Careful planning of deepwater drilling cuts costs

Spending more time planning before drilling and using fixed platforms as hub facilities for satellite subsea wells help slash costs for deepwater operators in the Gulf of Mexico, according to new studies by the Ziff Energy Group.


Sam Fletcher
OGJ Online

OFFSHORE TECHNOLOGY CONFERENCE, HOUSTON�Spending more time planning before drilling and using fixed platforms as hub facilities for satellite subsea wells help slash costs for deepwater operators in the Gulf of Mexico, according to new studies by the Ziff Energy Group.

"Companies that spend time and involve all team members in drilling planning see a reward in lower finding and development costs," said Philip Moses, project manager for Ziff Energy's first study of offshore cost components for 10 participating operators.

Participants in that study spent more than $5 billion on offshore exploration and development in 1996-98, drilling about 1,200 wells in gulf waters as deep as 1,500 ft. In the process, they added more than 700 million boe of reserves, including 10% upward revisions of discoveries.

That means the 10 companies invested an average $6/boe of production during a 3-year period, as oil prices slid from 1996 highs to the low levels of 1998. Yet their spending pattern was "remarkably stable," even as rig rates collapsed during that period.

Finding and development costs varied significantly among the seven offshore strategy areas studied. But in four mature areas, those costs averaged $6.89/boe or $1.15/Mcfe, with actual costs in the ranges of $5.20-8.50/boe and $0.87-1.56/Mcfe, Moses said Wednesday at the Offshore Technology Conference (OTC) in Houston.

That study was the first to try to evaluate how much additional financial value an operator derives from using 3D seismic surveys. It found that virtually all 3D seismic surveys in the gulf are now done on a speculative basis, with few proprietary shoots for individual companies. It also found that all of the wells were drilled on the basis of 3D data.

With such widespread use of essentially the same data, 3D itself was not a factor in determining finding and development costs. But the extra steps taken in processing that data and the best skills in interpreting it helped reduce total finding and development costs for various companies.

Those firms that do additional processing do better than "the cowboy companies that just take the 3D data and start drilling," said Ziff officials.

Latest cost studies
Ziff Energy is now doing its third evaluation of operating costs and best operating practices for the Gulf of Mexico. The work is divided into two studies�one on the shelf and on in the deep waters of the gulf. Delivery of the results to participants is scheduled for July, in time for planning programs for 2001.

But earlier studies in 1998-99 found that fixed platforms on the shelf edge and slope areas of the gulf that serve as hubs to process production from subsea satellites registered the lowest average unit costs, in the range of $0.35-1.20/boe, said Tim Powell, manager of the deepwater study.

Use of floating production facilities also resulted in low average unit costs, ranging from 40�/boe to more than $2/boe, because of the tremendous flow rates of most of those deepwater fields, he said.

Development programs using subsea satellite wells are saving large amounts of investment capital, said Powell. But those savings could be wiped out if a producer is required to pay processing fees of nearly $1/boe at a host facility.

Moreover, costs for interventions of subsea wells for maintenance and workovers are 5-10 times the cost of similar work on conventional wells aboard platforms. That could wipe out initial savings on the subsea satellite program. It makes preplanning to avoid such problems even more valuable, Powell said.

Participants use information from the studies to determine their weaknesses and strengths in blind comparisons with one another. At the end of the study, participants can swap information on best practices, said Powell.

"No one company is the best at everything," said Adrian H. Goodisman, senior vice-president of exploration and production services for Ziff Energy, a leading North American energy-consulting firm.

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