Daily Archives: November 4, 2011
By Rob Almeida On November 4, 2011
It’s about a two and a half hour helicopter flight from Louisiana to get to this lonely patch of ocean far out in the Gulf of Mexico, but the Geoscientists at Statoil said that’s where the oil would be. They called the spot Logan and was located at block 969 in Walker Ridge.
Looking at a chart of the Gulf of Mexico, that’s way the heck out there.
For the past 6 months, the Discoverer Americas, a 6th-generation drillship owned by Transocean, has been sitting out there, precisely on station in around 7800 feet of seawater… slowly turning a drill string dangling far beneath the ship.
This rig is one of the newest in Transocean’s fleet, and her dual activity derrick and highly experienced personnel made her certainly one of the most capable. Built at DSME in Okpo, Korea, her Commissioning Manager, a former US Marine officer and Citadel grad, did an impeccable job in making sure she was ready to go to work as soon as the time came to leave the shipyard back in 2009.
Over the past two years, she covered a lot of ground crossing the Indian Ocean, South Atlantic, and then the Gulf of Mexico before starting on her first well in Mississippi Canyon at a well site called Krakatoa.
It was a heck of a well to start with, and at times her name seemed to be a good fit. After many months on the ocean, while enduring a frigid winter on the Gulf, and countless drilling challenges, the Deepwater Horizon exploded, bringing Gulf of Mexico drilling operations to a screeching halt.
Discoverer Americas off Durban, South Africa, Image (c) Robert Almeida
A few months later, Statoil decided it was time to cram as much gear on board as possible and point the Americas’ bow east, and head back across the Atlantic. Next stop Egypt.
Drilling operations began in a pretty straightforward manner, not many issues. It was deep water, but a relatively shallow well. Or so they thought.
Thousands upon thousands of feet down they drilled, but still nothing. No signs of hydrocarbons, but soon the question of what to do next was once again answered for them.
Egypt erupted in a revolution, ending all possible support from shore. Cairo-based personnel from Statoil and Transocean left town as fast as they could, and soon thereafter, the Discoverer Americas pulled their riser and followed suit, back across the Atlantic Ocean to the Gulf of Mexico.
This was her forth major ocean crossing in 3 years, and she had yet to hit paydirt. Logan had been on the plans ever since she arrived in the Gulf of Mexico a year earlier, and now was the time to earn their paycheck, and hopefully give Statoil the return on investment they were looking for.
This past April, the Logan well was “spud-in” with 36-in casing, officially starting the top section of what would end up being an enormous steel and concrete structure extending miles down below the sea floor of the Gulf of Mexico. Over the next few months as they drilled through dozens of different sediment layers such as shale, sand, and thousands of feet of salt while carefully shoring up the well from the internal pressures of the earth with strings of steel pipe.
The geologists on board carefully analyzed the drill cuttings entrapped in mud that was returning back to the surface. They were looking for the dead remnants of ancient organisms deposited long ago. Finding the right type of organism would be a clue that hydrocarbon-rich sands were close by.
After 6 months of drilling, with their drill string extended nearly 5 miles into the earth, they found what they were looking for. Their polycrystalline, diamond-studded drill bit had finally cut through a formation that was saturated with oil. It was the Americas’ and Statoil’s first find in nearly two years of drilling. Very little public information about how much oil was found and its properties is available however outside of the inner circles at Statoil.
Even Transocean has no idea how much, or exactly what was found, but at the end of the day, none of that matters.
As an offshore drilling contractor, they safely executed an incredibly complex drilling program in waters over a mile and a half deep, allowing their client to gain incredibly detailed and valuable information about the geology present in the Gulf of Mexico.
Next up for the Discoverer Americas is a few month drilling contract for Anadarko at the Heidelberg Prospect in Green Canyon. Sitting below 5,000 feet of seawater, this well will reach over 30,000 feet below the wave tops to an area that has already proven to hold a significant amount of high quality oil-bearing sands.
Congrats to Transocean and the crew of the Discoverer Americas for a job well done.
- Statoil and Transocean pull out of Egypt
- Transocean to Buy Norwegian Firm Aker Drilling
- Transocean CEO on new contracts, speculative shipbuilding, and the Deepwater Horizon [WEBCAST BREAKDOWN]
- Gulf of Mexico: Vector Lands Cascade Chinook Field Job (mb50.wordpress.com)
- Hess to spend $2.3 billion to develop Gulf of Mexico oil field (mb50.wordpress.com)
- USA: Statoil Signs Energy Partneship Agreement with UT (mb50.wordpress.com)
ALICE — For a city that always has lived and died by the oil field, life is good right now.
Flush with cash generated from sales and hotel occupancy taxes — all bringing in money associated with the oil and gas boom — the town is planning something most South Texas cities couldn’t contemplate even a few years ago: paying for a new event center without dipping into reserves and without taking on debt.
In the past two fiscal years, Alice set aside more than $4 million in seed money for the project, envisioned as a multipurpose convention center and natatorium. It has committed $70,000 to an assessment to determine the type and scale of facilities the community wants.
This phase included a town hall meeting Tuesday night, dominated by the community’s swimmers, including swim team coaches and student athletes lamenting the practice time lost on hourlong bus rides to and from Corpus Christi, site of the nearest pool that serves their training needs
Years from now, Alice swimmers may not draw a connection between the convenience of a modern, hometown pool and the heavy oil field trucks that lumber to and from town with loads of sand, water and drilling equipment. But to project planners and city leaders, that connection is everything.
Alice sits just south of the Eagle Ford Shale, a 400-mile long underground rock formation in Central and South Texas unleashing ancient stores of natural gas and crude oil with new technology called hydraulic fracturing. In the past two years, oil field service companies have expanded their Alice facilities, brought hundreds of jobs and filled up every hotel room in Alice, prompting more to to be built.
“If Eagle Ford Shale was not in play to the level it is, there would still be a need (for a multipurpose center), but it would not be as big,” City Manager Ray De Los Santos said. “There would still be funding available, but it would not be as much.”
For the fiscal year ending Sept. 30, Alice budgeted $650,000 a month in sales tax revenue. Only one month came in under $1 million, giving the city a $6 million surplus.
The event center project was being considered even before the Eagle Ford boom started in earnest in 2009. But the facility almost surely will be larger than what was initially imagined because the city can afford it, and because it anticipates the demand will be there to support it for years to come.
Oil boom and bust cycles notoriously are unpredictable and, at least in the past, short-lived on the boom end. But with Eagle Ford, analysts are expecting a ramp-up in production to last as long as 10 years, with production remaining steady at least another decade.
“This has changed the model for communities in South Texas because they have a long-term horizon where they can plan for capital improvements,” said John Michael, project engineer for Naismith Engineering. Naismith is conducting the needs assessment in Alice and has contracts with governments throughout the region.
Michael said there has been a dearth of new swimming pools in South Texas in the past 30 to 40 years because the last bust cycle drained the financial resources of communities and they never fully recovered.
De Los Santos said Alice isn’t taking Eagle Ford longevity for granted. Other South Texas cities have struggled with keeping convention centers and similar venues afloat. Last fiscal year, the American Bank Center convention center and Selena Auditorium in Corpus Christi posted a $1.3 million loss. And in Aransas Pass, the convention center has become a political football as officials try to figure out how to make it profitable.
It’s unclear how much the Alice multipurpose center would cost, where it will be built or exactly what it will entail. Project planners want to spend more time gathering input before making decisions.
The $70,000 study includes market analysis, financial projections, economic impact analysis, and aquatic and convention center complex conceptual analysis, De Los Santos said.
The general vision is a campuslike setting with meeting facilities, room for a privately-developed hotel, walking trails in a parklike area, and, of course, the pool.
Swim team coaches, members and athletes told the planners Tuesday that the city, with only one six-lane municipal pool that’s at least 30 years old, sorely needs a facility ready for competition, for family relaxation and for general health in a community suffering high obesity rates.
The town has a nonprofit swim group of more than 100 participants in the summer, and its school swim teams regularly compete at the state level.
Alice High School‘s senior class president, Horacio Rangel, said he rides two hours on the bus every day to keep up his swim training, but the bus isn’t the best environment for homework. He recently dropped to No. 22 in academic ranking in his senior class.
“I’d be top 20,” he said, “if I had more time to study.”
French oil and natural gas major Total is close to signing a firm long-term sales agreement with Cheniere Energy to lift 3.5 million tonnes per annum (mtpa) of LNG from its Sabine Pass liquefaction project, according to sources close to the deal.
The structure of the deal is understood to be virtually identical to Cheniere’s 20-year sales and purchase agreement signed with BG Group last week, the first firm offtake deal signed by the project. Under that agreement BG will pay the US developer a fixed take-or-pay fee of $2.25/MMBtu to cover the procurement, liquefaction and loading costs at the Sabine Pass plus an interruptible 115% of US Henry Hub natural gas futures fetching fee paid to Cheniere to provide free on board (FOB) cargoes.
Total is also understood to be taking the commercial export agreement one step further by assuming an ownership stake in Cheniere’s Sabine Pass Liquefaction company. Specific terms of the equity stake were undisclosed.
Bringing an equity partner into the project has been seen as crucial for Cheniere if it is to secure its financial future and reduce its $3.14bn debt, which includes $2.2bn specifically related Sabine Pass.
While credit rating agency Standard & Poors (S&P) called Cheniere’s deal with BG a “significant milestone” in its efforts to generate future cash flows, it has reaffirmed its CCC+ junk-status rating with a negative outlook.
“Assuming its current liquidity does not materially improve, Cheniere will not be able to make its 2012 maturity payments,” S&P said in a report released on Monday.
“The company must generate significantly more liquidity to avoid further credit deterioration or default. We believe its options include further asset sales and terminal use agreements (TUAs), incremental LNG marketing activity, equity offerings, and debt restructuring.”
Closing in on sales threshold
A firm 3.5mtpa sales commitment from Total would bring Cheniere to the 7mtpa threshold, a figure that chief executive Charif Souki told ICIS Heren last week was the target for moving forward with the first phase of the liquefaction project.
Phase One at Sabine Pass is planned for two liquefaction trains of 4.5mtpa capacity each, with Cheniere indicating that it will retain and market the remaining 2mtpa.
Cheniere and Total both declined to comment when contacted to confirm the deal.
Total is already an import capacity holder at Sabine Pass where it has 1 billion cubic feet/day – 0.2 million cubic metres/day – of regasification capacity as part of 20-year terminal utilization agreement.
The agreement with Cheniere follows Total’s declaration last week that the company has been studying the possibility of exporting US gas but provided no additional details.