Comment

7 September 2006

Drilling 5 miles is a deep well

Signal conditioning, advanced mathematical formulas, new technology, and automation have the oil industry on the verge of cracking open a deep-water bonanza.

The Wall Street Journal reported there is a region in the Gulf of Mexico that could become the U.S.’s biggest new domestic source of oil since the discovery of Alaska’s North Slope more than a generation ago.

Chevron Corp. and partners Devon Energy Corp. and Statoil ASA said this week it is the first successful oil production from the region, a 300-mile-wide swath of the Gulf that lies below miles of water and deep within a bed of ancient rocks geologists call the lower tertiary.

The company said the well sustained a flow rate of more than 6,000 barrels of crude oil a day during the production test.

The test paves the way for the development of the three partners’ Jack field, located 270 miles southwest of New Orleans, and ultimately for dozens of comparable discoveries under federal lease to companies that include Anadarko Petroleum Corp., Petróleo Brasileiro SA, Exxon Mobil Corp., BP PLC, and Royal Dutch Shell PLC.

Chevron and Devon officials estimate the recent discoveries in the Gulf of Mexico’s lower-tertiary formations hold more than three billion barrels’ and perhaps as much as 15 billion barrels’ worth of oil and gas reserves.

If the industry succeeds in finding 15 billion barrels of oil, it would boost the nation’s current reserves of 29.3 billion barrels by 50%.

With three-quarters of the world’s oil and natural-gas resources off-limits to Western oil companies, the high oil prices swelling their coffers have encouraged them to take bigger financial risks in search of new sources of oil.

The 5-mile-deep Jack well is among the world’s deepest production wells and may have cost more than $100 million, according to industry officials. Developing Jack and the other lower-tertiary fields could cost several billion dollars for drilling, building platforms, and laying pipelines to take the oil ashore.

Technological gains have made the new wells possible. Today, floating oil rigs drill deeper than their predecessors, and advances in seismic exploration have made it possible to detect oil below the massive salt canopies that typically sit atop the Gulf’s lower-tertiary rock formations.

Until recently, seismic images from below these salt formations were muffled and largely useless. The oil companies, however, developed new mathematical formulas that allow them to interpret the images, bringing potential new troves of oil and gas into focus.

The three partners discovered Jack, which is under 7,000 feet of water, in May 2004. One 29,066-foot-deep well drilled that year and a second 28,175-foot-deep well followed in 2005.

This spring, the companies parked the Cajun Express, a 350-foot floating rig, above the second well and turned on the well.

The oil is light and sweet, the kind that commands the best prices and is in the most demand.