A Review of the Nigerian Energy Industry

Low oil prices not holding back frontier drilling technology research

Transocean Polar Pioneer    Source: Keppel
Transocean Polar Pioneer     Source: Keppel

16 May 2015 – Supermajors and large-cap independents are pressing on with research on new offshore drilling technologies supporting the exploitation of hydrocarbon reserves under high pressure and high (HPHT) and Arctic operating conditions, even as uncertainty pervades in a volatile oil price environment.

Royal Dutch Shell plc, BP Plc and Anadarko Petroleum Co. have sounded the market for the provision and development of next generation drilling units to unearth oil and gas reserves believed to have been trapped in either the high pressure, high temperature lower tertiary reservoirs in the U.S. Gulf of Mexico and the Caspian Sea or the frosty Arctic basins off Alaska.

BP and Anadarko are after drilling rigs capable of operating in HPHT reservoirs up to 20,000 pounds per square inch (psi) and 350 degrees Farenheit. Shell is seeking a rig capable of drilling beyond the restricted Arctic summer window.

In all three cases, the enquiries could eventually result in the construction or modification of the first drilling units of its kind, which is projected to take place at least partially in South Korea or Singapore.

Frontier Rig Development Projects Gather Pace
BP may have been the first to unveil its rig development through announcing a joint study agreement in February 2013 with Maersk Drilling on what is coined the “Project 20K”.

However, Shell and Anadarko appeared to be moving faster on the contracting front, having floated tenders that will lead to the award of multi-year charters to the successful drilling contractors.

Shell is understood to have commenced shortlisting contenders for a front-end engineering and design (FEED) contest on an Arctic rig for its drilling program in the Chukchi Sea. The winner of the contest – now expected to be selected among five invited contractors, Transocean Ltd., Noble Corp. plc, Seadrill Ltd., Maersk Drilling and Stena Drilling Ltd. – stands to walk away with a five-year drilling contract that will underpin the construction of a rig to their proposed design.

The FEED contest was called after Shell announced its intent to return to the Chukchi Sea to drill exploration wells targeted at proving up the commerciality of hydrocarbon reserves in the Arctic waters off Alaska.

Shell has already spent $1 billion on preparing its Arctic drilling work and it is costing several hundred millions of dollars a year even without progressing with drilling, Chief Financial Officer Simon Henry was quoted as saying at the company’s fourth quarter results briefing in late January.

At the time of writing, Shell has already filed its drilling plan with the U.S. Bureau of Ocean Energy Management for up to six wells testing the Burger prospect about 70 miles northwest of the village of Wainwright.

Shell’s Chukchi Sea exploration program was met with strong objections from environmental organizations but the super major has persisted not least because as a company spokesperson said there is “reason to believe Alaska offshore is home to some of the most prolific, undeveloped hydrocarbon basins left in North America”.

Shell is banking on the unproven reserves offshore Alaska to potentially rival that of BP’s producing Prudhoe Bay assets, but the “only way to know for sure is to drill the leases [Shell] purchased”, the spokesperson said while abstaining on any comment on further Arctic drilling research initiatives.

The exploration drilling campaign, likely to take several summer drilling seasons from 2015 to complete, will be conducted using two drilling vessels, the Noble Discoverer (mid-water drillship) and the Transocean Polar Pioneer (mid-water semisub).

Although Shell has elected to proceed with the exploration drilling using two existing floaters in the market, the supermajor is hoping to stretch any required development drilling beyond the four-month summer open season in the Arctic.

Arctic Drilling FEED Proposals Invited
Contenders in the FEED contest are understood to have also been invited to submit proposals based on either jackups or drilling floaters deemed best suited to maximize drilling efficiencies under the icy Arctic water conditions.

Shell’s requirement to stretch the drilling campaign to the shoulder months of the summer drilling season means Stena Drilling will not be able to offer its existing Stena IceMAX (UDW drillship) without modification. Sources added that Shell’s earlier joint study with Singapore-based Keppel FELS on a full Arctic Class jackup intended to also work through winter would be an overkill for the summer plus Arctic waters drilling requirement.

Securing a suitable rig is just one hurdle to cross when drilling in the Arctic. Besides the impact of the ice and winterization on the rig, Keppel’s offshore technology development executive director, Foo Kok Seng said planning for an extra drilling window during the ice infested season also needs to be balanced against extra requirements in safety, logistics supply, people movement and rig evacuation.

“Technically, it is possible to design a rig to drill through the calendar year in the Arctic; however, the high cost expected for such a rig may not be feasible especially in today’s [economic] climate,” Foo said.

He nonetheless shares Shell’s optimism in the hydrocarbon potential of the Arctic.

“The current oil price will impact the immediate plans [but] we believe as the potential of the oil resources in the Arctic is huge, there remains an impetus to continue investing in order to harvest them in the future”, Foo explained.

US Gulf Of Mexico Drives Research In Project 20K
The sheer volume of proven reserves beyond the operating limits of available rigs in the deepwater U.S. Gulf is driving Anadarko and BP’s separate research in the next-generation drilling floater.

BP estimates the application of the technology to be developed under its Project 20K will extend access to additional 10-20 billion barrels of resources alone in its portfolio including the Kaskida and the Tiber discoveries in the U.S .Gulf.

Anadarko rates its Shenandoah discovery to be developed with 20K drilling technology as one of the largest in its company history. Both BP and Anadarko have approached the market for supply of drillships for their 20K BOP requirements in the U.S. Gulf of Mexico. The corresponding rig tenders have experienced some delays on the back of unfavorable oil price movements, but there are no signs of cancellations of the bid rounds so far.

However, BP is reportedly considering deploying the Caspian Drilling Company’s KFELS DSS38M design, 20K BOP ready semisubmersible drilling unit being integrated in the Caspian Shipyard for planned wells in the deepwater Azerbaijan basins.

The semisub being built in various locations in Singapore and the drilling rig is scheduled for delivery by December 2016. BP has identified the Shafag Asiman block as potentially demanding a 20K bop semisub.
*Chen Hui Hui – Rigzone Contributor

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