July 2014

First oil

Getting into (and out of) the Gulf of Mexico

Pramod Kulkarni / World Oil


“There are more ways than one to skin a cat.” — An expression originating in England in the 1840s.

My apologies to cat lovers everywhere, but there was no better expression available to describe how oil and gas operators have found success in the Gulf of Mexico through a variety of E&P strategies.

Some operators are doing well by hugging the shallow-water area of the continental shelf. A few others are bringing into production the discoveries made in the 1990s, in the deepwater Miocene play. Still others are going to extreme deep water (9,000-ft depth and beyond) to start producing from the Lower Tertiary Paleogene formation. Meanwhile, several operators have sold off their producing properties in the Gulf and shifted their E&P focus to North American shale plays.

Supermajors. Operators, such as Chevron, Shell, BP and Exxon Mobil, are comfortable with both the scale and time span of major deepwater projects. A decade is the typical time span for many of the projects, from prospect evaluation and lease bidding, to first oil. Chevron’s Jack/St. Malo is scheduled for start-up during 2014, with a capacity production of 177 Mboed, with Big Foot to follow during 2015 at a capacity of 79 Mboed. In February 2014, Shell completed its Mars B extension to add peak capacity of 100 Mboed, and is developing its Stones FPSO-based project at an ultra-deepwater depth. While Shell has sold off its properties in the North American shale plays, the rest of the supermajors have planted their feet firmly on both sides of the deepwater/shale divide.

Major independents. Among the large independents, operators such as Anadarko and Noble Energy have also diversified their E&P basket between the deepwater Gulf of Mexico and shale plays. Anadarko is expecting first oil from its Lucius spar during the second half of 2014, and is on track to produce from the Heidelberg facility in 2016. Yet, Anadarko has strong positions in the Eagle Ford, Marcellus and Wattenberg plays, and is also operating fields offshore West Africa and Mozambique. Noble Energy also holds a similarly diverse portfolio, divided between the deepwater Gulf of Mexico, U.S. shales and the Eastern Mediterranean. Meanwhile, Apache and Devon have made more of a commitment to their shale assets. Devon has sold all of its Gulf properties and has even moved its headquarters from Houston to Oklahoma City. With some shale operators reporting return on investment above 100%, perhaps there is merit in Devon’s shale-only strategy.

Independent newbies. In February 2014, Fieldwood Energy acquired properties from Sandridge along the shelf, as well as the deepwater Bullwinkle field. Meanwhile, well-funded Cobalt International has staked its fortunes on the deepwater Lower Tertiary plays, in partnership with Anadarko, as well as on its own. An interesting addition to this category is Venari Resources, which bills itself as the “non-operating partner-of-choice in the Gulf of Mexico.” Backed by more than $1.25 billion in private equity, Venari is focusing on subsalt prospects in deep water.

New home for the NOCs. While Total and Eni have been operating in the Gulf of Mexico for several years, two interesting NOC additions are Petrobras and Statoil. Priding itself on its deepwater expertise, Petrobras was the first to initiate FPSO-based production in the Gulf of Mexico from the ultra-deepwater Cascade and Chinook fields. Statoil has started wildcatting in earnest in the Miocene plays, and hopes to make major discoveries in the next few months. Locals tend to carp about the BSEE, but the reliable regulatory regime is attracting interest from the large NOCs.

More the merrier. According to Wood MacKenzie, 9 Bboe have been produced in the Gulf of Mexico, thus far. In addition, 24 Bboe have been discovered, but are yet to be produced, and future discoveries are estimated at 14 Bboe. As such, there are plenty of opportunities for operators of all shapes and sizes in the Gulf of Mexico—mother of all oilfield bonanzas. wo-box_blue.gif 

About the Authors
Pramod Kulkarni
World Oil
Pramod Kulkarni pramod.kulkarni@worldoil.com
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