OFFSHORE DRILLING: Blazing a trail far out at sea

A view from a helicopter shows a supply vessel near the massive Perdido hub, which is temporarily burning off natural gas until production begins.

Blazing a trail far out at sea

By BRETT CLANTON Copyright 2010 Houston Chronicle

April 17, 2010, 12:24AM

Astronauts just had to get to the moon. They didn’t have to figure out how to extract oil from it.

With the new $3 billion Perdido oil and natural gas platform, in a remote deep-water area of the Gulf of Mexico, Shell and its partners have effectively done both.

After more than a decade of work, they began last month pumping oil at the massive floating facility, which sits in nearly 8,000 feet of water and draws from wells that far below the sea floor, setting several records along the way.

A recent visit to Perdido, roughly 200 miles south of Houston, brings the scope of the achievement into focus.

It also offers a glimpse of what could be ahead for the oil and gas industry as it presses farther into one of the last remaining U.S. regions where big quantities of crude oil are still being discovered.

“What we’re seeing here is the start of a new frontier in the Gulf of Mexico,” Bill Townsley, Shell’s Perdido venture leader, said as he stood aboard the hulking steel structure, staffed with 150 people, that he has dedicated the last three years of his life to building.

Indeed, Perdido could offer a template for rivals to follow in coming years as they develop fields of their own in an emerging deep-water area known as the Lower Tertiary trend. In recent years, more than a dozen big oil discoveries have been in made Lower Tertiary formations — deposited from 65 million to 35 million to 23 million years ago — in a 300-mile band on the outer edge of the U.S. Gulf between Texas and Louisiana.

Shell’s Perdido — which in Spanish means “lost” — is the first to achieve commercial production there, but Lower Tertiary fields are also being developed by BP, Chevron Corp. and others and are expected to help reverse years of oil and gas output declines in the well-plowed offshore region.

Perdido alone is capable of producing 100,000 barrels of oil and 200 million cubic feet of natural gas per day — enough to meet the energy needs for over 2 million households for a year.

Though not at that level of production yet, getting to this point hasn’t been easy. Shell, with partners Chevron Corp. and BP, has done the equivalent of moving mountains to bring the project online.

To make the project feasible, Shell, the lead operator, and partners devised an elaborate plan for tying in three distinct fields — called Great White, Silver Tip and Tobago — and handling their production through a single platform. Doing it, however, would require drilling at least 35 wells, some as far as seven miles from the platform and all extremely costly.

“When we came at them with 35 wells, people’s heads exploded,” Townsley said.

Has its own drilling rig

To help reduce costs, the platform was designed with its own drilling rig, which will drill nearly two dozen of those wells over the next few years and is itself a marvel of engineering. A mobile drilling rig will drill the rest.

Jutting out of the top of the platform, the onboard rig can move on a track to six different slots running through the middle of the buoylike spar that serves as Perdido’s base. Nine mooring lines, which anchor Perdido to the sea floor, can also be adjusted to move the entire 50,000-ton structure within an area the size of a football field to aid the rig in drilling wells.

But perhaps the biggest innovations are not visible from onboard.

In a first for the Gulf of Mexico, new equipment separates water from oil and natural gas at the sea floor, rather than having to do it all on the platform. Subsea boosting systems also help push oil to the top of low-pressure reservoirs, improving recovery rates.

Finally, powerful pumps are used to send the oil and natural gas back to the platform, nearly two miles above, for further processing, before it is finally sent to shore in pipelines.

“This is serial number one for this type of project,” Townsley said, who said some of the technology on Perdido did not even exist in 1996 when Shell acquired government leases to explore the fields.

Larry Goldstein, a director at the nonprofit Energy Policy Research Foundation in Washington, said other oil companies could develop their own ways to solve challenges posed by producing oil from Lower Tertiary discoveries. But the example of Perdido, which draws on fields discovered in 2002, could help speed development of other projects, he said.

Gary Luquette, president of Chevron North America Exploration and Production Co., a Houston-based arm of the California oil major, said while there are great incentives to bring large deep-water projects up faster, he doubts it can be done, given the vast amount of exploration and technical work required.

“When you stack all this stuff together, eight to 10 years is pretty damn good,” he said.

Four more are possible

Meanwhile, Shell says it is already thinking beyond Perdido. After a string of recent exploration successes, the company is considering adding as many as four major oil and gas production platforms in the Gulf to complement the six it has there today.

The platforms, or hubs, as Shell calls them, would be akin to Perdido in that they would tie in production from multiple fields that alone may not be substantial enough to warrant development. The hubs would be near recent Shell discoveries called Vito, Stones and Appomattox, and by the Mars field, where the company already has a major platform, officials said.

A final investment decision on the first of those could come as early as this year, Marvin Odum, Royal Dutch Shell’s top U.S executive, said in an interview.

“We’ll sort out through our normal processes which ones we’ll move forward on first,” he said. “What I can tell you, though, is the Gulf of Mexico opportunities are very attractive.”

The doubling down by Shell in the Gulf of Mexico highlights the region’s rising importance to Western oil companies as access to new oil and gas resources becomes tougher around the globe.

It also suggests there could be much more life ahead for a U.S. offshore basin that after being left for dead many times continues to surprise.

“The honest answer about whether we’re running out of oil,” said Goldstein, with Energy Policy Research Foundation, “is that we don’t have an honest answer.”

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