January 1998 Vol. 219 No. 1  Exploration

A.E. (Al) Hutchins, Jr.,  Technical Editor

Deep-rights reversion spurs activity

In the Canadian province of Saskatchewan (on the North Dakota/Montana border) amendments were made to the Crown Minerals Act to effect deep-rights reversion of Crown petroleum and natural gas leases. The amendments make provision for termination of all petroleum and natural gas rights below the base of the deepest productive zone on a lease, after expiration of the primary term of the lease. Implementation of the reversion process will commence March 31, 1998, and will coincide with the review of leases that end their primary term on this date. All leases with a primary term that expired prior to March 31, 1998, will also be affected.

Talking with Ed Dancsok, senior petroleum engineer with Saskatchewan Energy and Mines, I learned that the province is following the lead of their neighbor to the west, Alberta. In 1981, Alberta implemented these same regulations; it is, presently, the top producing province in Canada. Saskatchewan began work on the amendments back in 1992, so operators have had time to explore possible deeper production.

Exploration for hydrocarbons in deeper strata in southeastern Saskatchewan has continued at an unprecedented pace following the December 1995 discovery of oil in Ordovician strata below producing Mississippian pools in the Midale area. The discovery well, Berkley et al Midale 4-2-7-11W2, produced 45,695.3 m³ (287,880 bbl) of 39.8°API oil from the Red River formation in the first 17 months on production. Peak production in February 1996 was 1,610 bopd. A good well like this will get your interest, and the thought of losing your lease anywhere near discoveries like this is having the desired effect.

In the Midale area, 36 wells have been perforated in the Red River, comprising 28 oil producers and six wells reported as perforated with no production data available. Two additional wells were recompleted after producing no Red River oil; one as a Mississippian producer and the other as a water disposal well.

Multi-zone potential of deeper strata in this area is demonstrated by the recompletion of Berkley et al Midale 11-35-6-11W2 as a Devonian Birdbear producer in October 1996, with average production of 107 bopd through June 1997. Completions have also been filed in the Devonian Duperow formation (no production data available), and the Ordovician Winnipeg. Other wells had drillstem tests recover hydrocarbons from Winnipegosis and Winnipeg, and oil-cut mud from the Stonewall and uppermost Stony Mountain.

The high success rate of wells drilled to the Red River, or deeper, since December 1995, with average daily oil production exceeding 250 bbl in several wells, coupled with deep-rights reversion regulations, should ensure continuation of active exploration of deeper strata in Southeastern Saskatchewan. The province holds a lease sale every two months. Mr. Dancsok estimated the first leases offered under deep-rights reversion would be available in the October 1998 sale. For more information access Saskatchewan Energy and Mines on the Internet at http://www.gov.sk.ca/enemine/, or call Ed Dancsok at 306 787 2602 (e-mail address: edancsok@gov.sk.ca)

Deepwater GOM over the next decade. Peter J. Robertson, president of Chevron U.S.A. Production Co., gave us some insight into what to expect from all the activity in the Gulf of Mexico deepwater play in a speech presented at the Tulane University Business Forum, last fall. Robertson said, "Not only has new technology reduced the cost of getting at these deep reserves, but the reservoirs themselves look much better than we had imagined."

Chevron's long-term goal is to add over 2 billion bbl of GOM oil reserves to its books over the next 10 to 20 years. The company is obviously committed to reaching this goal, as evidenced by a deepwater lease inventory that rose from 16 leases in 1990 to 362 today. The company's first deepwater production is scheduled to come on line by the end of this year at a project named Genesis, in 2,600 ft of water.

Robertson credited many advances in technology for making deepwater projects viable, but cited advances in drilling technology as the key to economically developing these projects. For instance, Genesis was expected to require a 40-well development plan and was a marginal project when discovered. Now, with multilateral and directional drilling capabilities, only 12 to 17 wellbores will be needed. You can see how the economics of a project can quickly improve.

The next decade should bring improved production from the GOM, with a significant contribution from deep water. Annual GOM oil production has been around 1 to 1.25 billion bbl. Robertson indicated that oil production from the Gulf is expected to increase nearly 42% to 1.7 billion bbl over the next decade. Natural gas production should climb 25% in the same period.

The GOM supplied 27% of U.S. domestic gas in 1996. By the year 2000, when some recent deepwater discoveries come on line, Robertson expects gas production in the Gulf to increase to 17.2 Bcfd from 13.8 Bcfd. Chevron's eastern GOM gas project, Destin Dome, off Florida will have an impact on these numbers when it finally gets development approval from local and federal authorities.

In preparation for the first Eastern Gulf of Mexico area wide lease sale in more than a decade, TGS-CALIBRE Geophysical Co. recently announced a seismic program that will add 16,000 mi of new 2-D data in the eastern GOM to the company's already extensive non-exclusive seismic database. The new data will be acquired in the Destin Dome, Desoto Canyon and Lloyd Ridge areas, with subsequent 3-D surveys already planned and funded. The project is being acquired and processed in partnership with Geco-Prakla, a division of Schlumberger, and will be available prior to lease sale 181, to be held in 2001.

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