Chevron postpones Orphan Basin drilling

Chevron has decided to postpone an exploration drilling program in the deep water Orphan Basin, according to The Telegram and CBC, due to higher than expected rig costs for 2009. 

Chevron regional manager Mark Macleod said the estimates were higher than the costs for the first well.  According to some reports, the first exploration well cost twice as much as anticipated.

In late 2007, the company committed to drilling a second well during 2008 but those plans didn’t turn into action. Rig availability  has been a consistent factor in drilling decisions since high demand has driven up costs accordingly against a relatively short supply of rigs capable of operating in deep water, difficult environments.

Chevron likely expects that demand will lessen for deep water drill rigs as the price of oil makes deep water plays less attractive. 

In addition, as the Telegram reported:

"As well, we felt we needed to do some additional technical work to re-evaluate all the prospects in the basin from a risk and cost basis," MacLeod said. "So, we've got a bit more homework to do to be ready to drill, hopefully, in 2010."

Late last year, Chevron and its partners consolidated eight Orphan Basin exploration licences (ELs) into four.
Those ELs give the companies the right to explore the seabed.

Under the consolidation, the companies will keep four reconfigured ELs until 2013. MacLeod says that consolidation didn't delay drilling.

"It's allowed us to more carefully focus on the best parts of the basin."

At the same time, Chevron is likely also looking closely at its bottom line.  The company warned investors last week that fourth quarter profits in 2008 will likely be lower than those in the third quarter. Chevron blamed the lower price of crude and natural gas.

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Exxon confirms second Orphan Basin well

ExxonMobil confirmed Thursday that it will drill a second exploration well in the Orphan Basin offshore Newfoundland in 2008.

The well had been forecast but until Thursday, the oil giant had been reluctant to commit to drilling.

Its first well in the deep water area north of the Jeanne d'Arc Basin - site of current offshore production at Hibernia, White Rose and terra Nova - cost an estimated US$200 million.

The Orphan Basin is located approximately 390 kilometres northeast of St. John's. The area is estimated to hold as much as eight billion barrels of oil. Existing exploration parcels are both inside and outside Canada's 200 mile exclusive economic zone. Water depth ranges from 250 metres in the western portion to over 2500 metres in the centre. More detailed information on the area is contained in the environmental review conducted for the offshore regulatory board in 2003.

Also on Thursday, ExxonMobil reported third quarter profits were down 10% form the same period in 2006.

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Raude heads south

Having finished at Great Barrisway F-66 in the Orphan basin, the drill rig Eirik Raude is off to the Gulf of Mexico to complete a drilling program there on behalf of ExxonMobil.

Before leaving Newfoundland waters, the rig will stop at Marystown where it will undergo inspections and recertification, a process required for drill rigs every five years.

The Eirik Raude is likely to return to the Orphan Basin in 2008 or 2009 to continue exploration. The Great Barrisway hole was drilled in 2,350 metres of water, deeper than any other well drilled so far offshore Newfoundland and Labrador.

Initial estimates were that the exploration well would cost $140 million based on an estimated four months drilling. As completed, the well took seven months.

On top of the harsh ocean environment offshore Newfoundland, the water depth in the Orphan Basin calls for cutting edge technology. Pressures at the depths involved can be as much as 200 times the atmospheric pressure at the ocean surface.

Great Barrisway F-66's water depth rivals those in the Gulf of Mexico. Chevron's Jack 2 field in the Gulf of Mexico was discovered at a water depth of 2100 metres and 6100 metres below the sea floor.

But drilling to such depths provides many daunting engineering challenges.

Such equipment, for example, must be built to handle tremendous weight.

"The way the drilling process works is that you put sections of pipe together one at a time as you run [the pipe] through the water and down into the earth," Hadden said. [Steve Hadden, senior vice president of exploration and production at Devon Energy in Oklahoma City, quoted in the National Geographic story linked above.]

"You keep adding to the drill string until you reach the total depth of the well. So [in this case] you've got a 30,000-foot-long [9,144-meter-long] string of pipe hanging off a floating rig," he added.

"You can imagine the weight requirements, and you have to have the ability to lift it to the surface to change the drill bit."

Twenty thousand feet (6,096 meters) of the large diameter pipe that encases the drill hole tops the scales at over a million pounds (453,000 kilograms).

The enormous pressures found in deep wells are another major hazard.

Too much pressure can make it difficult to control the drill bit. Or the pressure could collapse the hole altogether.

Drillers must therefore use seismic readings while drilling to predict how high pressures will be at future depths in order to keep the hole viable.