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Petroleum News: Shell, Petrobas off and running

Joint venture groups in race for first Lower Tertiary production from ultra-deepwater U.S. Gulf of Mexico, Odum says Shell will win

Ray Tyson
For Petroleum News
Week of November 05, 2006

The race is on between joint venture groups led by Shell Offshore and Brazil’s Petrobras seeking to become the first to produce from the massive and highly touted Lower Tertiary play in the ultra-deepwater Gulf of Mexico.

Shell made it a contest on Oct. 26 when the major announced plans to combine three Alaminos Canyon discoveries — Great White, Tabago and Silvertip — into a single “hub” development called the Perdido Regional Development Host. BP and Chevron are Shell’s principal partners in the Shell-operated joint venture.

Marvin Odum, Shell’s executive vice president, E&P Americas, declared in a prepared statement that the Alaminos Canyon development “will establish the first production from the Lower Tertiary play in the Gulf of Mexico.”

First production from the three Lower Tertiary discoveries in Alaminos Canyon is expected “around the turn of the decade,” the company said.

2009 startup planned at Walker Ridge Cascade

However, Petrobras and 50-50 partner Devon Energy announced earlier that they anticipated a 2009 startup of their Lower Tertiary Cascade discovery in Walker Ridge. “It’s the leading candidate for first production of (the) Lower Tertiary,” declared Stephen Hadden, Devon’s senior vice president of exploration and production.

The Cascade partners already have received approval from the U.S. Minerals Management Service to form a 23,000-acre unit which prevents exploration encroachment on the Cascade prospect while authorizing commercial development of the unit. However, the partners have yet to say how much daily production could be expected from Cascade.

Oklahoma-based Devon also happens to own interests in two additional Lower Tertiary discoveries in Walker Ridge, St. Malo and Jack, as well as in the first-ever Lower Tertiary discovery in Keathley Canyon, called Kaskida.

Jack production test key

Plans to develop both the Walker Ridge and Alaminos Canyon discoveries were announced only after positive results from a crucial Lower Tertiary production test conducted on the Jack discovery were disclosed two months ago, setting the stage for what’s likely to be the U.S. Gulf’s next oil rush, situated along a gargantuan trend extending several hundred miles from Walker Ridge westward through Keathley and Alaminos canyons.

Results from the Chevron-operated Jack test, although conducted on just 40 percent of the pay, essentially proved the “deliverability” or commercial potential of the risky Lower Tertiary horizon, located in a remote area of the Gulf and up to 20,000 feet and more below the ocean floor. It’s believed the play could hold billions of barrels of recoverable oil in scores of individual prospects. Thus far, a dozen Lower Tertiary discoveries have been announced, with many of their owners waiting on production results from Jack before proceeding with field development.

Perdido will process 100,000 bpd

The Perdido development in Alaminos Canyon is being designed to process 100,000 barrels of oil and 200 million cubic feet of natural gas per day, Shell said, noting that the installation would be moored in about 8,000 feet of water, making the deepest spar production facility in the world, the company added.

“The Perdido Foldbelt is remote and is located in ultra-deep waters from about 7,500 to 10,000 feet, with rugged seafloor terrain,” Shell’s Odum said. “This geologic setting is different from what has previously been produced in the Gulf of Mexico.”

The development concept includes a common processing hub on Alaminos Canyon Block 857 near the Great White discovery that incorporates “drilling capability and functionality” to gather, process and export production within a 30-mile radius of the facility. The hub concept would reduce costs and lower risk, plus reduce the number and size of the facilities and operations, Shell said.

Shell did not say whether production from Great White and the other two fields, Tabago and Silvertip, would be transported ashore via pipeline or by ocean tanker. The Perdido hub would be located about 200 miles south of Freeport, Texas.

Shell operates the Perdido Regional Development with a 35 percent interest, followed by Chevron with a 37.5 percent stake and BP with a 27.5 percent interest.

Shell operates Great White

Separately, Shell operates the Great White discovery with a 33.34 percent interest, followed by Chevron with a 33.33 percent interest and BP with a 33.33 percent stake. Great White, among the first Lower Tertiary discoveries in the U.S. Gulf, is located on Alaminos Canyon blocks 812, 813, 814, 857, 900 and 901. Shell drilled a total of five wells at Great White, with the most recent spud occurring in March 2004. The original well was drilled to a vertical depth of 14,405 feet. An appraisal well was drilled to a true vertical depth of 15,035 feet in 2002.

Tobago is located on Alaminos Canyon Block 859 in about 9,600 feet of water. Chevron owns 57.5 percent along with its co-owners Shell, the operator, with 32.5 percent and Canada’s Nexen with 10 percent. The discovery well was drilled in 2004 to a total depth of 18,510 feet. A sidetrack well was drilled to 18,425 feet.

Silvertip, on Alaminos Canyon Block 815, is 60 percent owned by Chevron and operated by Shell with a 40 percent interest. Chevron drilled the AC 815 No. 1 discovery well in August 2004 in roughly 9,200 feet of water to a total depth of 14,778 feet.

Chevron operates two fields that have been discovered in the Perdido area, Tiger and Trident, and owns interests in two exploration prospects, Whale and North Brontosaurus. Aside from participating in the Perdido development in Alaminos Canyon, the company received worldwide acclaim for the record-setting production test well at Jack in Walker Ridge. It was the first Lower Tertiary production test in the U.S. Gulf. Chevron also is developing the $3.5 billion Tahiti project in the Green Canyon area, which is expected to achieve first production in 2008.

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