The Last Oil Frontier In The Gulf Of Mexico

The U.S. Gulf of Mexico, (GoM) has been a tremendous resource that has largely been developed over the last thirty years or so. One by one, companies ventured into deep waters using their wits, and brawn to bring these deeply buried resources to market. Wits and brawn, and a lot of money. Many companies learned the hard way that deep water was not a fun place to play if your checking account was low. The companies who were adequately capitalized did well, rebounding from the initial steepness of the learning curve to add huge reserves and daily production increases to their bottom lines. Those of us who drive and use gas to heat our homes can be glad they were successful, as now much of the U.S. Daily Offshore Production comes from wells drilled in more than a 1,000’ of water.

As can be seen from the graphic below, the oil industry’s advance into deeper waters has been a fairly gradual one. Led primarily by the marine engineering developments that occurred as fields farther and farther offshore were explored, discoveries made.

After a tremendous initial burst in exploration activity geologists began to run out of prospects, and the pace of new discoveries slowed. Only the fairly recent ability to “see beneath the salt” led to the massive peak in E&P activity in the early 2000s that led to Miocene discoveries like Thunderhorse, Mad Dog, K2, and a number of others. This miracle continued with Lower Tertiary discoveries like St. Malo, Jack, Shenandoah, Anchor, and again, a number of others. This period has been referred to as the “Great Unveiling,” and in the view of some represents a peak potential for the offshore GoM deep water play.

So, is this it for the GoM? Are we destined to an inevitable decline in production deep water? Not all are convinced, and that is where the meat of this article really begins.

Shell was the first oil company to really begin to explore and produce deep water resources in the U.S. GoM. Beginning in the early 1980’s with the record breaking jacket supported Cognac, and Bullwinkle platforms, they took the experience they gained from decades of exploratory work onshore and in near-shore waters and began to stretch the universe of what it was possible to do offshore.

In the picture above the Bullwinkle jacket is being towed out to sea from its fabrication site in the Corpus Christi Channel.

Deepwater helped to build Shell into the highly technical Super Major oil company they are today. A lot of lessons were learned along the way. Lessons that they can now apply to tackling the production challenges of today, where the capital costs associated with reserves development must remain positive in low oil price environments.

Shell has been drilling the Norphlet for decades onshore in the Missississpian and Alabaman Gulf Coast areas. In the late 80’s and early 90’s it extended its familiarity with this reservoir into Mobile Bay. From five wells drilled in the Fairway Field, offshore Alabama, Shell produced gas in prolific amounts~200 mmscfd, for a number of years. These wells were drilled in shallow water to about 20,000’ MD, and cost upwards of $20 mm to drill and complete at a time when the oil price was about $10/bbl.

Success like this encouraged Shell geoscientists to wonder just how far offshore this prolific trend might extend. In the late 90's Deepwater was becoming a catch phase in the oil patch.

In the table below, you can see that right off the bat, Shell had more success than other companies developing this formation. While it’s apparent they drilled their share of dry holes, the five commercial discoveries listed below are Shell's, and only Shell’s. Other companies just seemed not have the early affinity for picturing this reservoir the way they did. Since this was published however, nearly four years ago, other operators have cashed in on the Norphlet, most notably, Chevron, at the Ballymore prospect, and discussed briefly in another article earlier this year.

As can be seen in the next graphic Shell has feasted off their in-house expertise picturing the Norphlet, and in 2015 sanctioned the mega-project Appomattox.

You can see above with their latest discovery, Dover, announced on May 24th, Shell has continued their winning ways in the Norphlet. They cut 800' feet of pay here. I expect these wells will be tied-back to the Appomattox hub, through subsea completions.

The Appomattox hub is designed to deliver up to 180K BOEPD from 15 producing wells. Initially only the Appomattox and Vicksburg fields will be flowed to the hub, with the other satellite fields to be produced later. Production will consist of oil and gas.

Around 200 mm years ago the supercontinent of Pangea began to pull apart from emerging tectonic activity. In the case of the Gulf of Mexico, the North American plate separated from the African and South American plates, creating a rift basin that developed grabens (valleys) that filled with volcanic, largely windblown (eolian) sediments. Tectonic subduction and crustal stretching over the eons allowed for intrusion of marine waters, creating a shallow sea as they did. Geologists have named this the "Louann sea." Evaporation and replenishment of this sea over time led to the massive halite deposition now known as the Louann salt.

Fed by riverine (fluvial) and eolian clastics (particulates) this salt layer gradually became buried under sediments that carried the organic material that draws Shell's interest today.

Two very encouraging aspects of these plots taken from a BOEM study done in 2014. First, from the upper graph, the porosity and permeability are fairly high. Porosity is the void space in the rock where hydrocarbons can exist. Permeability is a measure of the reservoir’s horizontal flow characteristics. Second, from the lower graph, the Aeolian net sand, or highly porous section of the interval is a large portion of the gross.

Summary

It remains to be seen just how prolific this reservoir will be. First production from Appomattox isn’t due for another couple of years. Will the area in which Shell will be driven have sands accumulated under Aeolian conditions, or Fluvial? Something that only time and actual drilling will tell, and from the plots above will be indicative of the quality of the sands being produced.

The early indicators look good in the Norphlet, with permeability exceeding what was thought to be possible in a deeply buried reservoir such the this. Shell has made the biggest bet so far on this reservoir based on their years of experience with it. Other bets may follow.

Hopes are high, but now we just have to drill it.

By David Messler for Oilprice.com