A couple of issues ago, Dick Winchester suggested in his Both Barrels column that shale gas could perhaps one day play a major role in satisfying the UK’s hunger for energy. After all, he said, if shale gas can work in North America, it can just as easily succeed in Europe.
Indeed, it has been so successful on the other side of the Atlantic that the US has now overtaken Russia as the world’s largest gas producer.
US output in January through October 2009 increased 3.9% from a year earlier, to 18.3trillion cu ft (519billion cu m), according to the latest Department of Energy data. In contrast, Russian output plummeted 17% over the same period, to 16.315TCF (462billion cu m).
Even three years ago it looked as if the world’s greediest economy was on a one-way ticket with gas and that salvation perhaps lay in importing large quantities of LNG, including from Russia.
The view was forming that domestic gas production was in terminal decline, or at least from traditional areas and geological plays. One of those is the shelf area of the Gulf of Mexico, which long ago went through the majors-to-minnows transition, with everyone believing that the latter would exhaust the province, pull out the infrastructure and close the door.
Well, not quite everyone believes in that convention. Enter McMoRan Exploration Company of New Orleans. It takes the opposite view.
Basically, its thesis is, as it is possible to drill for so-called deep gas off the shelf, why not try drilling for deep gas on the shelf. After all, is there any valid reason why the deep geological play does not reach towards the beach?
A few weeks ago, McMoRan Exploration made a discovery on its Davy Jones ultra-deep prospect on South Marsh Island block 230 in just 6.5m (20ft) of water, only 10 miles off the coast.
The well was drilled to 8,614m (28,263ft) and was logged with pipe-conveyed wireline logs to 8,575m (28,134ft).
The wireline log results indicated a total of 41m net (135ft net) of hydrocarbon-bearing sands in four zones in the Wilcox section of the Eocene/Paleocene. All of the zones were full to base, with two of the zones containing a combined 27.4m net (90ft net).
The Eocene/Paleocene (Wilcox) suite of sands logged below 8,321m (27,300ft) appears to be of exceptional quality, though flow testing will be required to confirm the ultimate hydrocarbon flow rates from the four separate zones.
It was reported that the resistivity log obtained on January 10 was the last data needed to confirm hydrocarbons in South Marsh Island block 230 prior to deepening the discovery well to about 8,839m (29,000ft) in order to check out further objectives.
Early estimates of the size of the discovery are in the range 2-6TCF of gas. That puts Davy Jones right up there among the topmost gas finds ever in the US Gulf.
Already the talk is of a new frontier opening up – right below where everyone and his dog have been extracting oil and gas since the birth of the US offshore industry in 1949.
It is suggested that the same rock and sand layers that, in recent years, yielded the many major and continuing oil&gas discoveries several hundred miles out in the Gulf may be just as hydrocarbon-rich beneath the shelf.
“It’s definitely going to bring a number of players back into this area … this is more than just a one-well discovery,” Neal Dingmann, industry analyst with Memphis-based brokerage firm Wunderlich Securities, was quoted as saying.
“Success at Davy Jones could be a transformative event for (the companies),” said Jefferies Research, in a note to investors.
It will take at least 10 wells, at a cost of $150-175million each, to bring Davy Jones into production, according to McMoRan co-chairman James R. Moffett.
So what’s the relevance to the North Sea? Simple – and I’ve been here before. I do not believe that enough effort has been put into the North Sea hydrocarbons quest, either by the collective industry or the UK Government.
If one looks at the success of little Sterling Resources with the Breagh discovery in the Southern Gas Basin – a substantial resource located in a geology that had been written off by many as being in the too-difficult category – I believe that is a great example of what is possible with lateral thinking and a bit of determination. Geologically, Breagh is a shallow prize, and there’s undoubtedly much more to come from that part of the North Sea.
So why doesn’t the UK Government sponsor a systematic deep probe of the North Sea? Comb the databanks, co-fund new surveys using the latest technologies – really go to town. Invest in the future.
I’ll bet that, combined with shale gas on and offshore, together with what such a sweep would reveal, coupled with Breagh analogues, the UK would likely come up trumps. That would, of course, please our greedy Treasury.
So think on it: majors have slashed their presence in both the UK North Sea and all but the deepest sector of the US Gulf of Mexico over the past decade or so. They sold their interests on to smaller firms with lower operating costs that could make money out of smaller fields. But have they, in fact, made a big mistake by giving up too early and being too conservative in their thinking.
Do please bear in mind that the hydrocarbons book is already being rewritten thanks to the possibly prolific ultra-deepwater plays being found by Petrobras off Brazil; quite possibly by BP offshore Angola with its current, and hugely successful, drilling campaign, and, by the way, by Chevron in the US Gulf with Jack.