Technology Gives Gulf Prospects World-Class Investment Appeal

John H. Miers
Amoco Exploration & Production Co.
Houston

Technological advances place exploratory prospects in the Gulf of Mexico back on the list of world-class opportunities appealing to major oil and gas companies. These advances are enabling companies to drill, complete, and produce in very deep water, and to image structures beneath salt.

Breakthroughs in these areas have revived hopes for large oil and gas discoveries in the gulf, where the average size of new fields previously had been in steep decline. From Amoco's point of view, Gulf of Mexico prospects have become strongly competitive in relation to opportunities elsewhere in the world.

A look at the technologies contributing to this revival illustrates how Gulf of Mexico prospects can economically compete worldwide.

Field size

Average field size in water depths less than 1,000 ft has fallen to less than 10 million bbl of oil equivalent (BOE) from 140 million BOE before the 1960s (Fig. 1 [16629 bytes]).

The initial large discoveries made in the late 1950s occurred in large structural traps easily identified on seismic data available at the time. Since then, exploratory targets have continuously decreased in size and have become increasingly more subtle.

Reversing these trends usually requires a technological breakthrough or a new-play concept. Both changes have occurred with the emergence of the subsalt play, results of which are not included in Fig. 1.

The shelf decline in average field size with time instigated not only the shift to subsalt targets but also the move into deeper water. The decline in discovery size is not evident in water depths greater than 1,000 ft (Fig. 2 [23094 bytes]). This is due to stepping out into deeper and deeper water which effectively exposes industry to an expanding resource base.

The lack of a noticeable decline suggests there are still fields of significant size yet to be discovered in the deep water. In addition, the total resource discovered in the 1990s is quickly approaching and will probably surpass the 2.8 billion BOE discovered in the 1980s. Comparing Figs. 1 and 2 illustrates why the majority of major oil and gas companies and many of the larger independents are focusing their efforts in deeper water.

Amoco's exploration spending in the Gulf of Mexico reflects this new focus (Fig. 3 [17495 bytes]). Both capital and operating expenditures in the gulf have increased since 1992, although operating outlays as a share of the total have declined. Capital spending has increased because Amoco believes that the Gulf of Mexico is an attractive place to invest exploration dollars.

Global position

Amoco uses a portfolio management system which evaluates and compares exploration investment opportunities worldwide. The aim is to focus exploration spending in a select number of highly prospective basins that offer the highest value return.

At Amoco, the Gulf of Mexico opportunities must compete and stack up against other investment opportunities worldwide. One of the first benchmarks we use when evaluating worldwide opportunities is the relative fiscal terms in countries where we are considering making investments. Fig. 4 [18180 bytes] is based on the Annual Review of Petroleum Regimes by Petroconsultants SA and shows that the U.S. ranks fairly high among the countries Amoco currently has in its portfolio.

After evaluating countries and basins in this manner, Amoco prioritizes specific drilling opportunities based on several criteria. Two examples of the multiple criteria used are risk-weighted internal rate of return (RWIRR), and probability of economic success (PES), illustrated in Fig. 5 [15969 bytes] and Fig. 6 [53373 bytes]. The relative risk weighting is developed from a series of tools based on probability and statistics. These tools help rank, prioritize and predict the resource potential of prospects on a risk weighted basis and allows Amoco to focus its resources on the highest value opportunities.

In addition, through several years of calibration, Amoco has increased its wildcat economic success rate in each of the last 5 years to over a 40% level through October of 1996. The gulf has continued to rank very favorably in Amoco's portfolio of opportunities under these and other criteria. This can be attributed in some respect to the continual development of technologies enabling companies to explore below salt and in increasing water depths.

Subsalt technologies

The risks affecting value-generation potential in the subsalt play remain very high; however, the ability to count on relatively stable fiscal terms makes them manageable. The main risks are geotechnical and drilling.

Fig. 7 [26091 bytes] depicts the typical subsalt play concept. The technology with the largest impact on reducing subsalt geological risk is the seismic processing technique called prestack depth migration. It is the technology that allows geoscientists to clearly image the top and bottom of salt and ultimately focus on imaging traps beneath the salt. Prior to prestack depth migration, the risk associated with finding subsalt traps was extremely high due to the relatively poor quality of conventionally processed seismic data.

Fig. 8 [127758 bytes] is a prestack depth-migrated seismic line over the Mahogany salt sill. This illustrates the clarity of imaging the top of the sill (about one fourth of the way down from the top), the bottom of salt (about half-way down), and reflectors below salt. In earlier vintage processing, commonly only the top of the salt would have been clearly imaged.

A second technology that reduces geotechnical risk is 3D visualization. This technology helps geoscientists dissect the salt's complicated geometry and emplacement history.

The Mahogany salt body appears in Fig. 9 [107578 bytes]. The feature in approximately 15 miles wide and 15 miles long and ranges in thickness from a few hundred feet to over 7,000 ft. Having a solid understanding of how the salt sill was emplaced and its geometry helps us to piece together a very complicated story of how the hydrocarbon trap was formed and therefore improves our understanding of the trap risks.

Fig. 10 [24047 bytes] depicts the drilling risks associated with the subsalt play. Most drilling problems occur in a high-pressure disturbed zone immediately beneath the salt.

The challenge is to effectively plan for these problems during the engineering phase of the well. Mud weights must be controlled to keep pressures in balance in the well bore. The disturbed zone must be carefully drilled through and cased off to avoid expensive redrills.

Historically, costs of drilling through salt have ranged between $l0 million to $25 million/well. The higher costs typically resulted from difficulties associated with the disturbed zone. The difference between the high and low drilling costs could be the difference between achieving an economic and uneconomic project.

Deepwater technologies

In the deepwater play, value generation becomes primarily a game of cost management and is accomplished by identifying the optimum drilling locations and controlling the actual well costs.

Three-dimensional seismic coherency mapping has helped optimize well locations and hold the number of wells drilled per prospect to a minimum. Coherency mapping is based on waveform variations from seismic trace to seismic trace in a 3D data volume. By mapping the lateral changes in seismic character from trace to trace, the technology reveals stratigraphic and structural features that may be less evident on conventional seismic-amplitude displays.

Fig. 11 [96514 bytes] is an example of 3D coherency data overlain on a depth structure map of a submarine channel system, visible on the right side of the display. These kinds of detailed looks at the channel system help identify where the best reservoir rocks were deposited.

Combining some of the previously established seismic amplitude technology with this 3D coherency capability should help minimize the number of dry holes in a given project.

As with subsalt wells, deepwater wells are very expensive, costing $10-20 million or more. High permeability reservoir rocks observed in the deep water help offset the high drilling costs by providing higher flow rates and therefore reducing the number of wells necessary for development.

Reducing development costs is a continuous challenge in the deep water. Technological advances in this area have been evolutionary, enabling the industry to produce fields in progressively deeper water. Subsea completions, surface-piercing floating production systems, optimization of tension-leg-platform technology, and shared infrastructure are areas we'll continue to study to optimize our spending and generate higher economic returns.

An enduring play

The Gulf of Mexico is still an attractive basin on a worldwide basis in which to explore for hydrocarbons. This is primarily due to the fiscal stability and the improving technologies.

As long as the stability remains and the technologies continue to advance, companies will most likely be investing in the Gulf for many years to come.

The Author

John H. Miers became vice-president, worldwide exploration, of Amoco Exploration & Production in April 1991. His primary focus at this time is exploration in Europe, the U.S., and Algeria.
Miers previously was regional exploration manager and division exploration manager in Denver and, before that, manager, geology, in Chicago. He joined Amoco as a geologist in 1970.
Miers holds BS and MS degrees in geology from the University of Washington.