OTC: Deepwater roles eyed for indies, compact wells

May 20, 2002
US independent oil and gas companies have been increasingly active and productive in the US Gulf of Mexico.

US independent oil and gas companies have been increasingly active and productive in the US Gulf of Mexico. And access to new areas as well as some royalty relief in existing areas will allow them to continue playing this vital energy supply role for the US in the near term.

That was the message of Chuck Davidson, CEO, president, and chairman of Noble Energy Inc., Houston, speaking at the May 6-9 Offshore Technology Conference in Houston. Davidson made his remarks as part of a panel representing the US Independent Producers Association of America.

Crowds at this year's Offshore Technology Conference May 6-9 in Houston were much heavier than this afterhours photo might suggest. Final attendance at the world's largest oil and gas industry conference and exhibition, in its new venue at Reliant Center near the old Astrodomain complex, was 49,620. That compares with 47,649 in 2001 and 43,785 in 2000.
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Meanwhile, another late session at OTC focused on the economics of deepwater development demanding compact well designs. Technology advances will make more-slender and smaller wells possible, reducing wellbore volume by as much as 40%, luncheon speaker ABB Vetco Gray Vice-Pres. Norman Brammer said.

Deepwater potential and technology, especially in the Gulf of Mexico, dominated the focus of earlier sessions at OTC this year (OGJ, May 13, 2002, p. 22).

Industry condition

Davidson said the events of the past 2 years have shown how closely coupled is the energy industry's health with energy prices. He said that high levels of activity and costs in early 2001, in response to the high prices commodities were attracting, led to increases in gas supplies. And he noted how rapidly US gas drilling faded as inventories grew and those same prices began to sag.

At present, a reviving economy is driving up gas demand-and prices-along with the natural gas rig count. But the underlying long-term demand for natural gas in the US remains strong, he said, although both producers and consumers continue to see highly volatile prices.

IPAA's objective, said Davidson, is to obtain access to the new resources so important for future supply growth.

Among issues the industry faces, however, is continuing consolidation as companies work to increase efficiency and gain access to capital. Technology advances are playing a huge role in these efforts, specifically by making more mature areas more productive and aiding efforts in newer, more difficult regions.

Davidson noted that there are about 8,000 independents currently active in the US who have drilled more than 85% of all wells in 33 states with oil and gas. He also showed how independents' involvement in US oil and gas development has increased, to 60% of US upstream investment in 2000 from 35% in 1980. Independents hold nearly half the federal leases nationwide, 80% of the shallow-water leases in the Gulf of Mexico, and 50% of the deepwater leases. Davidson said that in the recent federal gulf lease Sale 182, independents had apparent high bids on more than 80% of the tracts.

Deep tracts

In the gulf, independents face fewer and smaller prospects and a higher rate of decline in existing fields, which Davidson said advances in technology are helping to mitigate. Deep water presents longer development times, risks more capital, and raises significantly more difficult technical challenges.

Davidson particularly noted the challenges of the deeper-strata Outer Continental Shelf-wells to below 15,000 ft-where advanced seismic technologies have enhanced prospectivity. There, the target sizes are larger than on what he called the "conventional" shelf.

He said US Minerals Management Service studies put the gas potential below 15,000 ft at 5-20 tcf. In 2001, with 35,000 wells drilled to date on the shelf, only 5% had penetrated below 15,000 ft.

It's at these drilling depths that producers receive some favorable royalty consideration.

Also using MMS data, Davidson pointed out how production from deepwater tracts has, beginning in the mid and late 1980s, allowed total Gulf of Mexico production to continue to grow. Shelf production has been flat and, since the mid-1990s, declined to about 15 bcfed in 2002, while production from the deepwater gulf in the same year pushed total gulf production to about 23.5 bcfed.

Changing standard

Brammer delivered his message on the role of increasingly compact well designs in deepwater development at the OTC topical luncheon on "Deepwater Drilling Systems: Evolution and Integration with Production Systems."

Brammer, responsible for ABB Vetco Gray's engineering policies, procedures, standards and specifications, material engineering, and product development, said, "The 183/4-in., 10,000 psi blowout preventer [BOP] with 21-in. drilling riser has become the dominant riser system; however, I predict that is going to change."

He added that, even though deepwater wells require high structural capabilities, the economics of deepwater development will drive operators to use compact wells.

Brammer noted that the industry has applied slimhole-drilling techniques to land-based operations for a long time and that Brazil's state oil company Petroleo Brasileiro SA (Petrobras) had pioneered the use of slender wells offshore.

He defined a compact well as effectively having 40% less wellbore volume. Drilling operations would generate 40% fewer drill solids, and the well would require 40% less steel, mud, and cement to construct.

In addition to lower direct well construction costs, the secondary benefits of compact wells would improve the capacity and capability of smaller and older rigs to drill and complete wells at greater water depths. Compact well designs will also keep the costs down for newbuild rigs.

Brammer said, "If you go from a 21-in. riser to a 16-in. riser, you're going to save 40% of the mud volume in 5,000-ft water depth or whatever water depth you're drilling in." He added that the 16-in. risers and related equipment are available and that more of the smaller risers are under construction.

He noted that Petrobras has drilled about 50 wells patterned to a slender well design using 163/8-in. BOP stacks and conventional wellheads.

Technology

Looking forward, Brammer said the offshore oil and gas industry must learn and is learning to do more with less. Reviewing technologies that will make his envisioned compact wells viable, Brammer highlighted expandable tubulars and slimhole-drilling technologies such as coiled tubing drilling.

Concerning dual-density mud systems, however, Brammer said that the complexity of the equipment involved, establishing its reliability, and the high capital investment are question marks for the technology's further use in the industry. "I wish the [subsea mudlift] technology every success, but I cannot see it becoming the routine solution," he said.

Advancing the frontier

Brammer said that the offshore drilling industry has come a long way in 40 years since it installed the first subsea wellhead in 51 ft of water in 1961; he then highlighted some current industry records:

  • Unocal Corp. and Transocean Sedco Forex Inc. hold the record for the well drilled in deepest water with the Trident II discovery in 9,727 ft of water.
  • BP PLC's Thunderhorse project holds the record for the deepest well drilled in the deepwater environment at 29,060 ft TD and in 6,300 ft water depth.

Other records Brammer noted included the well completed in deepest water at 7,209 ft of water, the well drilled in deepest water from a deep draft caisson vessel or spar at 4,800 ft of water, and the record well drilled from a floating vessel with surface BOP was in 6,730 ft of water.

Brammer said, "It has really been [since] the late 1990s that we've seriously started drilling in deep water, with 4% of all wells drilled last year in water depth greater than 5,000 ft." He added that the trend ahead looks steady, with 6% of all wells drilled by 2004 in deep water. For well completions, 20% of all wells completed for production in 2001 were in water depths greater than 3,000 ft, indicating that the motivation for drilling deepwater wells more efficiently should be clear.