HOUSTON ̶ The deepwater Gulf of Mexico (GoM) ranks highly vs. exploration and production opportunities anywhere else in the world, but costs need to be controlled as drilling day rates go up, according to four top-flight panelists at Hart Energy’s inaugural Gulf of Mexico Offshore Executive Conference.

They were optimistic about the Gulf’s reserve potential, citing the Lower Tertiary Trend. Thanks to ever-improving 3-D and 4-D seismic processing, exploration in subsalt and near-salt zones will be the next big thing as operators seek to understand more about the Paleogene formations. In the next decade, drilling activity will move south and west into ever-deeper water, they said.

Why does the Gulf continue to impress? Obviously the reserve potential is paramount and thus the appetite for the Gulf has not diminished, despite higher costs for drilling. Geologists think that in the Inboard Wilcox Trend alone, there’s an estimated 5.5 to 6 billion barrels of oil equivalent yet to find. But other factors shine as well.

“First, it’s the profit margins. There’s not a place I’ve worked anywhere in the world with similar margins,” said James H. Painter, executive vice president, Cobalt International Energy. “Second, it’s the infrastructure. Third, it’s the ability to have so many technical people available. Technology moves very quickly here. Everything starts in the Gulf of Mexico and then moves around the world, whether it’s seismic, new drillbits, rig technology or whatever.”

Statoil has been steadily increasing its Gulf presence for the past few years. “It’s a core area in our portfolio and we see a lot of potential. We’re here on a long-term basis,” added Ola Gussias, Statoil’s technology manager for U.S. offshore.

“There is a very commercially driven, transparent fiscal regime,” said Brian Reinsborough, president and CEO of privately held Venari Resources LLC. Since the Dallas company started in 2012, it has received commitments of $2.4 billion from Warburg Pincus and other private-equity investors, and it’s a participant in one of the Gulf’s largest oil finds in the Lower Tertiary play, the Shenandoah Field operated by Anadarko Petroleum in Walker Ridge Block 52.

The Gulf presents numerous challenges, however, including rising costs and lack of standardized development approaches, two elements every speaker introduced to the conversation. “Most of the value destruction occurs in the appraisal phase when you drill too many wells before making the FID [final investment decision],” said Reinsborough.

Statoil, the world’s largest operator in deepwater, is researching the industrialization and standardization of the seabed, such as for subsea processing. Meanwhile, it is transferring a lot of its industry-leading technology from the North Sea to its operations in the Gulf, which it entered in 2005. Today it’s involved in nine producing fields including Tahiti and Caesar-Tonga, and another seven in the execution or concept phases. One such technology is through-tubing electric submersible pumps being developed with Chevron and Schlumberger.

In February it announced a major, global technical efficiency program. But everyone talks about standardizing topsides production facilities in order to save time and money. “It’s a balance between thoroughness and front-end design; and good, tried –and-true management practices,” said Stephen Pastor, asset president, conventional, for BHP Billiton.

“The more you can mature the FEED process before you get to the FID, the better. Don’t feel you need to blank-engineer everything or over-engineer everything. It’s being smart about what you do and what you don’t do.”

Painter said Cobalt is transferring its learnings from offshore West Africa to its partners in the GoM and vice versa. “It’s about breaking down every step of the whole drilling process and seeing ways to be efficient and reduce cycle time.”

They agreed that water depth is not a big issue anymore compared with the greater technical challenges of drilling ever deeper below the mud line, due to extremely high temperatures and pressures.

Offshore