It seemed important for those of us concerned about peak oil to respond to the Jack-2 test well result and all the publicity it has spawned.
With the successful test drilling of Jack-2 in the ultra deepwater Gulf of Mexico, there has been a media blitz proclaiming the good news. Further, the "peak oil" theory is under attack. From Business Week's September 7, 2006 article "Plenty of Oil—Just Drill Deeper," the authors write "You can tune out all the scare talk about Peak Oil for a while--probably a long while."
There is no doubt that the successful Jack-2 test well is a technological achievement. It set more than a half a dozen world records for test equipment pressure, depth, and duration in deepwater were set during the Jack well test. More importantly, it demonstrated that these reservoirs are capable of producing at rates that are potentially economic. But in the end, what did Jack-2 prove and what how significant is it relative to the future of exploration and production in the Lower Tertiary of the Gulf of Mexico? What has been missing is a realistic appraisal of the discovery that goes beyond the public hyperbole.
Large estimated recoverable reserves (EUR) numbers have been quoted in the business and popular press--anywhere from 3 to 15 billion barrels (Gb). Many of these articles have given the public the misperception that all of these billions of barrels were demonstrated by and will shortly flow from the Jack discovery alone. This two-part series is meant to enlighten readers on the true significance of the Jack discovery, the Lower Tertiary play in general, and what can truly be expected from it.
Our four key conclusions:
The LTGOM (Lower Tertiary Gulf of Mexico) play consists of a number of fields as shown in Figure 1 below. All of these fields have an EUR in the 350 million to 500 million-barrel range, according to Rigzone and other unpublished sources. The production capacity of the various fields and the types of fluid they can deliver vary considerably. Aside from their great depth, the reservoirs and fluids present many challenges. Some of these fields will get produced, others will not. It is important for everyone to understand that the large EUR numbers quoted do not apply to any one field but rather represent the entire Lower Tertiary region.
The Jack-2 well test indicated a flow of 6000 barrels per day. This one data point encourages further appraisal but does not guarantee flow rates that will justify the massive (billions of dollars) investment required to put the LTGOM into full-scale production. Whether the economics of commercial exploitation is favorable for the various fields remains an open question.
Implementing development plans, where they exist, for these fields pushes the limits of deepwater technology. A myriad of questions exist about completion and production of the wells. Unanswered logistical concerns include securing rigs, transporting produced oil to market and what to do with associated natural gas.
Realistically, initial production of some fields in the LTGOM may happen by 2009 or 2010 at the earliest. The other fields that do get developed, including Jack 2, will likely not achieve first production before the 2012 to 2014 period. Delays are likely given that many technical problems are being solved for the first time. Under most forecasted scenarios, production from the LTGOM will likely only offset declines in US production that will have occurred by then.
Marvin Odum, Shell's executive vice president of exploration and production in the Americas, recently said that while the Gulf of Mexico will remain a key producing region of the world's biggest energy consumer, it was unclear if new discoveries could counter decline rates at existing fields.
The Original Number for Estimated Ultimately Recoverable Oil (EUR)
The World Oil issue of May of 2005 cited a paper, Emergence of the Lower Tertiary Wilcox trend in the deepwater Gulf of Mexico. That paper contained the following statement: “More than 12 Bbbl of oil in place have been discovered to date. Potential recoverable reserves per discovery range from 30 to 400 MMboe, with a 69% success rate, i.e., 9/13 [4 dry holes]. Trend-potential ranges from 3 to 15 Bbbl of recoverable oil.” So, you can readily see the origin of the EUR numbers thrown around in the press. The reserves estimate applies to the entire Lower Tertiary play, not just to the Jack discovery as has been implied by press reports. [More on this next week in Part 2 of this series.]
Dave Cohen, a senior contributor at The Oil Drum (www.theoildrum.com), spent time in academia and as a software engineer and entrepreneur; for the last few years he has been covering the energy and climate change stories for various publications. “Bubba,” an oil-industry participant, collaborated with Dave on is article and is a Contributor at The Oil Drum.