Devon Energy Corp. is making a $100 million bet on a potential oil bounty this week, drilling an exploration well 33,000 feet below the seabed in some of the Gulf of Mexico's deepest waters.
That's a lot to lose when the chance of success hovers around 30 percent, said Tony Vaughn, vice president and general manager of the Oklahoma City-based company's Gulf division.
But potential from discoveries near Devon's Chuck field about 240 miles southwest of New Orleans, most notably Chevron Corp.'s Jack field, makes it worthwhile.
"We still think there's about a 65 percent chance of this being a dry hole or a failure, but you're still willing to take quite a bit of risk when you're a step away from other wells that have been successful," Vaughn said.
Sharing the risk with Devon are its minority partners, ConocoPhillips and Exxon Mobil.
Last year, Chevron illustrated the potential of the lower tertiary, an ancient rockbed several miles beneath the water's surface. The company announced that a successful well test showed Jack could be the biggest find in North America since Alaska's Prudhoe Bay, the nation's largest oil field, was discovered in the late 1960s.
That test, known as Jack 2, came two years after Chevron drilled Jack 1, the field's first exploratory well. Both were drilled more than 20,000 feet below the seabed in 7,000 feet of water.
Jack 1's result transformed the Jack prospect into a discovery. Jack 2 provided enough information to indicate the field could hold 3 billion to 15 billion barrels of oil and natural gas liquids — which could boost U.S. reserves by as much as 50 percent.
Chevron spokesman Mickey Driver said a third appraisal well, Jack 3, is on the horizon.
Such further evaluation helps companies gauge whether a field has enough oil to be "commercial," justifying committing billions of dollars for an oil production platform and other infrastructure.
Devon is a minority partner in Jack and three other discoveries in the lower tertiary — BP's Kaskida, BHP Billiton's Cascade and Chevron's St. Malo.
A dozen discoveries have been announced in the lower tertiary since 2001, according to the Interior Department's Minerals Management Service.
"All that information combined gives us great confidence in the lower tertiary play being commercial," Vaughn said.
Chuck is still a prospect. Diamond Offshore's newly renovated floating drill rig, Ocean Endeavor, is in place in 6,500 feet of water to start drilling for Devon as early as today, Vaughn said.
If the first well reveals oil, Chuck will become a discovery that could lead to more wells and tests. Devon spokesman Chip Minty said the company estimates Chuck could contain 300 million to 500 million barrels of oil.
Vaughn said Devon expects it to take five months or more to reach the company's desired depth of 33,000 feet.
Such drilling in the lower tertiary presents numerous risks, said Matt Pickard, an analyst with Quest Offshore Resources in Sugar Land, which provides market research and analysis for the offshore industry.
Extremely high pressures and temperatures accompany wells drilled at such depths, Pickard said. Also, companies face the challenge of maintaining control over the operation with such distance between the well and the rig.
"The drilling of these deepwater wells by Chevron and Devon represents the potential impact of the Gulf of Mexico on future global energy supply," Pickard said. "Pushing to depths such as these also showcases the industry's often overlooked emphasis on developing new technologies."
Via: Chron
by KRISTEN HAYS
