First Field Found in ’47 Still Producing

GOM: Proud Past, Bright Future

By KATHY SHIRLEY
EXPLORER Correspondent

OCS Marks 50^th Year

GOM's Top Tens:

Table 1. Ten Largest Discoveries

Table 2. Ten Oldest Fields Still Producing

Table 3. Ten Deepest Water Depth Wells

First Sale Drew 336 Bids

The federal government held its first lease sale in October 1954 offshore Louisiana. MMS records show 199 tracts were offered, and 90 received bids. A total $116,378,476 was offered in high bids and 336 bids were received.

The average price per acre at the sale was $294.84.

The second sale was held just one month later for offshore Texas, and 19 bids were received on the 38 tracts offered. Total bonus high bids were over $23 million, and the average price per acre was $347.84.

The fifth lease sale in federal waters was off Florida’s coast in 1959 -- an area now off-limits to activity. The government offered 80 tracts, and 23 bids were received. Total bonus high bids were $1.7 million, and the average price per acre was $12.92.

-- KATHY SHIRLEY

It’s been alternatively called the Dead Sea and the salvation of domestic oil and gas production. Either way there is no doubt that the Gulf of Mexico has been critically important to the petroleum industry -- and the U.S. consumer -- for over five decades.

How important? A quick look at some Minerals Management Service statistics tell an impressive tale. For example:

• Cumulative oil production from the Gulf totals over 13 billion barrels.
• Gas production has reached almost 154 trillion cubic feet.
• A total of 41,188 wells had been drilled as of Aug. 1, and 1,259 fields have been discovered.
• There are 149 active lease operators conducting drilling and/or production operations in the region.
• There are 1,884 active companies qualified to do business in the Gulf, and 400 current leaseholders.

It all started in 1947, when Kerr-McGee made the first Gulf discovery at Ship Shoal 32, about 10 miles off the Louisiana coast in 18 feet of water. The firm is credited with setting the first offshore platform in the Gulf at its new field. Amazingly, that first oil field is still producing 56 years later -- and it is not alone. Many of the earliest discoveries in the Gulf are still producing today. (See GOM's Top Ten Table 1)

Over the years companies have found ways to make Gulf fields of all sizes commercially viable.

Of course, that was not difficult at the region’s largest field discovery, which came just two years ago when BP uncovered the giant deepwater field, Thunder Horse, in the Mississippi Canyon and Eugene Island areas. The firm estimated reserves at more than one billion barrels. But even the MO 830 field in the Mobile Bay area was commercially viable with just 82,384 estimated barrels of oil equivalent in reserves.

Going Deeper

Certainly, the deep water has been the Gulf’s exploration focus for the last decade, and that’s where many of the largest fields have been uncovered.

What most people might not know is that the first discovery in water depths over 1,000 feet came in 1979 at Shell’s Cognac field in the Green Canyon area.

Since then, 146 deepwater fields have been discovered.

Technology has played an important role in the deepwater evolution of the Gulf, and one of the more important "new" technologies has been subsea wells. The first subsea well was drilled in 1966 at the Eugene Island 175 Field, operated by Sinclair Oil. The technology has continued to expand, and as of today 330 subsea wells have been drilled in the Gulf.

For those who think the Gulf of Mexico has seen its heyday, think again. Chris Oynes, regional director of the MMS said the glass is only now half empty.

According to MMS’ 2000 resource assessment of conventionally recoverable hydrocarbons in the Gulf, 65 billion barrels of oil equivalent total reserves have been produced, but 71 billion barrels of oil equivalent remain.

According to the MMS the undiscovered resource assessment is approximately:

• For the western Gulf of Mexico, 37 billion barrels of oil equivalent.
• For the central Gulf, over 92 billion BOE.
• For the eastern Gulf, about nine billion BOE.

"Of course, our resources estimates are likely to be revised upwards due to new discoveries in entirely new geologic frontiers such as deep gas targets on the shelf," Oynes said.

New life for the Gulf of Mexico should not come as a surprise to anyone. Over the years, just as the region seemed to be peaking and on the downhill slide, a new geologic province or rule change by the MMS has regenerated interest and resulted in important new reserves.

In the 1980s, for example, the MMS instituted area wide lease sales, which prompted a whole new class of companies with new ideas to enter the Gulf.

"Area wide sales were the key to attracting smaller operators in big numbers to the Gulf and taking the province to that next level of development," Oynes said. "Other areas of the world, particularly the North Sea, hopes to emulate the success we have achieved in dramatically increasing the number of companies active in the Gulf (see August EXPLORER)."

Good Trends for Tomorrow

To say the deepwater has extended the life of the Gulf is a colossal understatement. The deepwater has yielded some of the biggest fields ever found in the United States -- at a time when many believed the glory days of the domestic industry were long past.

The regeneration of the Gulf of Mexico continues today. In the last few years the potential for deep gas targets on the shelf has been established and a growing list of operators are coming back to the shelf to search the frontiers below 15,000 feet.

And just as it did early in the deepwater play, the MMS has taken steps to entice companies to explore for deep gas. Royalty relief for deep gas from new leases was established a couple of years ago, and earlier this year the agency announced a proposed rule that would extend the royalty relief to existing leases.

One provision of the proposed rule is another first for the Gulf.

"A key element of this proposed rule is that the royalty relief will be retroactive to the date of the proposed rule," Oynes said. "As a result, companies who believe we will pass the final rule -- and virtually everybody believes that will happen -- can go ahead and begin drilling programs with the assurance that the royalty relief will apply to any new deep discoveries."