Falling rig rates advantageous for drilling offshore the Bahamas
Bahamas Petroleum Co. has issued an update on its plans to start exploration drilling offshore the Bahamas.
In anticipation of the islands’ new Petroleum Act becoming law, the company initiated discussions last year with the government on planning for the first well and subsequent commencement of operations.
To support this work, BPC completed various tasks designed to de-risk technical aspects of the project. These included commissioning fluid inclusion analyses from Fluid Inclusion Technologies on retained core and cuttings from three historical wells drilled in the Bahamas that offset BPC’s acreage.
All three wells demonstrated the presence of oil migration with a signature that indicates light oil across multiple horizons. Results suggest an active, local oil-generative source rock capable of generating large hydrocarbon volumes.
In addition, multiple source rocks are likely present based on API gravity variations within the inclusions.
BPC completed another program to substantially re-engineer its planned first well, based on 3D seismic data; comparison of historic drilling performance in the Bahamas and for similar wells elsewhere, establishing “technical limits;” and work with third-party companies to incorporate modern technologies in the well equipment design in order to maximize the rate of penetration.
Additionally, the company engaged a rig broker to review rig options, in light of globally falling rig rates and increased availability. BPC now anticipates a cost for the initial exploration well (inclusive of appropriate contingencies and ensuring safety and environmental procedures) in the $50-$60 million range, well below its previous estimates.
After updating its economic models to reflect current global oil prices, reduced well costs other factors such as the project’s proximity to existing infrastructure, BPC believes that the minimum field size for an economic development is less than 200 MMbbl, with a break-even oil price of $30-$40/bbl, meaning that the project would be profitable even in a lower oil price environment.