Sustaining the Gulf of Mexico; exploration and development below 15,000 ft TVD

June 1, 2006
Over the last several years, oil and gas explorers have applied various alternative methods to obtain resources needed to meet skyrocketing energy consumption, worldwide.

11% of all wells drilled from 1993-2005 reached TVD below 15,000 ft

Jim Dodson, Ted Dodson, James K. Dodson CompanyDavid Paganie, Senior Editor

Over the last several years, oil and gas explorers have applied various alternative methods to obtain resources needed to meet skyrocketing energy consumption, worldwide. In the US, industry experts have determined that one way to meet the region’s growing demand is to tap the 55 tcf of natural gas located below the seabed at levels typically not reached by drillers.

Regulatory authorities with backing from the US government have formally authorized incentives for operators that bring a well online on the shelf (=<600 ft of water) drilled to greater than 15,000 ft total vertical depth (TVD).

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However, according to the latest statistics for wells producing between the years 1993-2005, while deeper wells yield higher production rates, overall, not many deeper wells were drilled compared to the number of holes completed in less than 15,000 ft TVD. Only 11% (14% exploration; 10% development) of wells were drilled to greater than 15,000 ft TVD. Of these wells, 75% were drilled between 15,000 ft and 18,000 ft TVD.

According to statistics, 88 (12%) of prod-ucing exploration wells on the shelf were drill-ed to a TVD greater than 15,000 ft, and 132 (8%) of development wells were drilled in this range. In addition, a clear majority of these wells were drilled in the range of 15,000 ft to 18,000 ft TVD; 74% of exploration wells and 80% of development wells.

For exploration greater than 15,000 ft TVD on the shelf during the period 2003-2005, 115 wellbores (45 in 2003, 41 in 2004, and 29 in 2005) were drilled by 35 operators.

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The average final total depth (FTD) of the 115 exploration wellbores drilled was 17,568 ft with average TVD of 17,330 ft. The average duration to drill these wells from spud date to total depth was 76 days with average footage drilled per day or rate of penetration (ROP) of 231 ft. And the average cost to drill from spud date to FTD was surveyed at $10 million during 2003-2004 and $12 million in 2005.

The average mechanical risk index (MRI) for the wellbores, which normalizes the drilling complexity, was 2,168, compared to an average index of 975 for shelf wellbores drilled between 10,000 ft FTD and 12,000 ft FTD. The overall discovery ratio for deep shelf wells drilled to greater than 15,000 ft TVD was 33%.

Deep shelf operations

Twenty-two operators drilled at least 2 deep exploration wells on the shelf during the 2003-2005 timeframe. In 2005, El Paso only drilled one deep shelf well, and Dominion, Remington, Stone, and Pioneer Natural Resources did not drill any.

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Meanwhile, some of these operators have either sold off their respective property interests or were absorbed into other companies.

  • May 25, 2006 - Plains E&P andEnergy Partners, Ltd. have both issued bids to acquire Stone Energy.
  • May 16, 2006 - Coldren Resources entered into an agreement to purchase all ofNoble Energy’s shelf assets. The deal is expected to close in mid-2006.
  • April 21, 2006 - Mitsui Oil Exploration Co. closed an agreement withPogo Producing to acquire an undivided 50% interest in its GoM properties.
  • March 2, 2006 -Forest Oil completes spin-off of its GoM operations and merges into Mariner Energy.
  • January 26, 2006 - Helix signed an agreement to acquireRemington. The deal is expected to close in mid-2006.
  • January 23, 2006 - W&T Offshore entered into a definitive agreement to acquire all of Kerr-McGee’s shelf properties. The transaction is expected to close in mid-2006.
  • December 13, 2005 - the merger ofSpinnaker with Hydro was completed.
  • August 31, 2005 - Woodside Energy completed acquisition ofGryphon Exploration.
  • October 25, 2004 - Apache closed on acquisition ofAnadarko’s shelf properties.
  • May 21, 2004 - Kerr-McGee completed merger withWestport Resources.

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BP is also no longer active on shelf as of April 1, 2006. The company’s remaining shelf properties were acquired by Apache Corp. The transaction is expected to close in mid-2006.

Shelf production

A majority of gas production (67%) flows from the 715 exploration wellbores drilled on the shelf from 1993-2005. These wells account for 37% of current oil production. Meanwhile, a majority of oil and gas derived from shelf wells come from those drilled to a TVD of 15,000 ft or less. Production from exploration wells drilled in this range account for 79% of oil and 75% of gas. The total number of wells drilled on the shelf during the designated timeframe account for 86% of all exploration wells drilled.

Statistics indicate similar results for development wells drilled under these parameters. Total production from the 1,746 development wells account for 30% of oil and 63% of natural gas produced. Similar to exploration statistics, shelf development wells drilled to a TVD of 15,000 ft or less account for the majority of current oil and gas production. The number of wells drilled in this range total 82% of all development wells drilled.

It is important to point out that while a majority of exploration wells drilled on the shelf (88%) averaged TVD of 9,354 ft and 181 b/d of oil and 4,255 Mcf of gas and development wells (92%) averaged TVD of 9,030 ft and 195 b/d of oil and 2,638 Mcf of gas, daily production is dramatically higher as TVD increases.

The seven exploration wellbores drilled between 20,000 ft and 25,000 ft TVD averaged 490 b/d of oil and 20,163 Mcf of gas. Similarly, the seven development wells drilled in the same TVD range averaged 201 b/d of oil and 16,642 Mcf of gas.

Deep drilling in deepwater

According to statistics, 21 or 34% of exploration wells producing were drilled in greater than or equal to 1,500 ft of water to a TVD greater than 15,000 ft, and 72 or 38% of development wells were drilled in this range. Similar to deep shelf statistics, in this range, a majority of wells were drilled between 15,000 ft TVD and 18,000 ft TVD; 74% of exploration wells and 75% of development wells.

For exploration in less than or equal to 15,000 ft TVD in water depths greater than or equal to 1,500 ft during the period 2003-2005, 93 wellbores (43 in 2003, 30 in 2004, and 20 in 2005) were drilled by 18 operators who drilled at least one well.

The 93 wellbores drilled averaged an MRI of 5,919, 85 drill-days, 22,935 ft FTD, and 22,258 ft TVD. Average ROP per day was 270 ft. In addition, the average drill cost over the three-year period was $30 million for wells in the range of 4,000-6,000 MRI.

For wells falling in the range of 6,000-9,000 MRI, the average drill cost was $60 million. Overall, the success ratio for exploration wellbores drilled to greater than 15,000 ft TVD from 2003-2005, was 47%.

Approximately 50% of current oil production flows from the 62 exploration wellbores drilled in deepwater from 1993-2005. These wells account for 25% of current gas production. Meanwhile, a majority of oil and gas derived from deepwater wells come from those drilled to a TVD of 15,000 ft or less. Production from exploration wells drilled in this range account for 60% of oil and 56% of gas. The total number of wells drilled in deepwater during the designated timeframe account for 7% of all exploration wells drilled.

Statistics indicate similar results for development wells drilled under these parameters. Total production from the 191 development wells account for 59% of oil and 27% of natural gas produced. Shelf development wells drilled to a TVD of 15,000 ft or less account for the majority of current gas production and those drilled between 15,000 ft and 18,000 TVD account for the majority of current oil production. The number of wells drilled in this range total 9% of all development wells drilled.

Similar to drilling statistics on the shelf, while a majority of exploration wells drilled in deepwater (66%) averaged TVD of 11,006 ft and 3,512 b/d of oil and 18,684 Mcf of gas and development wells (62%) averaged TVD of 11,607 ft and 3,275 b/d of oil and 15,650 Mcf of gas, daily production increases with higher TVD levels as well.

Only two exploration wells were drilled between 18,000 ft TVD and 20,000 ft TVD, but averaged higher daily oil production output than any other TVD range at 13,494 b/d. A further four wells were drilled in the TVD range of 20,000 ft to 25,000 ft, averaging the highest daily gas production rate of 24,980 Mcf/d.

Three development wells were drilled in the 20,000 ft to 25,000 ft TVD range, averaging 9,149 b/d of oil and 10,456 Mcf/d of gas. The highest daily gas production rate of 21,457 Mcf was from the TVD range of 18,000 ft to 20,000 ft.

Mechanical Risk Index (MRI) is a registered trademark of James K. Dodson Co.

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