Gulf of Mexico deep shelf gas play requires basic geology and acceptance of risk

Sept. 18, 2003
One of the most striking things about opening a new petroleum trend is the high level of risk and uncertainty that the industry must overcome to prove the new play's potential. It has happened numerous times as the offshore oil and gas industry has moved into deeper water and it is now happening as the Deep Shelf gas play is unfolding. This trend became evident at the Back to the Shelf conference in Houston recently.

One of the most striking things about opening a new petroleum trend is the high level of risk and uncertainty that the industry must overcome to prove the new play's potential. It has happened numerous times as the offshore oil and gas industry has moved into deeper water and it is now happening as the Deep Shelf gas play is unfolding. This trend became evident at the Back to the Shelf conference in Houston recently.

The consensus at the meeting was that industry currently is working at the limit of its seismic imaging technology. The seismic "bright spot" approach will not work effectively in this new play, and companies must return to the basics: regional geology, sand trends, and detailed understanding of the petroleum system feeding the deep targets.

The third Back to the Shelf conference, organized by The Energy Forum, focused on the business strategies of successful companies working in the new play. El Paso Production's President Ron Erskine showed the importance of a dedicated drilling effort to learn how to effectively and economically drill deep shelf targets. By drilling 12-15 wells each year in the trend, the company has dropped its drilling costs to $14 million/well as it applied enhanced drilling technologies. El Paso considers the deep shelf similar to the opening of the GoM's marine frontier in the 1950s.

A luncheon address by Johnnie Burton, director of the Minerals Management Service, emphasized the need for new domestic natural gas supplies. The US' natural gas crisis is real according to Burton.

This is due in large measure to declining GoM supplies. Conventional shelf production dropped 23% between 1990 and 2000. Canada and Mexico have increasing domestic demand, so fewer supplies are available from them. MMS has acted to encourage deep shelf drilling through its royalty relief program.

Drilling technology is available to drill to 22,000 ft, according to Jon Marshall, president and CEO of GlobalSantaFe. The drilling environment is extremely challenging, with temperatures up to 500° F and pressures up to 28,000 psi, which is hard on electronics and elastomers. Experienced people are the key, Marshall said. "Brainpower will get these wells down, not horsepower," Marshall stated. Safety also is critical due to the extreme conditions and the presence of dangerous gases.

New drilling rigs and high-spec equipment is coming on the market. Danny McNease, president and CEO of Rowan Companies, highlighted the needed drilling solutions: hoist and setback capability up to 2.5 million lb, variable load capacity up to 5 million lb, 10,500-hp engines, three high-capacity mudpumps, mud storage up to 2,100 bbl with the ability to handle two different mud systems, a mud cooling system, and large-bore BOPs of 15,000 psi or greater.

Business strategies that work include choosing a sand trend to follow, delineate the past shelf edge and follow the sands into deeper depocenters taking into account the extensional faulting style of the region and its development history. Stacked sands are common with excellent production characteristics according to successful operators.

This Deep Shelf gas play is stretching of the industry's capabilities in many ways. Successful players must accept an element of risk to receive first-mover advantage.