After a few years of relatively light activity in the US Gulf of Mexico, Chevron said Friday it was again looking at potential large new deepwater developments.
The company, which since 2015 has chiefly focused in the domestic arena on its quicker-return Permian Basin onshore operation in West Texas and New Mexico, appears ready to invest again in longer lead-time fields that had been discovered since then, or even before then.
At least one of those projects needs new technology, but that is progressing well and should be ready soon for project sanctions, Jay Johnson, Chevron's executive vice president for upstream, said during the company's second-quarter earnings conference call.
Other projects are being appraised and evaluated, and there are even some brownfield developments being mulled, Johnson said.
During the industry downturn that began in late 2014 from US oil prices that had dropped near the $50/b level after hovering in the low $100s/ earlier that year, the company focused on shorter lead-time projects with a faster payback.
LOWER COSTS SPURS INTEREST IN SOME PROJECTS
But it is now ready to take on a selected few projects requiring higher capital expenditures and potentially years to bring on stream. In the past few years, industry has learned how to lower the costs of those projects through phased designs, improved construction and better supply chain logistics.
For example, the much-watched Anchor discovery, located in the Gulf's Green Canyon area offshore Louisiana, is a high-temperature, high-pressure field that requires some fancy technology to produce it.
Industry produces ultra-deepwater wells typically at a limit of 15,000 pounds per square inch (psi) of pressure, but Anchor and a few other US Gulf discoveries are at the 20,000 psi level.
Industry had expected Chevron to take a final investment decision on Anchor this year, but Johnson said that is now slated for early next year.
"The technology we're developing to exploit these higher pressure reservoirs will allow us to target other resource opportunities in the Gulf of Mexico," he said.
Johnson said two primary technologies are being developed to exploit the high-pressure reservoirs. The first is thicker steel to be used in construction, which is in the qualifications stage and should not be a major issue, he said.
In addition, development of technology to handle higher hook loads for to handle the pressure of deeper wells is also proceeding, Johnson said, but again is not particularly challenging.
TECHNOLOGY FOR HIGHER HOOK LOADS 'IMPORTANT' TO FINISH
Simply, "it's an important one to get finished," he said.
Chevron has a "strong queue" of exploration prospects the company is "actively evaluating and maturing," he said, but which were not mentioned by prospect name.
It is also pursuing what Johnson called "highly economic" brownfield developments at existing fields such as its Jack/St Malo which has produced since 2014 and Shell-operated Perdido, in around 8,000 feet, which has produced since 2010.
Several discoveries are also in early stages of evaluation. Chevron-operated Ballymore, located offshore Louisiana's "big toe," as well as Shell-operated Whale, both made in January 2018, are in appraisal stages to evaluate their respective resource sizes.
Whale is sited 10 miles from the Perdido producing hub, and Blacktip, another Shell-operated discovery made in April and located in 6,200 feet of water, is located 30 miles from the hub. Both are in the remote southern US Gulf.
"We're targeting unit development costs of $16/b to $20/b for the Gulf of Mexico," Johnson said.
