Sunday, September 11, 2016

Peak Oil? What Peak Oil? The Lower Tertiary -- Post-Dinosaur Formation -- This Is A Huge Deep-Sea Drilling Story For Many, Many Reasons; Many, Many Data Points: The Stones "Paint It Black" -- September 11, 2016

The Lower Tertiary: a $1.5 trillion oil frontier. 

Shell begins production at world's deepest underwater oilfieldThe Stones. Data points:
  • billions of dollars of investment over past three years
  • Shell's overall deep water production will increase to 900,000 boe by the early 2020s from already discovered, established reservoirs
  • other Shell projects: Coulomb Phase 2 and Appomattox in the Gulf of Mexico and Malikai off the coast of Malaysia
  • will produce 50,000 boepd at full capacity by end of 2017
Data points about Shell's Stones Project:
  • 200 miles south of New Orleans
  • deepest-ever underwater depth
  • target: Lower Tertiary
  • Lower Tertiary: the vast majority is a tight-rock play; tight plays produce 8 - 12 percent of the buried oil, lower than the neighboring Miocene play in the Gulf
  • on the edge of charted Gulf waters
  • the industry's second-to-last major development in the Lower Tertiary that had been approved for construction (as of late 2015)
  • two wells to be drilled by end of 2016 in about 9,500 feet of water; deepest-ever depth
  • exploratory; reservoir known but not known how productive
  • if oil prices increase: Lower Tertiary could produce 500,000 bbl/day by the end of 2025; could bring the region's share of output in the Gulf from 11% (2015) to 195 in five years (2020) and 30% in a decade (2025)
  • analysts suggest oil price of $60 - $80 would be needed to justify additional wells
  • wells in this region cost more than $300 million to complete
FPSO: floating production storage and offloading. 

The Turritella: a leased floater; converted and retrofitted from a Suezmax tanker into an FPSO vessel at the Keppel Shipyard in Singapore by SBM Offshore; will initially work for Shell for 10 years; extension options for up to 20 years

The Turritella: a genus of medium-sized sea snails with an operculum; tightly coiled shells, whose overall shape is basically that of an elongated cone. Comes from the Latin word turritus meaning "turreted" or "towered."

Related stories and time line:
The Stones. Paint It Black 

Paint It Black, The Rolling Stones

It's not easy facing facts
when your whole world is black.

No more will my green sea
go turn a deeper blue.

The Lower Tertiary: A $1.5 Trillion Oil Frontier

I was curious. The Lower Tertiary is "post-dinosaur." When was it discovered that this geologic formation would produce oil?

From Oilprice.
The Lower Tertiary is considered by many to be the final frontier of oil exploration in the Gulf of Mexico, where, until recently, production was forecast to decline. The post-dinosaur era geological formation was originally thought to be devoid of oil, but recent exploration has proven otherwise.
Who discovered it? How was it discovered? What is the backstory?
This turnaround began in 1996, when Robert Ryan, then a geologist with Texaco, pursued a hunch about an ultra-deep water geological play. For a fuller accounting of this story, Edward Klump recently wrote a fantastic, in-depth piece for Bloomberg News on the history of this development.
In 1996, four companies—Texaco, Royal Dutch Shell, Amoco, and Mobil— came together to drill an experimental, ultra-deep water well in the Gulf of Mexico. Known as BAHA, the well was 7,625 feet deep, deeper than any that had been previously attempted. Unfortunately, both BAHA 1 (1996) and BAHA 2 (2001) came up dry.
Normally, dry wells would deter future drilling, but the success of the BAHA projects was in proving that a massive trove of oil existed where no one thought possible in the Lower Tertiary—we just needed the technology to get to it economically.
The first oil sourced from the Lower Tertiary began flowing in mid-2010 from the Perdido project, the world’s deepest offshore facility jointly owned by Shell, Chevron, and BP.
Production stalled shortly after start-up, however, as deep water drilling was shut down in the wake of BP’s Deepwater Horizon disaster. Over 4 million barrels of oil spilled, $40 billion in clean up costs, and an incalculable loss of public trust later, oil companies are pushing ahead once again.
Like the shale revolution on land, new technology is the key to the newfound success of Lower Tertiary exploration. New seismic tools allow explorers to see through layers of salt deposits that had previously blocked sub-salt geological mapping. This has also translated into a very respectable success rate—Lower Tertiary drilling has yielded a 40% average commercially viable success rate, well above the 30% global average.
September 13, 2013: Bloomberg News - Edward Klump -- The Lower Tertiary
The companies had joined together a block of leases in the Gulf of Mexico that had languished for about 10 years. They were excited by the massive up swell of rock that formed the subterranean structure -- the type of dome that in other places had yielded abundant oil and gas. But doubts ran high about drilling.
The prospect was in deeper water than ever had been drilled -- 7,625 feet. Based on current geologic understanding, the scientists worried the formation wouldn’t contain the kind of oil-bearing sands that would justify drilling such an expensive frontier well. “It was thought that sands settled closer to shore,” said Ryan, who at the time was in charge of Gulf of Mexico exploration for Texaco.
After hours of tense debate, the four partners agreed to drill. It was risky, yes. It also promised to reveal a vast new store of knowledge about the potential of the deep water Gulf. The only way to mitigate the risk of future drilling is to get a well in the ground and find out what’s there.
“Somebody has to drill that first well,” Ryan said, recalling the difficult decision in an interview last month in his Houston office. It’s all about building the story, well by well. “You’re piecing it together,” he said.
 How was it named? Who would be the operator?
The next vote -- on what to name the well -- was almost as contentious. Naming privilege generally goes to the majority partner and operator, while the four companies were equal owners. Squabbling followed, Ryan recalls, until one of the geologists in the room, eager to step out for a smoke, hit on the solution: each company contributed a word, and the first letter of each word formed the name. So Brachiosaurus (Shell), Alpha Centauri (Texaco), HI-C (Mobil) and Anaconda (Amoco) became BAHA.
Shell, which had a drilling rig under contract ready to start, was named the operator of the project.
Go to the link for the rest of the story. Hopefully the link doesn't break for a long time. It's a great story.

The Lower Tertiary: The Future

From the Bloomberg News article linked above:
  • Petroleo Brasileiro SA, known as Petrobras, started production from its Cascade/Chinook wells in the Lower Tertiary last year.
  • Anadarko Petroleum Corp. has said its Shenandoah find in the Lower Tertiary may be one of the largest projects in the Gulf.
  • The success rate in the Lower Tertiary so far has been about 60 percent, with 40 percent of discoveries having commercial potential -- a “tremendous” rate considering that 30 percent is considered good, Chevron’s Ryan said.
  • The value of the Lower Tertiary extends far beyond the Gulf of Mexico as companies tackle similar ultra-deep projects and formations off the coasts of Africa and Latin America. The engineering, seismic technology and basic experience obtained in the Gulf can be leveraged to lower costs and raise success rates in those regions.
  • BP still has the most licenses in this area; will have eight rigs drilling in the Gulf (in the 2013 article).
From Offshore Technology:
  • The Jack and St Malo field reservoirs are located in a geological formation known as the 'lower tertiary' trend. The formation was deposited more than 65m years ago about 20,000ft below the seabed.
  • It covers an area larger than 300 miles off the Gulf Coast of the US between Texas and Louisiana. The formation is estimated to contain vast resources for long-life projects of up to 30 to 40 years.
  • The total recoverable resources of the two fields are estimated at over 500m oil-equivalent barrels.
Geologic Time

The formations generally keep their traditional names. Geologic time names have changed. From wiki:
Tertiary is the former term for the geologic period from 66 million to 2.58 million years ago, a time span that lies between the superseded Secondary period and the Quaternary.
The Tertiary is no longer recognized as a formal unit by the International Commission on Stratigraphy, but the word is still widely used.
The traditional span of the Tertiary has been divided between the Paleogene and Neogene Periods and extends to the first stage of the Pleistocene Epoch, the Gelasian age.
The period began with the demise of the non-avian dinosaurs in the Cretaceous–Paleogene extinction event, at the start of the Cenozoic Era, and extended to the beginning of the Quaternary glaciation at the end of the Pliocene Epoch.
And, of course, we all remember the Cretaceous-Paleogene extinction event. From wiki again:
The Cretaceous–Paleogene (K–Pg) extinction event, also known as the Cretaceous–Tertiary (K–T) extinction, was a mass extinction of some three-quarters of the plant and animal species on Earth—including all non-avian dinosaurs—that occurred over a geologically short period of time approximately 66 million years ago.
With the exception of some ectothermic species in aquatic ecosystems like the leatherback sea turtle and crocodiles, no tetrapods weighing more than 55 pounds (25 kilos) survived.
It marked the end of the Cretaceous period and with it, the entire Mesozoic Era, opening the Cenozoic Era that continues today.

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