Comments: Deepwater Promise
Authors: Donnelly John 
Published: February 2015

The successful completion of an extended production test by Chevron, Statoil, and Devon on a well in the Lower Tertiary of the U.S. Gulf of Mexico (GOM) may prove to be a watershed event for the GOM and several operators, and could even usher in a new era of deepwater production. The much-anticipated test on the Jack #2 well on Walker Ridge Block 758 showed sustained flows of more than 6,000 BOPD. Operator Chevron, which has a 50% interest, and Statoil and Devon, each with a quarter share, plan an additional appraisal well next year.

Jack, which was discovered in 2004, was one of the most closely watched GOM developments in recent memory because if development of the Lower Tertiary is feasible, it could open up a potentially prolific area to production. It is one of eight discoveries in the past 3 years in this GOM trend offshore Louisiana. Several analysts believe the area could produce as much as 500,000 BOPD within several years and hold as much as 15 billion bbl in reserves. Other estimates are more optimistic, predicting up to 800,000 BOPD of light, sweet crude and 1 billion cf/D day of natural gas coming from the reservoir by 2012. Chevron said that the Jack production test was the deepest successful well test in the GOM. Currently, there is no production from the Lower Tertiary, and Jack is one of several recent promising discoveries from this zone. Now the industry is finally beginning to get an idea of the extent of commercial hydrocarbons there.

But output from the Lower Tertiary is not without significant hurdles. Mapping will be a challenge because of the thick salt layers, and wells and production facilities will be expensive. The Jack well is located in 7,000 ft of water and was drilled to a depth of more than 28,000 ft. Getting the production to the U.S. mainland—whether by pipeline or through the use of floating production systems—also presents issues. And, while the Jack test well met producers' expectations, overly optimistic expectations seem premature.

Some of the industry's most promising and recent production developments are of increasing complexity. Hydro's Ormen Lange gas project in the North Sea, for example, is requiring complicated subsea installation and pipeline infrastructure. If the development of this trend confirms its expected potential, it will be another tribute to what upstream technology advances are making possible. Output from this deepwater frontier would not be possible without recent seismic advances as well as advances in rig technology.

The news is certainly promising to several producers who hold additional leases nearby, including Chevron, Devon, Shell, Anadarko, and others. Devon said its Lower Tertiary acreage could more than double its reserves base of 2 billion BOE. Jack is one of four discoveries by Devon in the Lower Tertiary. The others are the Kaskida discovery made this year, the Malo prospect drilled in 2003, and Cascade—in which Devon doubled its working interest to 50% this summer—drilled in 2002. The Cascade prospect, scheduled for startup in 2009, will be the first deepwater Lower Tertiary field to come on line, according to the company. Devon, once a small U.S. independent, has grown rapidly during Chief Executive Officer Larry Nichols' tenure through a series of careful acquisitions and strategic drill-bit plays (see July 2006 JPT Q&A).