GULF OF MEXICO SUBSALT PLAY YIELDS DRY WILDCAT

A.D. Koen
Senior Editor-News

The hot subsalt play in the Gulf of Mexico has chalked up a disappointment.

Anadarko Petroleum Corp.'s 1 Mesquite wildcat off Louisiana is a dry hole.

The first Anadarko operated subsalt wildcat in the gulf found no commercial hydrocarbons below a salt sill underlying Vermilion Block 349 at 9,400-11,750 ft. Operator Anadarko and Phillips Petroleum Co. each held a 50% interest in the wildcat, drilled to 16,146 ft as a test of the Mesquite prospect.

The disappointing Mesquite news marked the second reported failure to find oil or gas beneath allochthonous salt formations in the gulf since Phillips last fall disclosed its Mahogany discovery on Ship Shoal South Addition Block 349. Mahogany operator Phillips with a 37.5% interest and partners Anadarko and Amoco Production Co. with 37.5% and 25%, respectively, logged flow rates of 7,256 b/d and 9.944 MMcfd of gas from the subsalt test.

The other subsalt dry hole disclosed recently in the gulf was Amoco's 1 Mattaponi wildcat on South Marsh Island Block 169, where it was a partner with Oryx Energy Co., Dallas, Amerada Hess Corp., and Petroleo Brasileiro SA.

Despite the two setbacks, Anadarko officials remain enthused about the gulf's subsalt play.

The company late last month was buoyed by Phillips' and Amoco's decisions to participate in exploration and development of Ship Shoal South Addition Blocks 337 and 338 (OGJ, May 30, Newsletter).

Minerals Management Service awarded Ship Shoal 337 to Anadarko after the company submitted a high bonus bid of $40 million in late March at Outer Continental Shelf Sale 147 for the Central Gulf of Mexico. Anadarko was high bidder on more than a score of Sale 147 tracts offered for lease (OGJ, Apr. 11, p. 36).

Block 337 was the most sought after tract offered in the sale. Geophysical data revealed a large subsalt anticline, possibly related to the Mahogany structure on Block 349.

Given the large portion of the gulf underlain with salt and the few subsalt tests drilled there, "we think there is a lot of potential in a section of a prolific basin that has been underexplored," Anadarko's Ken Naldony, manager of offshore exploration, told a recent subsalt conference in Houston.

SUBSALT DRILLING

With the fate of 1 Mesquite in the record books, Phillips and Anadarko are focusing their gulf subsalt drilling on the 18,500 ft 2 Mahogany delineation well, spudded last January on Ship Shoal 349 at a surface site about 3,000 ft east-northeast of 1 Mahogany, and on 1 Teak, a 16,500 ft wildcat spudded last February on South Timbaher Block 260.

Phillips operates both wells. Phillips, Anadarko, and Amoco hold the same interests in 2 Mahogany as in the Mahogany discovery well. Teak is shared equally by Phillips and Anadarko.

At last report, Phillips and partners had set casing through salt and were nearing proposed depth in 2 Mahogany. Meantime, well tests were continuing at 1 Teak, where results were delayed because of undisclosed problems.

Based on 1 Mahogany well data, Phillips and Anadarko estimate Mahogany field's gross recoverable reserves at more than 100 million bbl of oil equivalent (BOE). Gross reserve potential of the Teak prospect also is estimated at more than 100 million BOE.

More intriguing is the promise of Ship Shoal 337, awarded to Anadarko along with 15 other tracts with subsalt potential in Sale 147.

Anadarko on Mar. 30 in New Orleans stunned Sale 147 participants with a $40 million bid for Block 337 that topped by nearly $34 million a joint offer by Phillips, Amoco, and itself. Phillips and Amoco later exercised an option to take shares in that tract and Ship Shoal 338 proportionate to their interests in Ship Shoal 349-359.

BIG BID VALIDATED

Lessees say the allure of Ship Shoal 337 is an anticline with four way closure, dubbed Alexandrite, covering 3,500 acres about 1-1/2 miles northeast of and 500 ft updip from Mahogany field.

Industry sources say Mahogany pay under Ship Shoal 349-359 is a middle Pliocene anticline beneath a 3,500 ft salt sheet. The Mahogany discovery well reportedly cut a gross hydrocarbon column of more than 1,000 ft consisting of interbedded sand and shale strata. Mahogany's main pay zone is said to be more than 200 ft of sand with good reservoir characteristics.

Alexandrite reportedly is larger than Mahogany-so big that topographic maps of the gulf clearly show the anticline.

"We saw it when we were reviewing blocks for Sale 147," said Anadarko spokesman Paul Taylor. "Everybody saw it. We saw 337 as the most attractive lease in the whole sale and thought it would get the most bids. And it did (nine)."

While Anadarko was convinced about the attractiveness of Block 337, it was unsure whether the $6.25 million joint offer by Phillips, Amoco, and itself would acquire the tract. "So we bid separately with a number we felt confident would win and would exceed the value MMS assigned to that block," Taylor said.

"We're glad we won it," he said. "Our evaluation before Sale 147 indicated we could have paid significantly more than $40 million and still had an economic discovery with a 10% chance of success."

In the eyes of Anadarko, decisions by Phillips and Amoco to join in tests of the Alexandrite prospect show they came to similar conclusions.

Phillips, Anadarko, and Amoco are awaiting results of 2 Mahogany and are processing data from a big prestacked 3D seismic survey across several blocks in the area before deciding when and where to begin drilling Alexandrite.

Partners expect to spud an Alexandrite wildcat early next year.

Meantime, hopes for the gulf's subsalt play remain high.

Anadarko's Naldony says the gulf's subsalt potential is exciting because it is a chance for operators to apply the latest exploration and drilling capabilities in pursuit of high quality prospects in relatively shallow water and at relatively modest costs.

Petrie Parkman & Co., Denver, estimates the cost of full development of a subsalt prospect like Mahogany, in 370 ft of water, at about $1.20/BOE.

"It's like going back to the 1950s and '60s before most of the gulf's wells were drilled," Naldony said. "We don't need to discover huge reserves to be hugely successful."