Hope floats for deepwater drilling
Nearly a decade after oil spill, BP is among oil majors entering next phase of growth in Gulf ’s teeming fields
For the first time since the Deepwater Horizon tragedy of a decade ago, the British oil major BP will ship a major oil platform to the Gulf of Mexico, where it will operate in some 4,500 feet of water nearly 200 miles south of New Orleans.
The Argos platform, which will reach its destination in the fall of 2020, is part of the next wave of oil production in the Gulf of Mexico as companies learn to reduce costs while operating with new technologies in more complex, deeper waters. Even as the onshore shale boom starts to slow and companies cut back onshore, global deepwater spending is back on the rise for oil and gas producers.
That has driven a mini-resurgence in the Gulf, where a mix of legacy production and the development of new mega projects has offshore platforms pumping out record volumes of oil to the tune of about 2 million barrels a day.
“There’s quite a bit of potential in the ultra-deepwater,” said George Laguros, a senior analyst the global research and consulting firm IHS Markit.
Just this month, Chevron authorized the $5.7 billion first phase of the Anchor project, which is considered the first ultra-high-pressure development in the Gulf. Anchor, located in the ultra-deepwater Lower Tertiary region about 140 miles off the coast of Louisiana, would be the first project to use subsea equipment and technology capable of withstanding pressures of 20,000 pounds per square inch — enough to crush concrete — compared to the previous highs of roughly 15,000 pounds per square inch.
Other companies plan to follow with their own projects at similar pressures in the Lower Tertiary area, including the French energy major Total, which is doing engineering work for the North Platte field , and the Louisiana company LLOG Exploration, which is buying equipment for its Shenandoah project — both about 200 miles southwest of New Orleans .
Meanwhile, BP is building its
Argos platform in South Korea. The
semi-submersible, floating production platform is the centerpiece of BP’s $9 billion Mad Dog Phase 2 project — greatly reduced from the original price tag of $20 billion — in the Gulf ’s biggest oil field about 190 miles south of New Orleans.
“I don’t think there’s very many Mad Dogs left, but there’s still a long way to go in the Gulf, ” said Starlee Sykes, BP regional president over the Gulf. “There’s still a lot to play for as we improve our seismic capabilities and reduce our costs.”
Gulf revival
While much of the focus is often on water depths, pressure levels have served as arguably the biggest barrier to opening up new fields in the Gulf of Mexico. As recently as a year ago, producers worried that growth in the Gulf was impeded by the lack of new technologies to withstand pressures of 20,000 pounds per square inch— a threshold considered essential to unlocking more reserves. Now, there’s new equipment designed to maintain well integrity under ultra-high pressures and temperatures approaching 350 degrees.
The revival in the Gulf of Mexico is in large part due to BP, Royal Dutch Shell, Chevron and other companies finding ways to dramatically reduce costs, typically by standardizing designs, techniques and equipment, as opposed to past practices in which every platform was custom-designed and components custom-made. The oil bust drove companies to stop treating each project as unique; nothing motivates innovation in the energy industry like low oil prices.
With Mad Dog Phase 2, BP could ultimately lower the price tag to $8 billion price, bringing the project in on time and under budget. All 22 wells in the oil field are drilled and the platform is mostly built. Subsea work on the deepwater production systems and pipelines has begun, Sykes said, although oil production won’t commence until 2021.
BP expects to produce 140,000 barrels of oil equivalent a day from Mad Dog 2.
“We’re getting the full amount of the reserves that we intended to develop even with this reduced cost,” Sykes said. “We’re optimistic it’s going to be a real success case for large project development.”
While Big Oil companies are still developing mega-projects such as Mad Dog 2, most new Gulf efforts are expansions off of existing platforms — another lower cost way to exploit oil and gas reserves. Companies are focusing exploration closer to their existing facilities so they can drill the wells and connect them to their platforms via underwater pipelines and umbilicals. These are called tieback projects.
Heavyweight rematch
Improved seismic technologies and artificial intelligence have helped BP and other companies discover additional oil deposits within well-known oil fields.
Such a discovery, for instance, led BP to decide earlier this year to spend $1.3 billion to expand its Atlantis development in the deepwater Gulf through tiebacks. BP also is expanding south of its
Thunder Horse platform.
“We knew there was more out there — in the old adage of the big fields get bigger,” Sykes said. “But we were surprised at how much we found, particularly around the Atlantis and Thunder Horse fields.”
BP and rival Shell are back to competing for the title of the
Gulf ’s most prolific oil and gas producer. Shell is estimated to have taken a small lead this year since bringing online its massive new Appomattox platform in the Gulf southeast of Louisiana. Shell is producing almost 400,000 barrels of oil equivalent a day in the Gulf and that is expected to grow .
Appomattox has the capacity to eventually hit 175,000 barrels a day on its own. Appomattox was the first major deepwater Gulf project authorized since the last oil bust began in late 2014.
BP could steal the lead back with Mad Dog Phase 2 in 2021, but Shell is building its next major Gulf project, called Vito, also scheduled for completion in 2021.
But BP isn’t done yet, either. BP is drilling the Puma West prospect with Houston’s Talos Energy in the Central Gulf. BP also is proceeding with the Johanna exploration well in the Eastern Gulf offshore of Alabama.
Lest we forget
Hovering over everything, though, is the memory of the Deepwater Horizon explosion as the 10-year anniversary approaches on April 20. Eleven workers were killed and nearly 4 million barrels of oil spilled into the Gulf. The penalties and court damages forced BP to sell some $75 billion of its assets in order to survive. But BP is now back in growth mode again — both onshore and off.
“It’s at the forefront of my mind every day,” Sykes said. “I do believe we’ve come a long way, and we are safer. But I don’t think we can ever become complacent. We need to continue to improve and keep the focus on making our industry as safe as it can possibly be, and also as clean as it can possibly be.”