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Despite GOM gloom, near- and longterm opportunities exist in Mexico, deepwater

Posted on 29 October 2009

 Given the dour state of affairs for Gulf of Mexico Shelf drilling, one might imagine that 9 out of 10 LAGCOE registrants attended to pass out resumes. That may be so, but excitement still reigns for deepwater and for opportunities in Mexico. Testifying to this effect were several senior E&P executives addressing the LAGCOE opening session on “World Class Opportunities – GOM Basin Activity”.

Exclusive video introduction from IADC’s Mike Killalea

In US deepwater, “The Lower Tertiary Wilcox Trend has just taken off”, said Steve Daines, President of Maersk Oil America.

How about a 170% increase in wells drilled by 2010, compared to 2008 for opportunity? Dr Pedro Silva, Exploration Vice President and Sub-Director for PEMEX Exploration and Production, said the operator had drilled 750 wells last year, doubling to 1,416 in 2009, and jumping to 2,050 in 2010. After that, the rate of well drilling will flatten, but the cumulative well count is impressive.

“There will be plenty of opportunity,” Dr Silva said. “We are planning to drill close to 25,000 wells in the next 25 years.”

Mexico’s plans center largely on the new deepwater play, Chicontepec. However, media reports have recently indicated that PEMEX may have gotten ahead of itself in issuing contracts. How and whether the work will continue is a question mark.

Oil production has fallen steadily in Mexico, in large part due to a lack of capital investment in the country’s major field, Cantarell. “We’re paying the price for that,” Dr Silva said. Since 2001, however, the Mexican government has increased investment, totaling nearly $14 billion in 2008, compared to $4.8 billion in 2001, he said.

Dr Silva estimated that Chicontepec holds more than 10 MM bbl of oil, crowning it as the largest field in Mexico. However, the geology is difficult. Permeability throughout 62% of the reservoir is less than 0.25 millidarcy (md), and only 0.25-0.5 md in another 36%. Reservoir depths range from 3,000 ft-8,000 ft, while oil-bearing sections range up to 50 ft.

PEMEX, Dr Silva said, is looking for significant technical help, particularly for seismic and intelligent completions.

“We are depending on international companies to come to Mexico and promote technology,” he said.

And therein lies the rub. The Mexican constitution, circa 1935, categorically reserves rights to all national petroleum to the national government. Therefore, international oil companies may not participate in the conventional sense as leaseholders and producers. Recent Mexican government reforms have aimed at building a new model for international participation, including incentive contracts and payment to IOCs of a “fee per barrel”. However, in the eyes of many IOCs, such reforms may fall short.

The US Gulf of Mexico, conversely, has no such governmental restrictions. Shelf slowdown notwithstanding, the very stability of the US system and its openness to investment is a real attraction.

Maersk Oil, a 2006 entry into the Gulf, is such an example. “This is an area that can offer significant running room,” commented Maersk’s Daines. “We’re just starting out…. We plan to be here for a very long time to come.”

Maersk is looking for partners in pursuit of the Lower Wilcox, the Tertiary trend that is the new pot of gold at the end of the deepwater rainbow.

The Lower Tertiary Trend, said Steve Thurston, Vice President, Deepwater Exploration and Projects Strategic Business Unit for Chevron, “We believe is really the future of the deepwater Gulf of Mexico.”

Mr Thurston said no onshore or Shelf analogs exist for this massive play – 400 miles 6,000 ft thick in some areas and 4,000 ft thick elsewhere. Plus, the reservoir contains significant sand. “It is very, very good,” Mr Thurston said. The entire trend could contain 4-10 billion boe ultimate potential.

On the other hand, the sand quality is poor. “It’s like concrete,” said one source. And the permeability is much lower than in earlier deepwater plays – on the order of 0.15 md.

Nonetheless, Mr Thurston anticipates high-rate wells – 10,000 b/d – 20,000 b/d.

Challenges abound – long reaches, reliability of downhole systems, and rig equipment, of course: “You need a very, very high-quality drillship,” Mr Thurston said. “The next generation drillships are key. Rig-wise, riser management is critical to combat loop currents, and dynamic positioning is important for quick disconnect and departure in hurricane season.

Drilling in the subsalt or salt canopy fields he added, “It’s avoiding problems entering, drilling and exiting the salt.”

Chevron also sees dual gradient drilling, which the operator recently resurrected, as critical. Similarly, it is working on completions for the thick reservoirs. Mr Thurston cited single-zone multiple completions to reduce trip time.

Other necessary tools include wide azimuth seismic in conjunction with detailed velocity modeling and rigless intervention.

Challenges, but surely not insurmountable. Maersk’s Daines was speaking for his own company, but might as well have stood for the entire industry: “Our strategy is built on our pioneer mindset – to make the impossible possible.”

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