By the OGJ Online Staff
HOUSTON, Oct. 23 -- Directors of Kerr-McGee Corp., Oklahoma City, approved development of the Gunnison field in 3,100 ft of water in the Gulf of Mexico, using a truss spar similar to those used in developing the deepwater Nansen and Boomvang fields, officials reported Tuesday.
"The Gunnison development will provide Kerr-McGee with its third deepwater hub in the gulf," said Luke R. Corbett, chairman and CEO. "Similar to our new Nansen and Boomvang developments, the Gunnison hub will allow us to maximize the value of the developments and surrounding assets."
Through its strategy of focusing on core areas in high-potential trends, Corbett said, Kerr-McGee accumulated 12 blocks in the immediate Gunnison area and holds interests in more than 300,000 acres in the western and southwestern Garden Banks area.
Gunnison was discovered in May 2000 on Garden Banks Block 668. The adjacent Durango gas field was discovered this June on Garden Banks Block 667. Kerr-McGee currently is drilling the satellite Dawson prospect on Garden Banks Block 669. The three blocks make up the Gunnison area.
Gunnison and Durango are estimated to have total reserves of more than 120 million boe. If the Dawson satellite proves successful, it will enhance development of the Gunnison area, Corbett said.
Kerr-McGee Oil & Gas Corp., a wholly owned subsidiary, operates the Gunnison area with 50% interest. Partners include Nexen Petroleum USA Inc., a Nexen Inc. subsidiary, with 30%; and Cal Dive International Inc., 20%.
The truss spar, designated the Kerr-McGee Global Producer VII, will be installed in Block 668 in company officials describe as "a prime position to provide a strategic hub for third-party business in the western Garden Banks and western Keathley Canyon areas."
The Gunnison spar will be designed for production of 40,000 b/d of oil and 200 MMcfd of gas. Initial production from the development is expected in early 2004.
The new spar will be slightly larger than the Nansen and Boomvang spars, with a length of 549 ft and a 98-ft diameter. Initial development will include nine wells connected to the spar -- six dry tree and three subsea wells for Gunnison and Durango. If successful, Dawson will be produced as a subsea tieback to the Gunnison spar.
The world's first truss spar was installed at Kerr-McGee's Nansen field earlier this month. This new technology is a more cost-effective version of the innovative spar production system first used in 1997 at Kerr-McGee's Neptune field in the gulf, officials said. The truss spar design replaces the lower cylindrical hull of the original spar with an open structure to improve stability and reduce size and cost.
"During the past 8 years, our net production volumes in the deep water have increased at a compound annual growth rate of more than 50% and, in 2002, we expect net daily production from our deepwater gulf facilities to reach more than 70,000 boe," said Corbett.
Kerr-McGee's share of the total cost of the Gunnison development will be $300-350 million, officials said. Finding and development costs are expected to be less than $5/boe, with operating costs projected at $1.10/boe, said company officials.
Nexen of Calgary also owns 50% interests in 12 other blocks in the Gunnison area, with multiple exploratory prospects that could be developed quickly and cheaply using the Gunnison infrastructure, said officials of that company in a separate statement Tuesday.
Nexen's share of the total project cost is expected to be $180-210 million (US), with $60 million invested by the end of this year, another $62 million in 2002, and the balance in 2003.
"The economics of this project are outstanding," said Charlie Fischer, Nexen's president and CEO. "Gunnison will produce high-quality oil and natural gas which will attract premium prices."
He said, "Our program in the deep waters of the Gulf of Mexico is right on track. Gunnison will be a major competitive advantage for us. We also expect to proceed with a fast track development at Aspen with first production in the second half of 2002."
With more than 100 deepwater exploration blocks and a 3-year inventory of high-quality drilling prospects, Fischer said, "We're well positioned to grow rapidly in this basin."