June 12, 2007
Tuesday

GULF OF MEXICO -- An arms race is brewing in the Gulf of Mexico.

Oklahoma City-based Devon Energy Corp. and its partners this month unveiled the newest armament in the race to tap what many energy industry observers say is the greatest oil field find in at least three decades.

The Ocean Endeavor is a floating city that reaches more than 17 stories above the water and caries more than an acre of deck space. The drilling rig will rely on the newest, most advanced technology in the industry in its quest to produce oil from the deepest parts of the Gulf of Mexico.

"Deepwater is one of the last frontiers of drilling," said Steve Hadden senior vice president of exploration and production. "Until four or five years ago, a lot of ultra-deep drilling wasn't possible."

The Ocean Endeavor is owned by Houston-based Diamond Offshore and under long-term contract with Devon. The Oklahoma City company and its partners hope to use the new rig to capture oil from the lower tertiary rock formation about six miles below the Gulf of Mexico.

JP Morgan analyst Joseph Allman and other industry observers have said the lower tertiary could contain as much as 15 billion barrels of recoverable oil. The volume is 44 percent more than the estimated 10.4 billion barrels of recoverable oil at the Arctic National Wildlife Refuge in Alaska, according to the U.S. Geological Survey.

"The reason the lower tertiary is as exciting and meaningful as it is is because it's one of the few large accumulations of crude oil coming in North America," Devon President John Richels said.

The lower tertiary was beyond industry limits until earlier this decade. Salt layers deep below the surface blinded industry's seismic readings of the rock formations until a new seismic technique was developed to see through - or around - the salt. The other major problem was how to drill in up to two miles of water.

"The water depths are tremendous," Hadden said. "At 10,000 feet of water, the pressures are going to be about 4,500 pounds per square inch, which would crush just about anything you can think of."

Air pressure at sea level is 14.7 pounds per square inch.

The Endeavor is specially designed to deal with the pressures and other issues of drilling in such an inhospitable part of the globe.

The high tech drilling machine is the sixth of seven 1970s-era rigs Diamond Offshore is rebuilding and reforming into a 21st century marvel necessary to tap some of the deepest known oil reserves. The Endeavor last month completed a $260-million upgrade that boosted its reach to 10,000 feet of water, up from a maximum water depth of 2,000 feet.

"This is our biggest and best upgrade yet," said Lyndol L. Dew, senior vice president of Diamond Offshore's worldwide operations.

The upgrade also nearly doubled the vessel's lifting capacity to 2 million pounds, which is more than twice the weight of a fully-loaded Boeing 747. The rig's deck space also was more than doubled to nearly an acre.

Even with modern technology, success is far from certain.

"Our target is six miles deep in the earth about 300 feet in diameter. We're trying to hit with an eight-inch drill bit," Hadden said. "The analogy is like standing across a 10-foot room and trying to thread a needle from across the room with the lights out. That's why this is very high tech. You need all this computing capacity. You need good engineering and good geology and geophysical work."

At $80 million to $120 million per well, Devon and other operators in the area can't afford to be wrong too many times.

The Ocean Endeavor first will be responsible for drilling the Chuck field. Chuck will be the seventh lower tertiary field Devon has attempted to tap. Of the previous six, two have yielded dry holes, and four have been touted as massive discoveries.

Devon auctioned the naming rights for the upcoming prospect as part of a United Way fundraiser. The woman who won the auction named the field "Chuck" after her husband.

Devon has said its share of the four proven fields so far could yield 900 million barrels of oil equivalent. The company has proven reserves of about 2.4 billion barrels worldwide. The lower tertiary oil has not yet met the stringent requirements for being considered "proven." Devon has identified 13 additional possible fields in the lower tertiary.

The first well on the prospect is expected to take about 140 days to drill. After the first well is drilled, the Endeavor likely will move to a nearby area to drill another Devon-operated well. At that point, Devon teams will inspect data from the well and determine whether Chuck is likely to be a successful prospect.

If the well proves successful, the Ocean Endeavor likely would be redirected back to Chuck, where it could spend up to five years drilling an additional 30 wells.

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