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The Bahamas: More exploration coming?

August 17, 2021 by offshoreenergy

Challenger Energy Graphic

The only 2021 Atlantic drilling activity offshore North America and south of Newfoundland was in Bahamian waters. Yesterday, Challenger Energy (formerly Bahamas Petroleum) provided an interesting update. Some highlights:

  1. The Perserverance I well was drilled approximately 20 miles from the Bahamas-Cuba maritime border, in water 518 meters deep. This was the first exploration drilling in The Bahamas since the mid-1980s, and the first test of any prospect located in deeper waters off the shallower water carbonate banks.
  2. There were no safety or environmental incidents.
  3. The well was plugged and secured in accordance with international and BSEE standards.
  4. Challenger advised the Government of The Bahamas of its intent to renew its exploration licences. 

Geologic summary:

Perseverance-1 reached total depth of 3,905 metres, having intersected five Albian, Upper Aptian, and Mid-Aptian horizons of interest. Post-drill analysis of the well has confirmed the geological risk elements for trap, seal and reservoir were present in the Lower Cretaceous carbonate play. Perseverance encountered high quality reservoirs in the targeted Lower Cretaceous carbonate closures, with thick sequences of evaporites providing effective seals. Depth and thicknesses of reservoir sections encountered were generally as prognosed pre-drill, and reservoir porosity was likewise generally in line with pre-drill expectations (in the range of 10% to 20%).

The presence of hydrocarbons was encountered at various horizons, indicated by elevated gas chromatography readings detected continually during drilling, generally increasing with depth and through the deeper Aptian reservoir column in particular. Oil was identified from high oil saturation values from logs in a number of reservoir sections, thus verifying the existence of a working Lower Cretaceous petroleum system and reservoir quality sequences in the Aptian.

Although hydrocarbons were present, these were not in commercial quantities, with the source quality and migration interpreted as being the primary reason for this non-commercial well outcome.

Petrophysical analysis of the well logs have confirmed high quality reservoirs down to the base of the well with no significant deterioration in porosity with depth, indicating the potential for high deliverability reservoirs in the underlying Jurassic formations.

In aggregate, the analysis of the data from Perseverance-1 drilling is broadly indicative of increased potential for oil in the underlying Jurassic interval (which was not penetrated by Perseverance-1). In particular, the relatively cool well temperatures place the postulated Jurassic source rock (producing in nearby Cuba and the US Gulf of Mexico) in the oil window, thus oil generative.

Challenger Energy, 8/16/2021

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Pipeline Decommissioning

August 16, 2021 by offshoreenergy

A recent Washington Post (WP) article, based in part on a March 2021 General Accountability Office (GAO) report, raises interesting pipeline decommissioning issues, but might benefit from some additional context, which I have attempted to provide below:

  • Decommissioning liability issues are not simply a matter of “companies trying to get out of that obligation.” Much of the complexity is associated with decades-long chains of lease ownership and the respective responsibilities of prior lessees. Pertinent questions include the following:
    • If a company sold a lease decades ago and there have since been multiple owners, to what extent is the original owner still liable for decommissioning lease facilities? (Note that guidance from the Federal government has not been entirely consistent over the decades.)
    • If current leaseholders fail to fulfill their obligations, who is next in line and why?
    • To what extent are prior lessees liable for wells and structures constructed subsequent to their ownership?
    • Knowing that decommissioning costs can vary significantly, what amounts of security should be required? How should these funds be protected or managed? Should an assigning company also collect funds to protect their interest?
    • How do inconsistent Federal policies and financial assurance requirements, and improper practices by subsequent owners, affect the liability of prior lessees? In that regard, the case of Platforms Hogan and Houchin in the Pacific OCS Region is interesting and pertinent.
  • Per the WP, “Federal regulations require the removal of offshore pipelines once they are decommissioned, but the rules are rarely enforced.” This statement is doubly incorrect.
    • 30 CFR § 250.1750 provides for decommissioning pipelines in place when the Regional Supervisor (BSEE) determines that the pipeline does not constitute a hazard (obstruction) to navigation and commercial fishing operations, unduly interfere with other uses of the OCS, or have adverse environmental effects. The consensus opinion of the regulators’ engineers and scientists has been that the safety and environmental risks associated with pipeline removal were significantly greater than those for decommissioning in place in accordance with the procedures specified in 250.1751.
    • The comment about enforcement is unfounded. BSEE and its predecessors have strictly enforced decommissioning requirements despite the challenges related to inconsistent policy direction, industry downturns, and hurricane damage. BSEE has an effective program to ensure that idle wells are plugged and platforms are removed in a timely manner. For this reason, 3315 platforms have been removed since 2001; 1933 since 2010. Only about 1800 platforms remain. This very significant loss of habitat is a concern to fishing organizations, another factor that complicates decommissioning policy.
  • In situ decommissioning of buried or trenched offshore pipelines is the standard throughout the world. The seafloor disturbance and safety risks associated with the removal of such pipelines are universally viewed as unwarranted. The pipeline decommissioning procedures followed elsewhere are similar to those described in 30 CFR 250.1751. In the Gulf of Mexico, pipelines installed in less that 200′ of water are typically buried (30 CFR 250.1003) to minimize interference with commercial fishing and other activities.
  • The decommissioning of wind turbines, which are typically more densely located and closer to shore, and their attendant power cables and substructures, will also be challenging. In their 9/16/2019 Congressional testimony, the Responsible Offshore Development Alliance expressed concern about the practice of leaving structural foundations when turbines are abandoned.

In remarks to the WP, Syed Khalil, a coastal restoration geologist for the State of Louisiana, commented that they have enough sand to meet their short term needs, but future needs were a major concern. The Gulf of Mexico Offshore Sand Management Working Group would seem to be the best mechanism for timely action and a workable, long-term action plan. The minutes of their meetings are quite instructive. Rulemaking is not a solution unless the parties want to tie their fate to both the 25 year pipeline rule rewrite (draft published in 2007, another draft coming? final?) and the contentious and similarly interminable financial assurance rule.

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If you build it, they will come

August 12, 2021 by offshoreenergy

Watching Kevin Costner at the beginning of the “Field of Dreams” game in Iowa reminds me that Kevin visited the MMS Ohmsett facility in New Jersey in 1999. He and his brother had developed an oil purification system that was being tested at Ohmsett (“Tank of Dreams?”). In the picture below, Kevin is flanked by Ohmsett Manager Bill Schmidt and Engineer Dave DeVitis. Were it not for the heroic efforts of Ed Tennyson and other MMS employees, Ohmsett would have been abandoned in the 1980s. More on that in a later post.

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Déjà vu?

August 12, 2021 by offshoreenergy

The White House urged OPEC to boost oil production Wednesday, saying recent planned increases are insufficient as countries around the world seek to emerge from the Covid-19 pandemic.

Wall Street Journal, 8/11/2021

 

(Eizenstat) urged Carter to “shift the cause for inflation and energy to OPEC, to gain credibility with the American people 

Washington Post, 7/7/1979

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“Oil and Gas” or “Gas and Oil?” Why We Care

August 9, 2021 by offshoreenergy

In the early 1990’s, Department of the Interior (DOI) and Department of Energy (DOE) leadership dabbled at re-branding the OCS Oil and Gas Program by reversing the order of the words. Clever? Perhaps by Washington public relations standards. One senior manager even changed his license plate from “OCS OIL” to “MMS GAS” (not much competition for those tags 😃). Technical staff were less enthused about this simplistic marketing gimmick that misrepresented the historical and scientific facts about oil and gas production. For many years, natural gas was a byproduct of oil production that was commonly flared. (This practice continues in some regions of the world, although to a lesser extent than in the past.)

Understandably, the Oil and Gas Journal wasn’t very impressed by the change. I saved a copy of their 1/24/1994 editorial (attached) on the subject. Per the OGJ:

We at the Journal love natural gas. But that doesn’t warrant an attempt to repeal the laws of nature and ignore the weight of tradition by renaming everything “gas and oil” this and that.

John L. Kennedy, Editor, Oil and Gas Journal, 1/24/1994)

To their credit, BOEM and BSEE web pages and announcements during recent administrations (both parties) indicate a preference for the more traditional “oil and gas.” (The DOE website largely ignores the existence of either oil or natural gas.) Surprisingly, the American Petroleum Institute (API), an industry trade organization with more than 100 years of history, is now consistently using “natural gas and oil.” This rearrangement of words is not entirely consistent with the interest of API’s members. In the offshore sector, the primary interest of API members is in finding and producing oil. if you think otherwise, look at the EIA GoM gas production data. Most of the Gulf’s declining gas production is now associated with deepwater oil production, and BSEE rightfully requires that this gas be used for fuel or transported for sale. Similarly, gas is a secondary consideration for API members exploring in Alaska given that 35 trillion cu ft of North Slope gas still awaits a pipeline.

Oil companies, and those who represent them, should be proud of their current and historical role in producing oil (and gas) for our economy, security, and way of life; and of the men and women who have toiled to locate and produce petroleum resources for the benefit of society. Are there better energy alternatives? Perhaps, but issues with these alternatives remain to be resolved, and oil and gas will continue to be important. Let’s focus on producing these resources as safely, cleanly, and reliably as possible.

gas-and-oil-2Download

Posted in Alaska, Gulf of Mexico, natural gas, Offshore Energy - General, Uncategorized | Tagged , , , , , | Leave a Comment »

Not My Job Award Nominee

August 8, 2021 by offshoreenergy

Jim Lane, who inspired our NMJA program many years ago, has submitted this nominee from the Texas Hill Country where he now resides. The metal stake in the picture was used to support a sapling that was planted in a county park. However, neither the employee who planted the young tree nor any of his colleagues saw fit to remove the stake. Not their job? The end result is pictured below.

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GoM Production Held Steady in May

August 6, 2021 by offshoreenergy

A previous BOE post estimated that current stabilized GoM oil production rates were 1.7 – 1.8 million BOPD. EIA recently announced that May production was 1.791 million BOPD, which is consistent with our estimate. Per the chart below, GoM production was essentially unchanged from the beginning of the year despite a 37% increase in the price of oil (WTI) from 1 January to 31 May. This suggests that stabilized GoM production may have peaked pending first oil from several new projects.

Key production questions:

  • Will new production from Mad Dog 2, Vito, PowerNap, Thunder Horse South 2, and the recently sanctioned Whale project offset high depletion rates elsewhere in the deepwater GoM?
  • Looking further ahead, is deepwater GoM production sustainable without increased drilling activity? Per BSEE data, only 33 deepwater wells were started in 2021 YTD, just 18 of which are classified as exploratory. Drilling is thus at historic low levels. For reference, there were 477 wells started in 2001, 149 of which were exploratory. This level of activity facilitated a 30% growth in oil production, peaking at 2 million BOPD in 2019.

Regardless of one’s views on the urgency and timing of the “energy transition,” is there any doubt that oil and gas will continue to be important to our economy and security for years to come? If not, should deepwater GoM production, with its relatively low carbon intensity, be a core element of our energy strategy? To better understand the trade-offs, I suggest that BOEM’s Environmental Studies Program conduct a peer reviewed assessment of the carbon intensity of domestic and international supply alternatives. Product transportation considerations should be included in this assessment.

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BOE is committed to recognizing safety leadership

August 2, 2021 by offshoreenergy

Continuous improvement has to be the primary objective of offshore safety leaders, and this independent blog is committed to recognizing initiatives that further reduce safety and environmental risks. Australia’s collaborative mental survey project is an interesting such initiative in its early stages. Two other important initiatives are noted below.

BSEE’s Dropped Object Risk-Based Inspection initiative: As has been the case for 50 years, most offshore fatalities and serious injuries are associated with falls or falling and moving objects/equipment. BSEE’s Dropped Objects initiative, as described in a presentation by Jason Mathews during a recent Center for Offshore Safety (COS) webinar is intended to draw further attention to and better manage these risks. In addition to BSEE’s focused inspections, the “Good Practices” being followed by some operators and contractors, as described on pages 40-50 of the presentation, are encouraging. These types of initiatives are necessary if we are to achieve the elusive “zero fatality” year on the US OCS.

IOGP process safety guidance, Report 456 v.2 : Contrary to some post-Macondo narratives, process safety and well control were always the primary focus of the US OCS regulatory program. In 1974, my boss Richard Krahl (known as “Mr. OCS” for his commitment to offshore safety) dropped a copy of the first edition of API RP 14C (Analysis, Design, Installation, and Testing of Safety Systems for Offshore Production Facilities) on my desk and told me it was an excellent document that I should read. RP 14 C and other process safety standards were incorporated into the USGS OCS Orders (regulations) in the 1970’s. For decades, the USGS and MMS were leaders in well control and production safety research and training. That said, better indicators and improved approaches to offshore facility process safety were needed, and the International Association of Oil and Gas Producers report has provided an excellent framework. Report 456 is comprehensive and technically sound, and provides excellent guidance and examples. Very well done!

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Gulf of Mexico Oil Production: Attention Needed!

July 26, 2021 by offshoreenergy

In light of energy security and price considerations, rebounding oil demand, uncertainty about the long-term viability of non-conventional onshore production, and the elimination of most other offshore options, sustaining deepwater GoM production should be a high-priority U.S. policy objective. The deepwater GoM also offers significant environmental advantages in that approximately 1.6 million BOPD are produced from only 58 widely dispersed surface facilities that are well maintained, closely monitored and inspected, and distant from shore. Another advantage of US deepwater production is the low carbon intensity relative to other sources of petroleum (more on this in a later post).

EIA (Chart 1) projects relatively stable GoM production over the next 2 years. Platt’s (Chart 2) is forecasting a slight decline in 2021 production primarily because of COVID-related delays in the initiation of production at Shell’s VIto and PowerNap and BP’s Mad Dog 2 and Thunder Horse South 2 facilities. Based on the latest available EIA data, current stabilized GoM oil production appears to be in the 1.7-1.8 million BOPD range.

Going forward, the concern is the high rate of reserve depletion and the absence of drilling activity needed to replace reserves. Schlumberger data through 2016 (Chart 3) show depletion rates rising to above 20%, the highest (by far) of the offshore regions analyzed. I was unable to find more recent data, but unless this trend line has made a sharp turn, production declines are likely in the next 3-5 years. Further, drilling trends do not suggest the likelihood of significant reserve growth. Data from BSEE’s Borehole File (Chart 4) indicate deepwater well start activity that is comparable to the moratorium years of 2010 and 2011. Even more concerning is the absence of exploratory drilling (chart 5) and the very few operating companies that are drilling deepwater wells. Only five operators have spudded deepwater exploratory wells in 2021 YTD. One US supermajor hasn’t started a well since 2019, and another US major has essentially exited the Gulf.

Deepwater production trends are not easily reversed, so dialogue is urgently needed to assess the implications of declines in drilling, reserves, and industry interest. As the resource manager on behalf of the public, BOEM is the logical choice for initiating these discussions. BOEM’s Norwegian equivalent, the Norwegian Petroleum Directorate (NPD) demonstrates the importance of pro-active land management. The NPD has done an outstanding job of sustaining exploration activity and production consistent with Norwegian safety and environmental values, which are among the highest in the world. On their website, NPD provides ongoing updates on exploration, production, and reserve depletion parameters. Their competency and commitment to sustaining production on the Norwegian shelf is underscored in this news release, an excerpt from which is pasted below:

Exploration is of great importance for the long-term value creation on the shelf. The supply of oil and gas resources from new discoveries, as we have seen so far this year, is necessary so that activity in the petroleum industry does not fall sharply after 2030. Without new discoveries, production can fall by more than 70 percent in 2040 compared to 2020, says Torgeir Stordal, director of Technology and coexistence in the Norwegian Petroleum Directorate.

NPD, July 21, 2021
monthly crude oil production from U.S. federal gulf of Mexico
Chart 1, EIA GoM Production Forecast
Chart 2

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Chart 3: Depletion calculated as annual production divided by proved-developed reserves at end of same year

Chart 4: Data from BSEE Borehole File; 2021 Data as of 7/23
Chart 5: Data from BSEE Borehole File; 2021 Data as of 7/23

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Mental Health Surveys: Important Step for Offshore Safety

July 23, 2021 by offshoreenergy

Following the Piper Alpha tragedy (1988) and the Exxon Valdez spill (1989), the Minerals Management Service, under the direction of Dr. Charles Smith, embarked on new research to address the human and organizational factors that are fundamental to offshore safety. An important 1993 report, MMS project 167, Management of Human Error in Operation of Marine Systems by Robert Bea and William Moore, observed that:

“High consequence accidents resulted from a multiplicity of compounding sequences of breakdowns in the human, organization, and system; often there are precursors or early-warning indications of the breakdowns that are not recognized or are ignored.” The human element is complex and “states” such as “fatigue, negligence, ignorance, greed, folly, wishful thinking, mischief, laziness, excessive use of drugs, bad judgement, carelessness, physical limitations, boredom, and inadequate.” Environmental factors such as weather conditions, time of day, smoke, and noise further complicate human performance.

Bea and Moore, 1993

COVID 19 has further complicated human performance and facility management. In an effort to better understand human factors during COVID, NOPSEMA (the Australian offshore safety regulator) has partnered with industry, and labor organizations, and universities to survey offshore workers.

Per the survey announcement:

Your unique insight on the impacts of the COVID-19 pandemic on members of the offshore workforce are vital to informing industry and the development of strategies that best support employee mental health and well-being.

BOE is looking forward to learning about the results of this survey and other efforts to better assess and understand mental health challenges facing offshore workers. The effective integration of mental health considerations into management systems is critical to safety achievement.

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