Gas Beckons in 'Deep Shallows'

Don't Expect Bright Spots

No, you weren't hallucinating when you read the daily Houston newspaper one recent Sunday morning.

There it was in print for all to see: "Old faithful," i.e., the oil and gas industry, was credited with keeping the local economy afloat in 2002. Gone from center stage were such previous high-flyers as the self-styled darling of the energy trading empires, which spiraled into a much-publicized "crash and burn."

Only very recently denigrated by the powers-that-be, among others, as so-o-o-o-o Old Economy, the oil and gas community garnered an impressive share of ink in the publication's annual special supplement identifying the area's 100 leading companies.

So nice to be appreciated once again -- for however long.

Rather than resting on laurels, though, roll up your shirt sleeves.

There's work to be done, particularly when it comes to the natural gas arena, where domestic production continues to decline and storage levels are at record lows as the hot summer begins.

The concern over the availability of adequate supplies to meet current and future demand was underscored when Fed chief Alan Greenspan himself recently commented before Congress on the tightness of the natural gas market and the supply problems facing the industry.

Even Wall Street appeared to take note, judging from the ensuing upswing in trading volume and prices for many of the public E&P companies.

In the scramble to find and produce new gas resources, operators once again are looking to the Gulf of Mexico (GOM) to save the day.

But it's not the sexy allure of the deep water that's grabbing their attention; it's that old workhorse: the shallow water (less than 200 meters) shelf.

It ain't gonna be easy, because this time they're going after the deep, virtually unexplored environs where high pressures/temperatures and corrosive gas show no mercy to drillers and operators. Well costs range between $10 and $20 million or even more, meaning it will take some large resource accumulations with the potential for high flow rates to be economical.

There's the added problem that most available 3-D seismic data on the shelf were acquired without long offsets, making it difficult to adequately image the deeply buried structures there.

The Minerals Management Service (MMS) reports some 10 TCF of gas already have been discovered on the shallow water part of the shelf at drilling depths greater than 15,000 feet true vertical depth subsea (TVD SS) -- the minimum depth the agency pegs as deep gas. Most of this has been less than 18,000 feet, but another estimated 5-20 TCF are technically recoverable in undiscovered deep reservoirs, principally at depths greater than 18,000 feet.

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No, you weren't hallucinating when you read the daily Houston newspaper one recent Sunday morning.

There it was in print for all to see: "Old faithful," i.e., the oil and gas industry, was credited with keeping the local economy afloat in 2002. Gone from center stage were such previous high-flyers as the self-styled darling of the energy trading empires, which spiraled into a much-publicized "crash and burn."

Only very recently denigrated by the powers-that-be, among others, as so-o-o-o-o Old Economy, the oil and gas community garnered an impressive share of ink in the publication's annual special supplement identifying the area's 100 leading companies.

So nice to be appreciated once again -- for however long.

Rather than resting on laurels, though, roll up your shirt sleeves.

There's work to be done, particularly when it comes to the natural gas arena, where domestic production continues to decline and storage levels are at record lows as the hot summer begins.

The concern over the availability of adequate supplies to meet current and future demand was underscored when Fed chief Alan Greenspan himself recently commented before Congress on the tightness of the natural gas market and the supply problems facing the industry.

Even Wall Street appeared to take note, judging from the ensuing upswing in trading volume and prices for many of the public E&P companies.

In the scramble to find and produce new gas resources, operators once again are looking to the Gulf of Mexico (GOM) to save the day.

But it's not the sexy allure of the deep water that's grabbing their attention; it's that old workhorse: the shallow water (less than 200 meters) shelf.

It ain't gonna be easy, because this time they're going after the deep, virtually unexplored environs where high pressures/temperatures and corrosive gas show no mercy to drillers and operators. Well costs range between $10 and $20 million or even more, meaning it will take some large resource accumulations with the potential for high flow rates to be economical.

There's the added problem that most available 3-D seismic data on the shelf were acquired without long offsets, making it difficult to adequately image the deeply buried structures there.

The Minerals Management Service (MMS) reports some 10 TCF of gas already have been discovered on the shallow water part of the shelf at drilling depths greater than 15,000 feet true vertical depth subsea (TVD SS) -- the minimum depth the agency pegs as deep gas. Most of this has been less than 18,000 feet, but another estimated 5-20 TCF are technically recoverable in undiscovered deep reservoirs, principally at depths greater than 18,000 feet.

To encourage drilling to tap into this resource, the MMS is proposing substantial royalty relief via its Deep Gas Initiative ([PFItemLinkShortcode|id:47331|type:standard|anchorText:Related Story|cssClass:|title:|PFItemLinkShortcode]).

The Bright Stuff

There's deep gas, and there's deep gas.

Some of the big players are already looking at structures as deep as 30,000 feet, according to Kerry Inman, exploration consultant.

"I think the prize is big enough, people are going to go for it," Inman said. "There's no question there's deep structures across the shelf, and there's no reason not to have good quality sand reservoirs."

The fledgling play has a strong south Louisiana deep Miocene onshore analog, and a number of seasoned operators are capitalizing on experience gleaned onshore to better understand the offshore opportunities.

Among these is McMoran Exploration, which holds the exploration rights to over 500,000 gross acres in the GOM offshore Texas and Louisiana. The company recently completed its JB Mountain exploratory well drilled to 22,000 feet in 10 feet of water off the Louisiana coast, with production scheduled to come on line shortly with ChevronTexaco as operator. The Mound Point offset drilled to 19,000-plus feet has been logged and found pay in three Miocene sands.

"I cut my eyeteeth doing work onshore in the deep Miocene," said James Moffett, veteran geologist and co-chairman of the board of McMoran Exploration. "But a lot of people offshore have not ever worked onshore, so there's a hiatus in the exploration experience.

"Many who worked offshore relied on bright spot techniques where they didn't have to be necessarily as knowledgeable about structural geology," Moffett added. "They often basically identified hydrocarbons because of anomalies on seismic as opposed to why they were there."

But don't expect to find bright spots to signal "drill here" in the deep province.

"In the entire exploration arena, the older the rocks get, especially in the deep trends, the denser the rock becomes and the less opportunity you have for hydrocarbon indicators, because you don't get the variable densities you need," Moffett said. "Put old rocks deep, and it makes it really difficult.

"The bottom line with the deep rocks in the Miocene on the shelf is you're going to have to go back to old style geology that depends on mapping the geometry of the structures.

"We've been doing this using onshore deep Miocene exploration techniques and the 3-D available to us offshore on the shelf, most of which covers such big areas it accomplishes the same thing as the long offsets," Moffett continued. "Instead of relying on hydrocarbon indicators, we're using those structural attributes I know will trap hydrocarbons.

"You have to map not just the shape of these things but understand the characteristics of thickening and thinning across these structures," he said, "to not only find the areas likely to trap hydrocarbons but to find areas that were active growth structures during Miocene time."

Without bright spots or hydrocarbon indicators to provide some level of confidence in sand presence, Moffett noted the geologists must be able to project in from what limited control they have, whatever the sand conditions may be.

The Advantage of 2-D

The need of the explorers to get a better handle on the deep section is spurring a respectable bit of seismic activity, albeit not the kind you might expect. In fact, much of the action is focused on acquiring 2-D data.

But this is not just any old 2-D.

For instance, GX Technology has acquired 4,600 miles of data across the Louisiana shelf from Mobile Bay to High Island using single streamer 9,000 meter (29,500 feet) offsets with trace lengths in excess of 18 seconds. The data are being processed using state-of-the-art technology.

The project is part of GX's GulfSpan program that covers essentially the entire northwest GOM.

"Overall, the image we get deep down around the deep area is better without question on the long offset data, which also allow us to derive more accurate velocities deeper in the section," said Chris Willacy, AAPG member and senior geophysicist, team leader at GX. "The structural imaging is better defined," he said, "so we get a greater range of angles and image steeper dips better.

"A lot of areas of 3-D because of shorter offsets and typically shorter trace lengths are not necessarily optimal to image some of these targets."

"If you're only going to 16,000 feet or so, you might get away with reprocessing older 3-D data," said Inman who works as a consultant on GulfSpan. "But these data aren't good enough to define the really deep structures as more than a bump, and then it's at the bottom of the data. The big issue is you can't see the details."

"A big advantage of the 2-D is it helps tie in main areas of interest and helps high-grade areas for looking at deeper prospects," Willacy said. "You can go in later and shoot 3-D for more prospect-oriented work."

Yet towing multiple long streamers to acquire new 3-D data in the infrastructure-cluttered shelf is so tedious, it's almost laughable. Likely, much of the new 3-D will be proprietary, prospect-scale projects, Inman noted.

Still, there are programs under way to acquire and process the long offset 3-D data that most operators are going to demand before pinpointing the drillbit target.

GX is joining forces with Geophysical Pursuit to put together a 100-block 3-D program on the shelf, and WesternGeco is active in the area, including some ocean-bottom cable acquisition work.

A Deep Shelf 3-D spec program using 30,000 foot-plus offsets and 11 second recording is in progress at Fairfield Industries, according to Steve Mitchell, vice-president, division manager, operations.

"We started acquiring long offsets in the shallow water about a year ago in anticipation of natural gas prices and the need for better data in the deeper section," Mitchell said. "We're using our proprietary radio telemetry technology, which is unhindered by streamers."

Among those already on board to take advantage of the Deep Shelf program data is Houston Exploration Co., which recently announced its first shallow water deep-shelf gas discovery drilled to 19,800 feet at High Island 115.

The stage is set to bring still a whole new long-offset 3-D data set to market, according to Mitchell. He noted they're going to shoot the Bays -- Atchafalaya, East and West Cote Blanche, etc., where recent deep discoveries indicate these environs to be highly prospective.

Improved Technology

Drilling technology will play a prominent role in realizing the potential of the deep gas resource, according to AAPG member Kevin McMichael, exploration vice-president at El Paso, which he noted is the most active explorer on the deep shelf. At press time, the company's most recent well was drilling at 18,700 feet at South Timbalier 212 as an offset to the initial discovery in the block, which reached TD at 19,730 feet and logged more than 100 feet of pay.

McMichael cited several key components in the drilling technology arena:

  • Improved bi-center bits, under reamers and hole opening tools.
  • Use of expandable casing.
  • Large bore well designs.
  • Enhanced drilling rigs with 3 mud pumps.
  • Use of oil-based mud in HTHP deep wells.
  • Pore pressure modeling, prediction and monitoring.

There's much activity afoot to upgrade existing rigs to meet the special requirements for deep gas drilling.

Rowan Companies, however, decided early-on to take a more high-end approach and proceeded to build a new generation jack-up rig dubbed the Tarzan.

This is the only place where industry is allowed to drill that's the closest to a new frontier," said Ed Thiele, senior vice-president at Rowan, "and you need the right rig.

"Tarzan is the only whole new rig just designed for shallow water deep gas," he noted.

The first of these powerhouses is scheduled to make its debut the second quarter of 2004 with three more to be constructed. At $100 million a pop, they're pricey, but Thiele anticipates they'll command a premium rate.

Despite the mounting excitement and high hopes for the deep gas province, Moffett interjects a note of caution.

"A lot of this stuff is HBP (held by production) because of shallower production," he said. "People knew there was deep potential, and they've been sitting with their hands in their pockets waiting for everybody else to spend the money to do the trial and error things necessary to get this trend moving.

"Ten to thirty million dollar wells take a lot of conviction," Moffett noted. "You have to have yourself conditioned that you understand it and are willing to check off a couple of deep, dry holes that are trial and error drilling, knowing if you find the big stuff, it will pay out quickly.

"Keep in mind, the multiple TCF fields that produced onshore are going to come offshore and be in this shelf area," he said. "You can bet on it."

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