the first well, drilled to 9,400 feet, produced oil. Encouraged, the partners soon expanded the platform deck area to keep both drilling and production equipment aboard. Employing new directional drilling techniques, they completed 10 more wells, setting a record for the number of wells drilled from a single platform that remained unbroken until the 1950s.
During the next three decades the Creole field, as the partners named their discovery, produced nearly 4 million barrels of oil, and the partners earned a significant netback during the field’s lifetime, ample proof that offshore operations could be profitable.
After WWII, producers moved ahead with existing plans to drill offshore, the book observes. In 1946, Magnolia Petroleum (now ExxonMobil) vaulted out to a point some 18 miles off the Louisiana coast, erecting a platform in 18 ft of water off Saint Mary Parish, La.
“Although Magnolia didn’t find oil immediately, the company made several important advances in marine engineering. The first use of steel pilings to augment the conventional wooden ones improved the platform’s ability to carry a vertical load so much that offshore operators used them almost exclusively thereafter. Additionally Brown & Root, once again the platform fabricator (by dint of its Creole field platform work years earlier), incorporated steel H-beams to enhance structural integrity from top to bottom. That also became routine in future platform design.”
The case for more mobility
Several other companies attempted to drill for offshore oil, but all of them set up fixed platforms in relatively protected waters, says the book. An exception was Superior Oil, who in early 1947 erected a drilling/production platform in 20 ft of water some 18 miles off Vermilion Parish, La.
But it was Kerr-McGee Oil Industries (now Anadarko Petroleum), as operator for partners Phillips Petroleum (ConocoPhillips) and Stanolind Oil & Gas (BP) that completed its historic Ship Shoal Block 32 well in October 1947, months before Superior actually drilled a discovery from their Vermilion platform farther offshore. In any case, that made Kerr-McGee’s well the first oil discovery drilled out of sight of land. And, the book points out, they drilled it with a new type of rig (Figure 4).
As 1946 drew to a close, the company began assembling its tender-assistedRig 16to drill the soon-to-be historic well. The company had been looking for a cheaper, more efficient way to drill offshore, and Rig 16 the result. Most of the rig’s drilling and rig power equipment was located aboard the tender Frank Phillips, a 260-ft × 48-ft naval surplus YF (yard freight) barge.
The rig’s second drilling element - the steel-girdered, wood decked drilling platform - needed only to support the derrick and drawworks winch, along with downhole pressure control equipment that was bolted to the top of the well conductor beneath its decks. So, the book relates, it was a much smaller platform whose deck totaled only 3,680 ft2. Even with steel pilings, the deck’s smaller overall area lowered construction costs significantly.
Since theFrank Phillips’quarters area and galley accommodated rig workers and the various mariners needed to man the vessel, the company could drill around the clock. The roughnecks worked 12-hour tours for seven days and then rotated to shore for a seven-day leave. According to the book, this crew change rotation served as a model for those the industry still uses, although rotations today occur more routinely on a two-weeks-on, two-weeks-off basis (and in more remote areas, are extended to as much as a month on, with a month off).
Patents held on hold
A number of Kerr-McGee employees, including Dean A. McGee, partner with future Oklahoma Senator Robert S. Kerr, held patents on certain components of theRig 16 design, writes the book’s author, Schempf. But they didn’t protest when other producers almost immediately began purchasing surplus naval barges for their own offshore rig fleets, using much of the same layout as the Kerr-McGee rig.
“In fact, the company often provided competitors with subtle design elements to make their conversions less difficult. To McGee, it apparently was enough that Kerr-McGee had created the first tender-assisted rig. Besides, he must have reasoned, more offshore rigs meant more offshore wells-and a better idea for everyone about the potential of the Gulf OCS.”
The well’s spud point fell on the flank of a deep-seated salt dome delineated roughly by marine seismic data collected in 1946 from small boats, with seismograph equipment recording the sound waves generated by dynamite blasts reflected back by underwater formations. From the seismic records, McGee believed there was a better-than-even chance that hydrocarbon accumulations might exist there.
“But even McGee hadn’t foreseen how soon the Ship Shoal 32 well would hit pay dirt. Though the well was officially permitted to a total depth of 4,000 ft (1.200 m), the drill bit penetrated the first oil sand at about 1,600 ft (480 m). Ultimately, the well reached a total depth of only 2,568 ft (about 770 m). Thereafter, the crew installed casing in the hole and the well began to produce on November 14, flowing 900 bbl of light, low-sulfur oil per day from a 16-ft interval that had been penetrated by downhole tools to allow the oil to flow into the wellbore.”
Today, only 60 years later, offshore operators are drilling wells in the Gulf and off Brazil that penetrate some 25,000 ft (7,500 m) or more below a water column of up to 10,000 ft (3,000 m) in depth. That compares strongly with the evolution of powered air flight, which began with the Wright Brothers’ first short hop into the air at Kittyhawk in 1903 and 60 years later had progressed to Astronaut Gordon Cooper’s Mercury earth orbit mission, in which he spent more than a day in a space capsule hundreds of miles above the earth before returning safely to the ground.
In any case, the book puts this first offshore oil discovery in context with its later history:
“The Ship Shoal Block 32 field, expanded in size by drilling many more wells, produced oil until 1984. When finally plugged and abandoned, it had delivered 1.4 million barrels of oil and 307 million cubic feet of gas from some 30 wells, producing continuously for 37 years.”
