Technology about to unlock Mexico treasure

Mark Lammey reports on the latest developments to access high-pressure environments

Oil firms are less than two years away from finding the final piece of the puzzle for unlocking the US Gulf of Mexico’s deepest bounty, an analyst has said.

Imran Khan, of energy consultancy Wood Mackenzie, said technology for unlocking ultra-high pressure reservoirs would do more to give operators “bang for their buck” than any other advancement.

Mr Khan, senior manager, Gulf of Mexico, said mastering the technology would “really get investment going again and get projects sanctioned”.

He said: “The Gulf of Mexico has fields containing 300-500million barrels of oil, but companies have missing a piece of technology.

“They cannot quite develop them because of the high pressure. Industry was working hard to develop that before the downturn, but not much was done in 2015-16.

“But last year Chevron picked up the ball and started to move quickly to get that technology going.

“We’re maybe 18 to 24 months away from that piece of the puzzle being completed. That’s the next step change.”

Operators in the US Gulf of Mexico and the UK North Sea have been dealing with similar issues – high costs and a lack of exploration. been

As with the UK, operators in the US Gulf of Mexico have made “great strides” in cutting costs during the downturn.

Mr Khan said: “A well that in 2014 cost $200-$225million to drill now costs $75-$100million.

“When we’re putting our models together we have to double and triple check the numbers, because the cost of wells has gone down so much.”

Another similarity between the regions is the common use of tiebacks to make new, smaller field developments economic. Tiebacks involve connecting new fields to existing platforms using pipelines – and are a cheaper rigs.

Mr Khan said: “Most of the projects in the Gulf of Mexico are now about subsea tiebacks. They just work. They address most of the challenges – they have a quick turnaround, and require less investment.”

But cost cuts could mean new platforms are worth considering again, in some cases.

Mr Khan said: “I recently spoke to an operator with fields which could be developed as standalone facilities or through tiebacks.

“I asked which way they were leaning. Usually the cost difference is huge. But the cost of facilities has alternative to building new come down so much, that they are now having a tough time deciding which way to go.

“Standalones would still be more expensive, but operators could be willing to pay more in order to retain control. That tells you just how much costs have come down.

“Maybe costs have come down enough to allow standalone installations to start competing with tiebacks.”

But, in general, the level of investment required for Gulf of Mexico projects is still too high compared with onshore shale. Only a very limited number of companies can take on large projects in the gulf.