GULF OF MEXICO Bruce Beaubouef • Houston
BP adds two drilling rigs in deepwater Gulf
BP says it has added two drilling rigs to the deepwater Gulf of
Mexico, bringing its feet to a company record nine rigs as it continues to develop its strong portfolio of assets in the region.
One of the rigs is a new ultra-deepwater drillship known as the West
Auriga, which is under long-term contract to BP from Seadrill Ltd. The
vessel, capable of operating in up to 12,000 ft ( 3,658 m) of water, has
begun development drilling work at BP’s Thunder Horse feld.
The other is a reconstructed drilling rig on BP’s Mad Dog oil
and gas production platform. It replaces the original rig on the platform that was badly damaged and left inoperable by Hurricane Ike
in 2008. With the new, state-of-the art rig, the platform recently resumed development drilling at the massive Mad Dog feld complex.
“The addition of these two rigs refects the vital importance of the
deepwater Gulf of Mexico to the future of BP,” said Richard Mor-
rison, Regional President of BP’s Gulf of Mexico business. “It also
clearly demonstrates BP’s commitment to the American economy
and to U.S. energy security.”
BP currently anticipates investing on average at least $4 billion
in the GoM each year for the next decade. The company plans to
concentrate future activity and investment in the Gulf on growth op-
portunities around its four major operated production hubs – Thun-
der Horse, Na Kika, Atlantis, and Mad Dog – and three non-operated
production hubs – Mars, Ursa, and Great White – in the deepwater,
as well as on signifcant exploration and appraisal opportunities in
the Paleogene and elsewhere.
BP is also advancing a strong pipeline of future development projects in the deepwater Gulf. In April, the company started up the Atlantis North expansion, the frst of seven additional wells to be tied back
to the existing Atlantis platform. At Na Kika, another feld expansion
is planned, following the successful startup last year of the Galapagos
development, a subsea tieback to the Na Kika production facility. BP
is also pursuing plans for a second phase of the Mad Dog feld.
Total Lower Tertiary capex
to exceed $50 billion by 2020
The Lower Tertiary play will drive long-term production growth
in the deepwater US GoM with an expected $50 billion in development capital expenditure to be spent through 2020, according to a
recent analysis by Wood Mackenzie.
“The commercial success of the Lower Tertiary has been robust,
leading all other plays in our probable (commercial, pre-FID) devel-
opment category with 54% of recoverable reserves,” said Jackson
Sandeen, analyst at Wood Mackenzie.
“Our base case model for a generic 300 MMboe Lower Tertiary
feld indicates a total valuation of $575 million, but this does not come
without uncertainty. Reservoir characteristics can greatly impact proj-
ect value depending on initial production rates and the pace of well
decline,” Sandeen explained. “If the recovery factor in our base case is
increased by 2%, an additional $462 million could be realized.”
Wood Mackenzie estimates Lower Tertiary production in 2013 to
be 113,000 boe/d, roughly 8% of regional production. By 2028, the
play’s production will outgrow the current leading subsalt Miocene
play to roughly 41% of regional production, or 533,000 boe/d.
Sandeen says that technical challenges of the Lower Tertiary
must be overcome for the play to remain attractive, but warned that
costly solutions have the potential to erode project value if operators
fail to increase recovery factors.
The Lower Tertiary play was frst deemed commercial in 2002 fol-
lowing Shell’s success at the Great White (AC 857) discovery. Since
then, a total of 15 commercial discoveries have been made, amount-
ing to recoverable reserves of over 4 Bboe.
Today, BP, Shell, and Chevron account for the majority of activ-
ity, holding 45% of remaining reserves in the play. “While majors
dominated the play in the early 2000s, the door has recently opened
to large caps, mid-caps, and smaller independents,” Sandeen ex-
Anadarko has balanced its Lower Tertiary position with success
in the subsalt Pliocene/Miocene and most recently the Jurassic
play, while BHP is exploring the play with its Racer prospect after
it originally discovered Cascade/Chinook. In addition, Cobalt has
emerged as a leading Lower Tertiary player following its North
Platte discovery and has additional running room from acreage ac-
quired during the 2006-2008 lease sales.
Wood Mackenzie expects operators to continue to map the ex-
tent of the Lower Tertiary play. Anadarko’s Nansen Deep prospect
could prove signifcant if commercial quantities of hydrocarbons are
found, and BP’s project at Gila is believed to be on trend with the
massive Tiber discovery.
“We anticipate interest will remain heightened as the Lower
Tertiary play becomes an increasingly important part of operators’
GoM portfolios,” Sandeen concluded. •
BP’s recent drilling rig additions to the Gulf of Mexico: the West Auriga
(above), which has begun development drilling work at the Thunder Horse
field; and the reconstructed drilling rig on BP’s Mad Dog oil and gas production platform (right), which replaces the original rig that had been damaged and left inoperable by Hurricane Ike in 2008. (Photos courtesy BP)