Lease Sale 220 will cover approximately 2.9 million acres offshore the State of Virginia in the Mid-Atlantic Planning Area, and is at least 50 miles (80 km) offshore. (Image courtesy of MMS)

It goes without saying that the major milestone for 2008 was the price of oil, which peaked in July at US $147/bbl. Although there has been some cooling in the industry within the past several months, the climb in price during the first half of the year served as a spotlight for new drilling technologies and their application in unconventional environments.

Deep water

In July, Murphy Exploration & Production Co. USA permitted its first wildcat, in the Manhattan prospect, on Lloyd Ridge Block 511 in the ultra-deepwater Gulf of Mexico (GoM). Diamond Offshore’s Ocean Confidence semisubmersible drilled the 1 OCS G10496 to set a record for the deepest water depth in the GoM at 10,139 ft (3,000 m).
The company plans to drill up to five remote wildcats in the Eastern GoM on its OCS G10496 lease. At the time of the announcement, only one well had been drilled in more than 10,000 ft (3,050 m) of water — Chevron USA Inc.’s Toledo prospect on Alaminos Canyon Block 951. ??

Extended-reach drilling

The most exciting trend for 2008 was the use of extended-reach drilling (ERD) technologies.

In February, Exxon Neftgas Ltd. set a new world record for ERD with its Yastreb Z-12 well, which achieved a measured depth of 38,322 ft (11,680 m) on the Chayvo field offshore Sakhalin Island. This well exceeded by 1,306 ft (398 m) the prior world record set by the Sakhalin-1 Project’s Z-11 well in 2007. The field currently holds 17 of the world’s longest ERD wells.

This record stood for only four months before Maersk Oil Qatar drilled its BD-04A on the Al Shaheen field offshore Qatar. Transocean’s jackup GSF Rig 127 drilled the BD-04A well to a depth of 40,320 ft (12,289 m) with a horizontal section of 35,770 ft (10,902 m). BD-04A was the first offshore well to exceed 40,000 ft (12,191 m), beating ExxonMobil’s Sakhalin-1 Chayo field record by 2,000 ft (6,096 m). The BD-04A well, which took 36 days to drill, was completed with a 6.8-mile (10.9-km) horizontal section. The well also achieved an impressive record for longest reservoir contact. Using Schlumberger technology, the 81?2-in. 35,449-ft (10,812-m) horizontal section was drilled within 3 ft (.9 m) of the “sweet spot” in a reservoir target measuring 10 to 20 ft (3 to 6 m) thick. This is possibly the most important record achieved because, at the end of the day, a well’s overall success is driven by contact between the reservoir and the well bore.

According to Schlumberger, the Qatar well broke 10 records in all. In addition to the records mentioned, the well also achieved records for deepest directional control, deepest downlink (measurement-while-drilling transmission and logging-while-drilling geosteering). The well achieved a record for the longest 8.5-in. section, which was drilled in two runs using Schlumberger’s PowerDrive X5 and PowerDrive Xceed rotary steerable system. The TeleScope high-speed, telemetry-while-drilling system transmitted geosteering information in real-time and continuous measurements of parameters that affect drilling efficiency.

The success of ultra extended-reach wells in Sakhalin and Qatar show ERD’s potential to drill in environmentally sensitive areas.

ERD is decreasing the footprint for drilling operations. That was a deciding factor in Houston-based Parker Drilling Co.’s receiving a contract in July to construct, deliver, and commission a land-based rig for BP Exploration (Alaska) Inc. to drill ultra extended-reach wells for offshore areas in Liberty field in the Alaskan Beaufort Sea.

Although Liberty is six miles (9.7 km) offshore, Parker plans to use an existing satellite pad — part of BP’s Endicott field — and ultra-ERD to develop the field with the least environmental impact possible. ERD will eliminate the need for a dedicated offshore platform, artificial drilling island, or subsea pipeline. The project will extend nearly 2 miles (3 km) deep and as far as 8 miles (13 km) out, some with measured depths exceeding the current record. The project is to begin in 2010.

Plains Exploration was recently approved for a 12-year offshore project in the Tranquillion Ridge field offshore Santa Barbara County, Calif., near the city of Lompoc. The project is expected to produce 100 MMbbl of oil (30,000 b/d) upon completion. The project will stem 17 wells from an existing offshore platform.

Platform drilling is also providing alternatives to standard subsea template drilling. StatoilHydro’s Gulltopp well was completed in April 2008. The well is offshore Bergen, Norway, in 443 ft (135 m) of water. The Gulltopp discovery lies 6.2 miles (10 km) from Gullfaks A. Drilling directly from the platform offered the operator an impressive potential cost savings (nearly 70%) and a faster return on investment. A subsea well was estimated at a cost of $393.9 million, which was exorbitant compared to the $98.5 million estimated for ERD from the platform.

The well holds the record for the longest well drilled from a platform. StatoilHydro estimated drilling would take 164 days, and completion would take 33 days (approximately 8 months total). In reality, the operation ultimately took 540 days (spread out over three years) and overran the estimated cost by $78.8 million. “If we were able to drill Gulltopp, we could then learn how to reach other prospects in the area. We wanted to prove it was possible,” said Reidar Helland, subsurface manager for Gullfaks. With a “learning experience” in mind, the operator had drilled the most difficult well in its history.

Rig use and day rates

The consistent rise in oil prices throughout the first half of 2008 helped achieve the highest rig count in the US in 22 years. Baker Hughes Inc. reported in April that 1,842 rigs were working in the US and its waters, which was the highest count for the region since 1986.

The concentration of rig deployment worldwide also helped to achieve record high day rates this year. ODS-PetroData reported in November that its deepwater rig day rates set a new record. Three new deepwater drilling contracts for future work were awarded at rates in excess of $600,000/day. According to ODS, deepwater rig fleet use remained at 100% and will remain at this level for the foreseeable future, despite recent drops in crude prices. The long-term deepwater projects are not likely to be affected by short-term slumps in worldwide energy demand.

Mid-water depth semisubmersible day rates also reached an all-time high. Recent contracts have been signed in excess of $400,000/day with fleet utilization maintaining 97%.

Deep drilling

McMoRan Exploration Co. and Rowan Companies continue to delve into the lower Miocene in the shallow water of the GoM, recently reaching a fourth potential hydrocarbon-bearing zone below 32,850 ft (10,019 m). The mega-deep Blackbeard West prospect is in the South Timbalier Block 168 on the GoM shelf in 70 ft (21 m) of water.

This well is proving to be the tightest hole in industry history with many speculations that the well, which is using Rowan’s Gorilla IV, will is approaching the world record of 38,000 ft (11,590 m).

Exploration

Another milestone for 2008 was the lifting of a presidential and congressional ban on offshore drilling in the US after a period of more than two decades. Although it is uncertain whether the ban will be reinstated under the Obama regime, many states are gearing up to begin offering leases for exploration.

The most recently announced offering is a lease sale offshore Virginia on the east coast. The Minerals Management Service (MMS) recently announced the bid round and is currently dispensing information for the acreage on offer. Lease Sale 220 is expected to take place no earlier than 2011. It covers about 2.9 million acres offshore Virginia in the Mid-Atlantic Planning Area, and is at least 50 miles (80 km) offshore. The MMS estimates the area contains as much as 130 MMbbl of oil and 1.14 Tcf of natural gas.