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US GULF FOCUS

Deepwater heartland: Shells Olympus platform Photo: SHELL

US Gulf gets back to basics


US operators are going back to basics in the US Gulf of Mexico as they navigate low oil
prices and competition from onshore unconventional production. Standalone projects are
being pursued, within strict economic parameters, but tiebacks are much more in vogue
and exploration is back on the agenda targeting reservoirs in better known plays rather
than pushing out the boundaries with fresh frontier wildcats.

Challenging conventional thinking in todays cost driven market


www.doris-engineering.com
22
FOCUS US GULF 21 July 2017

EXPLORATION

US Gulf players exploration


Potential targets lined up for
second half of year as companies
set sights on series of wildcats

KATHRINE SCHMIDT
Houston

A FTER a slow winter and


spring for exploration in
the US Gulf of Mexico, a
range of potential tar-
gets have started to appear for the
second half of the year.
The new proposed wildcats,
could see Llog Exploration tackle
a prospect that has long been in
the drilling queue of Spanish
major Repsol Hendrix Shallow
in Walker Ridge Block 67.
Repsol passed the reins of oper-
atorship to US independent Llog
however, for the most part are not last month, which also iled a new
chasing ultra-deep targets seen in exploration plan for the area in
the past decade, but instead look- recent weeks.
ing at more familiar zones such as While the full text is not yet
the Green Canyon area. publicly available, previous Repsol
Explorers have long said that marketing information indicated
the most complex ultra-deep the type of well-deined, shal-
developments have challenged low Pliocene and upper Miocene
economics in todays climate of objectives evident in discoveries
lower oil prices, and the explora- such as Hadrian and Lucius.
tion line-up relects that. Llog is also preparing to start
Others, however, will aim to drilling its own wells at the Buck-
take a fresh look at shallower tar- skin ield, where it took over oper-
gets in ultra-deep zones, or take atorship from Repsol earlier this
another pass at Lower Tertiary year.
targets with uncertain futures. According to an exploration
One of the prospects could see plan recently iled, the company
ExxonMobil return to wildcatting plans to spin the bit on as many as
in the US Gulf after spending sev- three wells in the area starting in
eral years bringing its Julia dis- October.
covery to production in the ultra- The location is north-east of the
deep Walker Ridge area. Chevron discovery, in Keathley PLATFORM RIGS OPERATING IN US GULF
The company has set out its irst Canyon 829.
two exploration plans in the Contractor Rig Current Location Water Prospect
region in more than two years for Coronado return Operator Depth
a pair of prospects in the Green Another interesting turn comes Nabors Mod 200 Enven Ewing Bank 873 773 Lobster
Canyon area Antrim, approved from Anadarko, which has laid the Ensco Mad Dog Spar BP Green Canyon 782 4428 Mad Dog
on 7 July, and Hershey, approved groundwork to return to the Coro- Ensco PDQ BP Mississippi Canyon 822 6037 Thunder Horse
last year. nado discovery with a new explo- H&P 203 Walter Ewing Bank 790 1183 Coelacanth
Antrim envisages the drilling of ration plan in place on Walker H&P 201 Shell Mississippi Canyon 807 2945 Mars
up to six sites on Green Canyon Ridge Block 143. H&P Olympus N88 Shell Mississippi Canyon 807 3036 Olympus
Block 364, about 103 miles (165 Chevron initially made the ind H&P 205 Shell Alaminos Canyon 857 7819 Great White
kilometres) ofshore in 3100 feet of in the nearby WR 98 in 2013, but *Does not include contracted but stacked rigs
water. Hershey is not far away, in allowed the blocks to expire amid Source: US Bureau of Safety & Environmental Enforcement and Upstream research
Green Canyon blocks 326, 327 and commerciality concerns.
371. Anadarko, a minority partner in
ExxonMobil has not iled a drill- the irst discovery, scooped up the
ing permit for either prospect, but blocks in a new lease sale in con- inconclusive, then disappointing Transocean drillship Discoverer oil equivalent. In Mississippi Can-
a preliminary schedule from the cert with 40% partner Venari. results. Clear Leader, according to US yon, Anglo-Dutch supermajor
Antrim plan provided a timeline Coronado had been seen as one Chevron, meanwhile, is drilling records. Shell has iled an exploration plan
to spud in July and also suggested of the areas contributing to the a wildcat at the Gator Lake pros- The Lower Tertiary well is per- to drill the Circius well immedi-
a drillship to handle the work, broader Shenandoah develop- pect in Green Canyon Block 720 mitted to a depth of about 35,000 ately west of its Kaikias ind.
mentioning the Transocean Deep- ment, which was dropped in near its Anchor discovery. feet. Sources put the pre-drill The latter ind is currently
water Champion. recent months after a six-well The new well is drilling ahead resource estimate at between 400 under development and due to tie
Another intriguing proposal drilling programme produced irst after spudding in late May with million and 500 million barrels of in about 40,000 barrels per day of

DEEP-WATER RIGS OPERATING IN THE US GULF


Contractor Rig Type Operator Location Water Depth (Ft) Prospect Dayrate Contract End
Diamond Ocean Black Rhino Drillship Hess Green Canyon 512 3618 Stampede $400,000 Q1 2020
Diamond Ocean Black Hawk Drillship Anadarko Green Canyon 519 4122 Warrior $495,000 Q2 2019
Diamond Ocean Black Lion Drillship Hess Green Canyon 512 3580 Stampede $400,000 Q1 2020
Diamond Ocean Black Hornet Drillship Anadarko Sigsbee Escarpment 39 8471 Phobos $495,000 Q2 2020
Maersk Viking Drillship ExxonMobil Walker Ridge 540 7147 Julia $150,000 Q4 2017
Noble Don Taylor Drillship Shell Garden Banks 427 2719 Cardamom $482,000 Q2 2019
Noble Bob Douglas Drillship Murphy Mississippi Canyon 734 5712 Thunder Hawk Not Disclosed Q3 2017
Noble Globetrotter I Drillship Shell Walker Ridge 367 6551 Ipanema $275,000 Q3 2022
Noble Paul Romano Semisub Hess Garden Banks 216 1380 Penn State Deep $128,500 Q3 2017
Pacific Sharav Drillship Chevron Walker Ridge 758 6955 Jack $551,000 Q3 2019
Rowan Resolute Drillship Anadarko Keathley Canyon 875 6809 Lucius $615,000 Q3 2018
Seadrill West Neptune Drillship Llog Green Canyon 390 3604 Khaleesi $573,000 Q4 2017
Seadrill West Auriga Drillship BP Green Canyon 743 6820 Atlantis $562,000 Q4 2020
Seadrill West Vela Drillship BP Mississippi Canyon 822 6268 Thunder Horse $564,000 Q4 2020
Seadrill West Capricorn Semisub BP Idle N/A N/A $316,000 Q3 2019
Transocean Deepwater Invictus Drillship BHP Green Canyon 520 4057 Wildling 2 $592,000 Q4 2017
Transocean Discoverer Inspiration Drillship Chevron Keathley Canyon 785 4239 Buckskin (P&A) $576,000 Q1 2020
Transocean Discoverer Clear Leader Drillship Chevron Green Canyon 720 4625 Gator Lake $580,000 Q4 2018
Transocean Deepwater Asgard Drillship Deep Gulf Mississippi Canyon 116 2667 Rampart Deep Not Disclosed Not Disclosed
Transocean Deepwater Proteus Drillship Shell Mississippi Canyon 392 7259 Appomattox $486,000 Q2 2026
Transocean Deepwater Thalassa Drillship Shell Walker Ridge 508 9582 Stones $488,000 Q1 2026
Transocean Deepwater Conqueror Drillship Chevron Walker Ridge 678 7035 St Malo $589,000 Q4 2021
Source: US Bureau of Safety & Environmental Enforcement and Upstream research
21 July 2017
FOCUS US GULF 23

n planning on the rebound


In demand:
Transocean
drillship
Discoverer Clear
Leader is drilling
at the Gator Lake
prospect for
Chevron

Photo: US COAST
GUARD

US GULF DRILLING
TARGETS
Antrim GC 364
Hendrix WR 67
Buckskin KC 829
Coronado WR 143
Gator Lake GC 720
Circius MC 767
Mormont 2 GC 478
Wildling 2 GC 520/521
Scimitar GC 348
Samurai GC 432

production via the Ursa hub start-


ing in 2019.The probe on MC 767
could begin work as soon as Sep-
tember, and lies in about 4000 feet
of water.
Interest also continues in the
south-east of Green Canyon,
where Llog has spudded a fol-
low-up well on the block contain-
ing its Mormont prospect. It also
drilled a follow-up to the Khaleesi
prospect on GC 389 to 390.
BHP Billiton is also continuing
work at its Wildling well on Green
Canyon 521 after being forced to
respud earlier in the year.
The Australian explorer has
been working to prove up
resources north of its operated
Shenzi tension-leg platform.
BHP is also looking to drill its
Scimitar prospect in GC 348 later
in the year, with spud planned for
September.
Murphy Oil will also make a go
at appraising the Samurai discov-
ery previously made by Ana-
darko before its fellow independ-
ent took the operatorship reins
in GC 432.

Search the archive:


Coronado
24
FOCUS US GULF 21 July 2017

FIELD DEVELOPMENT

Collaboration: the semi-submersible floating production unit at Chevrons Jack-St Malo development

Pace of developments is slow


Only the most viable US Gulf projects are moving
forward in the current low oil price environment
KATHRINE SCHMIDT
Houston

M AJOR oil companies


have not given up on
new stand-alone
developments in the
US Gulf of Mexico, but only a small
number of select projects are mak-
ing it to the top of the queue as
engineering, procurement and
construction orders for the 8800-
tonne topsides and 15,000-tonne
hull, as well as an integration con-
tract.
South Koreas Samsung Heavy
Industries, Hyundai Heavy Indus-
neering and design as well as
detailed engineering for the top-
sides. Shell may select its pre-
ferred bidders as early as the end
of this year, ahead of taking a inal
investment decision on Vito in the
second quarter of 2018, industry
progressing pre-front end engi-
neering and design work for a
semi-submersible design to
develop its Anchor and Tigris dis-
coveries in the US Gulf.
UK player Wood Group con-
irmed in May that it had scooped
expected to run about nine
months, and the same contractors
could potentially carry over into
FEED work to follow on late this
year.
KBR and Wood Group previ-
ously worked together on the hull
operators work with the econom- tries and Daewoo Shipbuilding & sources said. the pre-FEED award for the top- and topsides respectively on
ics of todays oil prices at around Marine Engineering are up Shell operates Vito with a 63.11% sides under a 10-year master ser- Chevrons last big semi-submers-
$50 per barrel. against Singapores SembCorp and stake and is partnered by Nor- vices agreement with Chevron. ible project in the US Gulf, Jack-St
At the top of the list is Vito, Keppel. ways Statoil on 36.89%, after the Malo, which came on line in 2014.
where Anglo-Dutch supermajor pair exercised their preferential Design project One source indicated that early
Shell is currently poring over bids In the mix rights and assumed the 18.67% Meanwhile, KBR is thought to be discussion on construction of the
from about a half-dozen shipyards Chinas Ofshore Oil Engineering share that was formerly held by handling the pre-FEED contract hull and topsides has begun, at
globally to construct a semi-sub- & Construction (COOEC) is anoth- Freeport McMoRan. for the hull utilising the compa- least with yards in South Korea,
mersible platform to develop the er contender for the job, while US Vitos sub-salt discovery well nys GVA 10000 design. but a range of options are under-
discovery in the Misssissippi Can- player Kiewit may also be in the was drilled in 2009 in Mississippi The project is for a mid-sized stood to remain open.
yon area. mix for a topsides bid and integra- Canyon Block 984 in 4038 feet of semisub platform of about 100,000 Anchor, hailed by Chevron as a
The 24,000-tonne loating pro- tion work, which it has completed water. barrels per day, potentially a hub class discovery, is in Green
duction unit is due onstream in for other recent projects in the The Miocene-age ield is esti- design one, build two scenario if Canyon Block 807 and seen as the
2021 and is designed to handle region. mated to hold more than 300 mil- the US supermajor proceeds with stronger of the two inds.
100,000 barrels per day of oil. Jacobs, a longtime Shell collab- lion barrels of resource. both projects. There, Chevron operates with
Three deals are in play the orator, handled front-end engi- US supermajor Chevron is also The pre-FEED work would be 55%, with Cobalt on 20% and Sam-
21 July 2017
FOCUS US GULF 25

Lease sale can pave


way for new exploration
WHILE the US Gulf of Mexico development queue is modest for now,
regulators are pushing ahead with a new lease sale programme to
award the blocks to pave the way for future exploration.
US regulators last week put the inishing touches on the
upcoming Gulf lease sale on 16 August, which will for the irst time
ofer up at once acreage from the central and western Gulf. The sale,
the irst in the 2017-2022 ive-year plan, will be live-streamed from
New Orleans.
Historically, regulators have held one event for the central Gulf in
the spring, typically the busier event, and a second for the western
Gulf in the late summer.
The policy change by the Bureau of Ocean Energy Management
(BOEM) was enacted by the Obama administration but is taking
efect in the presidency of Donald Trump.
The idea is to allow companies to bid on both regions more often,
and not have to wait a full year to try again if unsuccessful.
Trumps administration has made it a priority to include drilling
in new areas after Obama set certain areas of limits when he
departed the presidency, and has begun the process to craft a new
ive-year leasing plan.

Photo: CHEVRON

wing but not stalled

son Ofshore and Venari Resources sell all or part of its share in the 80,000 and 100,000 barrels of oil
both on 12.5%. discovery, and was due to take per day.
Tigris, which would be set to bids in early July. Responses to that query have
include development of the Tiber, The ind is estimated to contain been few due to the ownership
Guadalupe and Gibson inds, is recoverable resources of between questions, and it remains unclear
seen as more complex, given the 500 million and 800 million bar- whether that discussion would
three ields involved in the Keath- rels of oil equivalent. hold any bearing with a new
ley Canyon area. The independent operates owner.
Another top discovery seen as North Platte with a 60% share, Cobalt previously envisaged
prospective for development is with Frances Total holding the irst oil for North Platte in 2022
the Cobalt-operated North Platte remaining 40%. and Anchor in 2023.
ind. While the broader ield of inter-
est remains unclear, Upstream Work shelved
Questions remain previously reported that Norwe- Anadarkos Shenandoah discovery
However, there are big questions gian major Statoil is seen as a key had until recently been seen as
about the future prospects for that potential buyer of Cobalt proper- among the top candidates for a
development given the heavy debt ties given its hunger for operated greenield development in the
load of the operator and its frus- assets in the region. area, with a FEED study under
trated eforts to untangle itself Cobalt had previously begun a way from SBM Ofshore.
from a collapsed asset deal of An- compressed tender process for However that work was shelved
gola. development ideas on a mid-sized earlier this year after Anadarko
Left with few options, Cobalt semi-submersible, a patented took a writeof following disap-
has been running a data room to design with capacity for between pointing appraisal results.
26
FOCUS US GULF 21 July 2017

FIELD DEVELOPMENT

Moving ahead: Llog will develop the Buckskin field as a two-well tieback to Anadarkos Lucius spar Photo: ANADARKO

Tiebacks favoured in US Gulf


Operators increasingly using existing infrastructure
to keep competitive with shale
KATHRINE SCHMIDT
Houston

T IEBACKS have emerged as


the development solution
of choice for the US Gulf of
Mexico as operators work
to develop competitive projects
with shale by using existing in-
frastructure to bring new discov-
planned its irst well in the area
on Keathley Canyon 829, with
drilling tentatively set for as soon
as October.
Production is expected to total
about 30,000 barrels per day in the
irst phase at Buckskin, which is
behind by other operators. That
work includes a raft of opportuni-
ties following the companys
$2 billion acquisition from Free-
port McMoRan including multiple
production hubs with tieback
opportunities already mapped
darko is also moving ahead with
the Constellation project for-
merly the BP-operated Hopkins
discovery with the US inde-
pendent spudding its irst well in
April and a contract for umbilical
work recently awarded to Ocea-
phase is expected to begin in
2019 at a rate of 40,000 barrels per
day.
Shells other projects include a
second phase of drilling at its Cou-
lomb ield, as well as new inill
work near its Perdido spar in the
eries to market. due on line by late 2019. out. neering. ultra-deep Alaminos Canyon area,
The latest projects to spring on Llog is also progressing with That discovery is expected to be with potential new volumes from
to the scene are from privately- the Crown & Anchor ield, discov- Development well tied back to Anadarkos Constitu- the Whale discovery.
held Llog Exploration, which is ered in 2015 in Viosca Knoll Block Around the Horn Mountain hub, tion spar, with a irst-oil date ten- Chevron is pushing into the
understood to have sanctioned a 959, which is set to be a two-well Anadarko drilled its irst develop- tatively set for 2018. second phase of its Jack & St Malo
trio of tiebacks in recent months. tieback to the Marlin TLP. Start-up ment well in the irst quarter and Anadarko is also evaluating the project in the Lower Tertiary play,
Topping the list, Llog is believed could come as soon as November. discovered 70 feet of net pay, now details of tiebacks for the success- while work on the Tahiti Vertical
to have given the green light to Claiborne, which was discov- due to be hooked up to the facility ful Green Canyon area wells of Expansion project, designed to
the irst phase of development at ered in 2016 in Mississippi Canyon in the third quarter. A second de- Warrior and Calpurnia, both seen expand production in sands
the Buckskin ield, known from Block 794, is another two-well tie- velopment well is due to spud in as tiebacks to nearby facilities. beyond the main developed reser-
its initial discovery by Chevron. back, destined for the Walter Oil & the second half of the year. The company is also appraising voir, has also been under way.
The supermajor backed out Gas-operated Coelacanth platform The company is high-grading the Phobos discovery in the ultra- Meanwhile, Hess has one well
amid economic concerns, but the that was installed in 2015. other tieback opportunities and is deep waters of the US Gulf near to bring on line at its Penn State
US independent appears ready to Llog has not commented on pro- expected to follow up with more the Lucius spar. Deep project in Garden Banks
give the project a shot. duction capacity for either ield. drilling later in the year. Majors remain in the game as Block 216, with drilling and com-
Llog will initially develop Buck- Anadarko Petroleum remains At the Holstein facility, the well, with Shell having approved pletion planned to wrap up by the
skin as a two-well tieback to Ana- one of the top players in the US company sees multiple platform its three-well Kaikias project, a third quarter.
darkos Lucius spar in the Keath- Gulf tieback game, ramping up rig opportunities due to begin tieback to the nearby Ursa produc- Work is set to be completed by
ley Canyon area.The company has plans to reinvent projects left operations late in the year. Ana- tion hub. Output from the irst McDermott.
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28
FOCUS US GULF 21 July 2017

DEEP WATER

Longer term
view needed to
make most of
deep potential
Sector still has a key role to play but investment in
exploration and project sanctioning now at a crucial
point if operators are to keep production levels stable
LUKE JOHNSON
Houston

P RODUCTION from the


deep-water Gulf of Mexi-
co continues to play a vi-
tal role in operators port-
folios and is expected to remain a
key contributor to US output for at
least the next few years.
duction will slip to around 1.83
million boepd by 2020, WoodMac
estimates. That could be the start
of a more noticeable decline in
output if companies do not start
getting more development pro-
jects in the queue.
capacity of 80,000 barrels per day
of oil, with 80 million cubic feet
per day of gas throughput.
Chevrons long-delayed Big Foot
TLP is also due online next year
following a failed installation in
2015.
Mad Dog 2 project this year after
many years of delays and eforts to
lower project costs.
Mad Dog 2 is currently expected
to start-up in late 2021, with a pro-
duction capacity of up to 140,000
bpd.
Exploration also have multiple tie-
back projects in the queue.
Subsea tiebacks are a fairly low-
risk and cost-efective way to
maintain production growth, and
clearly the preferred method for
large and smaller players alike,
However, if the proliic region is We dont think deep water is Big Foot has a capacity of 75,000 Beyond those projects, deep-wa- since many such projects can be
to continue keeping pace with US dead by any means... but to really bpd of oil and 25 MMcfd of natural ter production growth will have to economic even at sub-$40 oil,
shale beyond 2020, operators will move the needle we need big pro- gas. rely on subsea tie-backs to keep Khan says.
need to start inding new jects, says Imran Khan, Wood- Shell also has a couple of pace. But if youre going to look to
resources and to sanction bigger Macs senior research manager of mega-projects in the works. Appo- One of the more high-proile tie- the middle of the next decade, you
projects, experts say. deep-water Gulf of Mexico mattox is the furthest along and back projects is Shells Kaikias will need some large projects to
According to consultancy Wood upstream oil and gas. will be the irst development to development in the Mississippi come through, he says.
Mackenzie, deep-water US Gulf Over the next several quarters target the Jurassic-aged Norphlet Canyon area, which was sanc- The oil price collapse undoubt-
production is expected to hit 1.69 operators will start putting into trend. tioned this year. edly shook conidence in the
million barrels of oil equivalent the water projects sanctioned The giant semi-submersible Kaikias will be developed in two deep-water US Gulf.
per day by the end of this year. years ago. production hub is expected to hit phases, the irst phase of which The pool of players is smaller
Output is expected to continue peak output of around 175,000 bar- includes three wells with a peak and the price of entry remains
rising in 2018 to an average of 1.78 Capacity rels of oil equivalent per day, with combined production capacity of high, while the lure of shale com-
million boepd, which would be The irst one expected to come on- irst oil in late 2019. about 40,000 barrels of oil equiva- petes for investment dollars.
the highest output level since the line will be Hess Stampede ten- Shell is also continuing to lent per day. However, Khan says operators
Macondo disaster of 2010. sion-leg platform, which has been advance its Vito development, The wells will be tied back to cannot forget about deep water.
Production will average about towed out to its permanent home though project sanction is not Shells Ursa TLP, with irst oil in If you want to have a balanced
1.87 million boepd in 2019, accord- in Green Canyon Block 468. First expected until next year at the 2019. approach and have a long-term
ing to WoodMac. oil is expected in the irst part of earliest. Independent players such as view, deep water clearly has to
However, US deep-water pro- 2018. Stampede has a processing BP also inally sanctioned its Anadarko Petroleum and Llog part of your strategy, he says.
21 July 2017
FOCUS US GULF 29

On the move: the Stampede platform has now moved out to its location in the
deep-water US Gulf Photo: HESS

Set your sights.


Contribution: BPs Mad Dog 2
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Gulf of Mexico
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Photo: CHEVRON
30
FOCUS US GULF 21 July 2017

SHALLOW WATER

Contrarian thinking: the sun sets in Port Fourchon, Louisiana

Shallow water proves to have l


The last of the supermajors may have left for deeper prospects in the US Gulf, but
outfits with more independent thinking know that there is still money to be made
LUKE JOHNSON
Houston

C hevrons recently com-


pleted exit from the shal-
low-water US Gulf of
Mexico in many ways
signiied the end of an era.
The US supermajor has been
producing oil and gas from the US
in their thinking and... can gener-
ate value through operating a lit-
tle bit more eiciently, says Mark
Smithard, chief operating oicer
of US Gulf newcomer Cantium.
Louisiana-based Cantium,
which is backed by private equity
Cantiums new trove of assets. He
and his partner built an entire
business plan around acquiring
these speciic assets, into which
they felt they could breathe new
life.
When one has owned an asset
player, bought most of the non-op-
erated shelf interests in Chevrons
portfolio.
Another new entrant to the US
continental shelf, and to the
global oil industry, is Israel-head-
quartered Navitas Petroleum.
away.We saw an opportunity in
the shelf and the swamps of Lou-
isiana because a lot of people had
just deserted those areas, so we
were able to pick up leases very
cheaply there and do some very
good farm-in deals, says Navitas
continental shelf for more than outits York Capital Management for 50 or 60 years, one gets into a Navitas was the international exploration manager Peter Mik-
ive decades, and has now become and Sole Source Capital, recently particular mindset and a particu- arm of Delek but has recently set kelsen.
the last major company to leave. purchased the last of Chevrons lar viewpoint. We just have the of on its own. The companys primary focus is
But while the shallow waters of continental shelf assets. ability to look at it with a slightly Unlike many of the other US currently on the Buckskin
states like Louisiana and Texas diferent view, Smithard says. shallow-water players, Navitas is deep-water project in the US Gulf,
have fallen out of favour with the Portfolio We, like others, are bringing to on the verge of going public, with but Mikkelsen says there are mul-
industrys biggest operators, The ive ields and 300 active wells bear a completely diferent para- plans to launch an initial public tiple prospects on its shelf acreage
smaller and often privately held in the Bay Marchand and Main digm to the US continental shelf, ofering in Tel Aviv, Israel in mid- that are quite exceptional, and
companies are inding new oppor- Pass areas comprise the entirety he adds.Chevron sold the other July. he expects to begin drilling
tunities. of Cantiums portfolio. chunk of top-tier shelf assets to Like others in the region, Navi- within the next 12 months.
Shallow water is attracting the Having spent two and a half Texas-based Arena Energy, one of tas saw a chance to pounce on This burgeoning interest in
contrarian thinkers, the people decades at Chevron and Texaco, the most active shelf drillers. some shallow-water assets at a shallow-water exploration coin-
who are a little more independent Smithard is well acquainted with Cox Oil, another privately held time when others were turning cides with oicial US eforts to
21 July 2017
FOCUS US GULF 31

Jack-up market shows promise


WITH a fresh batch of shal-
low-water operators in the US Gulf
of Mexico, jack-up owners are
inding new opportunities as well,
writes Luke Johnson.
It has not been a pretty two or
three years for any ofshore rig
owner, though there is increasing
conidence that the jack-up mar-
ket in the US has already hit bot-
tom and is now showing signs of
life.
However, the US driller market
has a decidedly diferent complex-
ion now than it did before the
downturn, primarily due to the
bankruptcy and liquidation of
erstwhile jack-up titan Hercules
Ofshore.
Much of Hercules leet was sold
for scrap, and some rigs were sold
to international buyers. However,
13 of the companys jack-ups in the
US Gulf were acquired by Hou-
ston-based newcomer Enterprise
Ofshore. Drilling work: the jack-up Ensco 75 Photo: ENSCO
Enterprise was founded with
support from privately held E&P White Fleet markets to third par- Enterprise 205 rig under contract
operator Arena Energy. ties as well. in the Ship Shoal area, and is drill-
It is understood that Enterprise Energy XXI recently hired the ing another well with the Ensco 75
owns 10 of the 13 rigs and markets WFD 350 to drill a sidetrack well in Eugene Island, records show.
them to third parties for work near a platform in the West Delta Other companies currently
nearshore and further ofshore. area. Upstream understands the drilling wells on the US shelf
Enterprise rigs have worked for 350 rig underwent a substantial include Walter Oil & Gas and
operators such as Renaissance refurbishment after it changed Enven Energy. Both are using
Ofshore and Gomex, primarily for hands. Ensco jack-ups.
spot or short-term jobs. The new owner added a new liv- However, while things do seem
The other three rigs were ing quarters and made other to be improving for shallow-water
cleaved of into a separate entity, enhancements while the rig drillers, it is hardly boom times.
White Fleet Drilling, which is was in the yard earlier this year, Baker Hughes showed just four
thought to be something of an according to once source. rigs drilling in inland waters in
KISWIRE_N2Hyrope_AD_146x181_161017.pdf 1 2016-10-17 1:34:04
in-house driller for Arena, though Renaissance currently has the mid-July.

Photo: AFP/SCANPIX

long shelf life C

CM

MY

CY

CMY

entice more activity. The US the shelf are in decline, despite


Bureau of Ocean Energy Manage- the existence of substantial criti-
ment (BOEM) has conirmed plans cal infrastructure.
to lower the royalty rate for shal- Companies such as Cantium are
low-water leases awarded in next hoping to bring life back to the US
months ofshore lease sale. continental shelf, but it will take
some new thinking.
Reduction Smithard said Cantium has
With the change, the rate for oil hired people with experience
and gas produced on newly award- from all over the world, including
ed shelf blocks will drop from the Africa, China, India and Oceania.
current 18.75% to 12.5%, which is Things that weve seen around
in line with royalties collected on the world, were bringing con-
federal land onshore. cepts, ideas and a vision that
The idea is to increase incen- weve developed in conversations
tives for activity in a mature basin over many long years, he says.
even when oil prices are low. We think we can bring ideas
The BOEM acknowledged in its (from) other arenas and we can
announcement that exploration, leverage those to great efect here
development, and production on on the shelf.
32
FOCUS US GULF 21 July 2017

SHALLOW WATER

Operators
see great
future for
the shelf
US Gulf of Mexico shallow-water
operators say many projects are
now economically competitive
with onshore shale plays

CAROLINE EVANS
New Orleans

AFTER years of lying under the Miocene, a formation Bain


radar amid low oil prices and in- believes is the last high-potential
creasing competition for cash US Gulf play that does not have
from more eicient and less capi- adequate drilling.
tal-intensive onshore unconven- If we have proof of concept in
tional plays, shallow-water US the middle lower Miocene, there
Gulf of Mexico players now see an is a lot of room to reinvigorate and
arena where their projects are on reignite the industry, he says.
par with some shale plays.
We see a great future for the Challenges remain
shelf. Everybody is paying a lot of However, there remains some risk
money to get into Permian and to working in shallow-water ields
other (onshore) plays, says Mark compared to some of the estab-
Smithard, the chief operating lished resource plays onshore.
oicer of shallow-water start-up Upstream Exploration drilled a
Cantium. We think theres a lot dry hole at its Palmetto prospect
of residual value and some very in the East Cox Bay ield earlier
smart people on the shelf. this year. Willis says the company
Michael Willis, president of has a number of other prospects
Louisiana-based shelf operator it is evaluating.
Upstream Exploration, says its It is a ield development, so its
projects can be proitable below unfortunate but it is the nature of
$40 per barrel, making the com- the beast, Willis says of the dry
pany competitive with many US hole.
shale plays. That disappointing well fol-
We can drill, complete and lowed a successful probe at the
hook up a well in 65 days, so we Palmetto C well in January. The
can see a quick return and we can companys two Palmetto wells
do it at $5 per barrel inding cost, together produce about 1000 bar-
so that makes us competitive, rels per day of oil and about 3 mil-
Willis says. lion to 4 million cubic feet per day
The Highbridge Principal Strat- of gas from Middle Miocene sands.
egies-backed company launched Willis says his company contin-
its shallow-water programme last ues to evaluate potential acquisi-
year when it acquired the assets tions ranging from $2 million to
and most of the staf of Century $200 millionin the areas where it
Exploration. Upstream Explora- already operates.
tion now operates six ields in For its part, Gulfslope hopes to
Louisiana state waters. tap cash from a partner to fund
Gulfslope Energy, another pri- drilling, but admits inding capi-
vately owned company operating tal has been tough.
on the shelf, is also betting its Bain notes interest from a num-
shallow-water assets can compete ber of foreign companies that view
with shale. the market as an opportunity to
Because you can get produc- enter the US Gulf of Mexico.
tion in 18 to 24 months... the eco- Were actually in advanced dis-
nomics are astoundingly robust, cussions with foreign-based com-
Gulfslope chief operating oicer panies, he says. We expect thats
Ron Bain says, adding that all of going to be the route into the drill-
the companies prospects will ly ing phase.
at less than $30 oil and $2.50 per Gulfslope hopes to carry out a
thousand cubic feet of gas. drilling campaign on its seven
Bain calls the sub-salt prospects phase one prospects, which are
on the shelf a deep-water play in scattered between Grand Isle and
shallow-water because wells pri- Vermillion, and are situated in 300
marily target the middle Miocene. to 430 feet of water.
The prospects reserves range Were teed up, ready to go. We
from 30 million barrels to 300 mil- just need a partner ready to bring
lion barrels, with the larger pros- some money to the table, Bain
pect targets in the middle lower says. Under the radar: an oil platform of Louisiana Photo: AP/SCANPIX
21 July 2017
FOCUS US GULF 33

SUPPORT VESSEL SECTOR

Workboat business on verge


of significant consolidation
Expected increase in drilling
activity in US Gulf is set to beneit
fleet owners with foresight
CAROLINE EVANS
New Orleans

W orkboat operators
devastated by low
dayrates and dwin-
dling demand may
soon see a wave of consolidation
in their industry as US Gulf of
Mexico drilling activity appears
Laborde said at the Louisiana
Energy Conference last month.
Laborde Marine has a leet num-
bering 23 workboats, including
crewboats and supply vessels that
service the US ofshore oil and gas
industry.
to be on the verge of bottoming. Laborde said he chose not to
Workboat companies, many of build any new vessels from 2011 to
which have been forced into bank- 2014 because he saw the number
ruptcy in the course of the indus- of units under construction and
try downturn, could beneit from suspected there would be a chance
an increase in activity this year to buy in the future.
and next as ofshore drilling sees The company intends to come
a resurgence after years of out of the downturn with some
under-investment, according to additional equipment, he added.
analysts at research company That opportunity is still there,
Evercore. its just a more diicult pro-
Oversupply issues will need to gramme to acquire at this point,
be worked out further to bring the Laborde said. The impairment
market back into balance, but issue now is becoming the biggest
early signs of rationalisation are issue for all of us, and lenders now
starting to materialise and we are very skittish about moving
believe the market will inevitably forward.
force a more tenable supply-de- Another likely consolidator in
mand dynamic, Evercore said. the ofshore vessel industry is Sea-
The early phases of the ofshore cor Marine Holdings, according to
recovery will likely centre around Evercore.
deferred maintenance work,
decommissioning, personnel Cash on hand
transport, and shelf production. The company has little debt and Deals: Hornbeck Ofshore Services chief executive Todd Hornbeck Photo: ERIC MARTIN
plenty of cash on hand after gen-
Acquisitions erating $174 million in proits
That means better-positioned from the sale of 380 vessels from
companies could beneit from ac- 1997 to 2015, and getting a $175
quisitions if vessel values recover. million boost from Carlyle Group
The sentiment that consolida- in 2015.
tion is just on the horizon is so The industry desperately needs ONSHORE. OFFSHORE. EVERY SHORE.

strong that the question appears vessels to exit the market and for

IT ALL STARTS WITH API.


to be when, not if, it happens. remaining vessels to be concen-
Nobody wants to give up their trated in fewer, more disciplined
leet, but eventually, thats going hands, Evercore said.
to be the thing that happens, With vessel values currently at
Laborde Marine owner Peter bargain-bin prices, the stage is set
for Seacor to expand its leet at its No matter where you go around the world, the oil and natural gas industry
A $600 own discretion. If an ofshore
relies on API Global Standards to meet the highest level of safety.
recovery unfolds and an upcycle
million crew looms, Seacor will likely appear Show the world your commitment to safety. Start with API.
prescient for the vessel trading it
ship is not enacts along the way, in our
dumb iron. view.
Hornbeck Ofshore Services
This is not chief executive Todd Hornbeck
says he expects consolidation to
something happen faster than it did in the
you can just years following the downturn of
the 1980s, largely because of the
idle and then advanced features that are built
into new vessels.
expect to After the 1980s you had just all
bring back this mechanical equipment that
was stacked for a decade... so, it
online for a was really what I call dumb iron,
Hornbeck said.Today, youve got
minimal cost. a $600 million crew ship, its not
dumb iron. This is not something
Hornbeck Ofshore you can just idle and then expect Its times like these
to bring back online for a minimal
Services chief cost.
you need people like us.

executive Todd Hornbeck expects consolidation


Hornbeck to also be more regional than in 877.562.5187 (Toll-free U.S. & Canada) | +1.202.682.8041 (Local & International) | sales@api.org | www.api.org
the past, and is hopeful deals will 2017 API, all rights reserved. API, the API logo, the Onshore-Ofshore-Every Shore tagline, the It All Starts with API tagline,
and the Its times like these tagline are trademarks or registered trademarks of API in the United States and/or other countries.
start rolling in sometime this
year.
34
FOCUS US GULF 21 July 2017

REGULATIONS

Industry cheers era of America


Explorers in the US Gulf of Mexico hope changes by the
Trump administration mean they will work with
regulators rather than just being regulated
LUKE JOHNSON and
KATHRINE SCHMIDT
Houston

O IL and gas companies


working in the US Gulf
of Mexico are hoping
the administration of
President Donald Trump will help
ease some of the regulatory bur-
den put in place by his predeces-
mental bonding rule, which
would have required companies to
post substantial inancial assur-
ances before being allowed to
operate, has been indeinitely sus-
pended, to the relief of small and
intermediate operators in particu-
tainly more (willingness)... to
work with the industry, not just
regulate the industry, says Scott
Heck, chief executive of Energy
XXI.
I think were going to see an
industry that works closer with
by operators. However, the ulti-
mate rule imposed by the Obama
administration deviated from
what industry had proposed and
added in prescriptive elements
that arent really grounded in ge-
ology and technology, Milito
have that second guessing going
on, Milito says.
Another thing API is focused on
a request the Trump adminis-
tration is eager to accommodate
is to open up more federal of-
shore areas to exploration, par-
sor. lar. the regulators as opposed to just says. ticularly on the east coast.
Those hopes have been realised Stifer air pollution oversight being regulated by them. The rules requirements for The current ive-year leasing
so far. proposed by the Obama adminis- One of the most urgent items drilling margins was the main plan, from 2017 to 2020, only
In April, Trump issued an exec- tration, but never implemented, industry groups and regulators sticking point, as API contends includes existing areas in the Gulf
utive order that called for imple- also appears to have stalled and is are working on is the well-control the Obama mandates are virtually of Mexico and in the Cook Inlet of
menting an America irst strat- now not likely to take efect. rule put in place in the wake of the unattainable and just not relec- Alaska.
egy for managing ofshore energy And the Interior Department Macondo disaster of 2010. tive of the way industry operates. The API hopes to get the plan
resources. now plans to lower royalty rates The rule also requires real-time revised so operators can step out
The order reads like a laundry for new shallow-water tracts Sticking points monitoring of operations from of these rapidly maturing areas
list of gripes industry groups have starting in next months lease sale Erik Milito, the upstream and in- onshore, which Milito says means and discover new ofshore
had with Barack Obamas regula- as a way to incentivise activity. dustry operations group director oicials end up second guessing resources.
tory regime. Overall, the oil and gas industry for the American Petroleum Insti- whats happening on the rig. The Gulf of Mexico is the life-
Trump has shown an eagerness now feels it has a US government tute (API), says the industry pub- Its important to allow the peo- blood of our ofshore, weve been
to reverse Obama-era regulations that is ready to listen to its con- lished rules shortly after Macondo ple who are authorised and there for 50 years, Milito says.
in numerous sectors, but oil and cerns and help it grow. governing well control and blow- responsible for operations to actu- These are long-cycle projects
gas has been one of the early ben- What I think weve seen since out preventers that were based on ally be able to conduct the opera- and in order for you to have that
eiciaries.A controversial supple- the new administration is cer- a true standard already adopted tions in a way where they dont important resource from the of-
21 July 2017
FOCUS US GULF 35

New chief at ofshore regulator


Heading out:
People watch
as tugs
believes balance is achievable
transport THE Trump administrations all approach which completely groups, local and state oicials,
Hesss pick to head the countrys top shut down an industry with trade organisations and energy
Stampede ofshore regulator aims to one stroke of the pen. companies.
platform from take a balanced approach to Asked how BSEE will Those partnerships are vital
Kiewit promoting energy production function diferently under him in the development of federal
Ofshore on the US outer continental than it did under the Obama ofshore resources, he says.
Services in shelf without sacriicing safety administration, Angelle said What I will be doing is
Ingleside, or environmental concerns, a starting point would be identifying those partners
Texas, to the writes Kathrine Schmidt. changing the agencys bedside and reaching out to them,
Gulf of Mexico Veteran Louisiana state manner, with a goal of making sure they have my cell
Photo: oicial Scott Angelle, the new addressing individual problems number, making sure they feel
BLOOMBERG director for the US Bureau in an evidence-based way. comfortable to come in and tell
of Safety & Environmental Angelle plans to carry me how they see the world, and
Enforcement (BSEE), says he out a series of listening try to ind a spot that balances
does not see those objectives as visits with a wide range of (energy, environment and
being at odds. stakeholders along the Gulf economy), he says.
Its about energy production, coast in Louisiana and Texas, Im conident we can do
and safety, and environmental including environmental that.
sustainability. I think those
things can be accomplished,
they are not mutually
exclusive, Angelle says.
I happen to be from a
generation of persons that
absolutely believes that green
grass and clean water are not
a luxury. So I think we can
accomplish that, but I dont
think we have to give up energy
production to accomplish it.
Angelle heads to Washington
after serving as chief of
Louisianas state oil regulator,
the Department of Natural
Resources.
He also served as lieutenant
governor in the administration
of former governor Bobby
Jindal.
Angelle also served as the
states liaison to the federal
government during the 2010
Macondo incident, where
he lobbied furiously to get
the government to lift a
moratorium on deep-water
drilling imposed after the
blowout and spill.
He has maintained his
criticism of the moratorium, New regime: US Bureau of Safety & Environmental
which he calls a one-size its Enforcement (BSEE) director Scott Angelle Photo: BSEE

a irst

shore you need to start looking at


other areas.
For its part, the US Bureau of
Safety & Environmental Enforce-
ment (BSEE) appears willing to
listen to the industrys concerns.
BSEEs new director Scott
Angelle, who worked closely with
the industry as head of the state
oil regulator in Louisiana, says his
top priority is safety, but he is also
focused on making sure federal
regulations do not pose an undue
burden to operators.
What I hope to be able to do
here... is look at all the regulatory
changes that have been made, and
try to confirm that those regula-
tory changes are tied to the spe-
cific goal of making things safer,
he says.
Sometimes well-intended but
unintended consequences result
from some of the rules.

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