Deep Lower Tertiary Playing Well

Jack 2 Success Proves Theory

When Chevron in September announced a flow test of 6,000 barrels of oil per day from its Jack 2 well  --  which tapped the Lower Tertiary age deposits in the Walker Ridge area of the deepwater Gulf of Mexico  --  and simultaneously noted potential reserves as high as 15 billion barrels for the region, the mainstream media hype machine kicked into high gear.

For starters, the Jack prospect/field was compared to a find more typical of the giant fields of Saudi Arabia and Iraq rather than the United States.

A congressman in Washington, D.C., prattled on about how such a discovery with the potential to increase the nation’s reserves by billions of barrels in one fell swoop will go far to ensure that Americans have affordable (i.e., cheap) gasoline.

There even were reports the Jack 2 well already was producing 6,000 barrels a day, when, in fact, any production to come from this well  --  or others in these same rocks  --  is years away.

Much of the inaccurate commentary making the rounds stems from a lack of understanding of the vast difference between a field discovery and a geologic play.

In other words, the news was exciting. But the full story is yet to be known.

A Lot of Risks

To date,in the Lower Tertiary play, which spans about a 300-mile swath across the GOM.

The Jack 2 well (the original discovery well in the field was drilled in 2004) was drilled in 7,000 feet of water to a subsea depth exceeding 20,000 feet. A third well apparently is being planned to help with appraisal of the field.

For the moment, the Jack 2 well’s real significance is that it was the first flow test conducted successfully in any of the Lower Tertiary discoveries in the deepwater GOM.

For the first time operators have hard evidence that hydrocarbons can flow commercially in these rocks they have eyed longingly since way back.

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When Chevron in September announced a flow test of 6,000 barrels of oil per day from its Jack 2 well  --  which tapped the Lower Tertiary age deposits in the Walker Ridge area of the deepwater Gulf of Mexico  --  and simultaneously noted potential reserves as high as 15 billion barrels for the region, the mainstream media hype machine kicked into high gear.

For starters, the Jack prospect/field was compared to a find more typical of the giant fields of Saudi Arabia and Iraq rather than the United States.

A congressman in Washington, D.C., prattled on about how such a discovery with the potential to increase the nation’s reserves by billions of barrels in one fell swoop will go far to ensure that Americans have affordable (i.e., cheap) gasoline.

There even were reports the Jack 2 well already was producing 6,000 barrels a day, when, in fact, any production to come from this well  --  or others in these same rocks  --  is years away.

Much of the inaccurate commentary making the rounds stems from a lack of understanding of the vast difference between a field discovery and a geologic play.

In other words, the news was exciting. But the full story is yet to be known.

A Lot of Risks

To date,in the Lower Tertiary play, which spans about a 300-mile swath across the GOM.

The Jack 2 well (the original discovery well in the field was drilled in 2004) was drilled in 7,000 feet of water to a subsea depth exceeding 20,000 feet. A third well apparently is being planned to help with appraisal of the field.

For the moment, the Jack 2 well’s real significance is that it was the first flow test conducted successfully in any of the Lower Tertiary discoveries in the deepwater GOM.

For the first time operators have hard evidence that hydrocarbons can flow commercially in these rocks they have eyed longingly since way back.

The rocks in this play are the same age as the productive Wilcox formation onshore Texas, according to Paul Weimer, professor of geology at the University of Colorado.

“The sands probably came from both the Appalachians to the north and northern Mexico and the Rocky Mountains to the west,” Weimer said. “They’re called sheet sands because of the environment where they’re deposited, which is at the base of a slope in unconfined settings.

“They’re deep marine sands with a widespread areal extent,” Weimer said, “which means the possibility of good continuity and conductivity.”

The GOM areas where discoveries have been made in the Lower Tertiary play are the Walker Ridge and Keathley Canyon areas  --  about 250-plus miles southwest of New Orleans  --  and the Alaminos Canyon area farther to the west.

“In Alaminos Canyon, the play has a distinct structural style,” Weimer said. “That’s what’s called the Perdido fold belt. There’s a lot of structural relief, there’s been some shortening and contraction there and the folds are salt-cored.

“In contrast, where discoveries have been made in Keathley Canyon and Walker Ridge, the structures are salt-cored but deformation is not as extensive, resulting in simpler structures.

“What a lot of people don’t understand is most of the play in the Keathley Canyon and Walker Ridge areas lies below shallow allochthonous salt, and that’s key,” Weimer said. “Imaging below salt with 3-D seismic is one of the biggest challenges in exploration, so it’s taken a lot of special geophysical acquisition and processing to be able to image these structures.

“It’s still high risk,” Weimer noted, “because you’re always dependent on what processing algorithms you use among other things. If it weren’t for the shallow salt and difficulty in imaging these structures, many of these features may have been drilled a decade ago.”

Indeed, advances in seismic data acquisition and processing to enable subsalt imaging, along with the ability to drill in water depths of close to 10,000 feet, represent an array of exploration innovations introduced and refined over the last several years.

Once discovered, these Lower Tertiary fields present a number of significant challenges to be addressed  --  not the least of which is the geology.

Reported sand porosities average perhaps 18 percent, which is not too shabby. Permeabilities, however  --  which are key to flow potential  --  are in the lower ranges. Unlike the one-half to 1 darcy permeability of the high-rate producing younger Miocene sands at some of the big Gulf fields, such as Thunder Horse and Mars, the Lower Tertiary rock may have permeabilities in the 10-30 millidarcy range.

“This means more diagenesis in the Lower Tertiary reservoirs, which is not as abundant in the Miocene and younger reservoirs,” Weimer said. “This affects how long and how well you can produce the reservoirs.”

A Play With Legs

Speculation over the play is widespread in the industry. In part, this can be traced to what has not been said by the principles. Details of the Jack 2 flow test  --  conducted in the upper 40 percent of the 350-foot pay zone  --  such as choke size, pressures and whether facilities were constrained are being held tight, so even the experts must try to back-out the potential as best they can.

Still, Jim Flanagan, regional manager for the Gulf of Mexico team at IHS Energy noted there are plenty of indications the companies think this play has legs.

“Projects are in competition for corporate cash, and they have a rigorous way of building a batting order of prospects,” Flanagan said. “That tells me these things they’re drilling out here in the Lower Tertiary trend stack up well economically on a worldwide basis with everything else they have to drill.

“If they could drill someplace else and get a bigger bang for the dollar,” Flanagan said, “they would have done it.”

One question weighing on a lot of minds is how low oil prices can drop before nerves become frayed. This is costly territory, not just in terms of drilling in such water depths, but in terms of the humongous cost to build pipelines and other facilities in remote areas, such as this play.

“If you’re drilling in some of the deepest, most expensive areas of the Gulf, you have to be concerned about costs and commodity prices,” Flanagan said. “But the leases are long-term, and they don’t have to make drilling decisions right away  --  and they’re not making things economic based on $60 to $70 oil.”

Taking The Long Way

Production from the Petrobras-operated Cascade and Chinook fields on the trend’s eastern edge reportedly will begin in late 2009. It is anticipated the company will deploy a FPSO (floating production, storage and offloading facility).

Significant production from the play is not expected until perhaps 2012-14, and fields will come on variably during that time frame, according to AAPG member Bob Esser, senior consultant and director of global oil and gas resources at Cambridge Energy Research Associates. He noted one of the reasons for the long time to significant production is it takes six months to drill a well here.

Without a good deal of factual information from operators in the play, it’s challenging to put together production outlooks. But determining numbers that are in the ballpark is doable, according to Esser.

“By 2012-2014 we think we can expect these fields to be capable of producing about 800,000 barrels of oil per day,” Esser said. “That’s from fields we know about so far that have already been discovered. That would be 800,000 barrels a day we wouldn’t have to import.

“The deepwater right now can produce 1.2 million barrels a day, and this would get it close to two million a day or a little more.

“Right now, we figure the play has two to three billion barrels discovered,” Esser added. “Rather than being the tip of the iceberg, the iceberg has been discovered  --  it’s just coming a little further out of the water now. Instead of being seven-eighths under water, it’s maybe just 75 percent under now.”

To put the play into perspective, Esser noted they think it’s the most significant oil trend to be discovered since Alaska’s Prudhoe Bay Field in 1968.

Prudhoe was initially assessed with the potential for about 9.8 to 10 billion barrels recoverable, according to Weimer. He said that number is approximately 14.5 billion barrels ultimate recovery now, owing to improved reservoir management and new technology.

“The Lower Tertiary in the deepwater has the potential to be as big as Prudhoe Bay,” Weimer said. “Fifteen billion plus-or-minus is not out of line for the trend, but it will take many fields and years to develop. There are extremely difficult conditions to develop it in.

“The deepwater Gulf of Mexico presents an enormous challenge.”

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