A_Guide_to_Offshore_Oil_Production

OffshoreProduction

• GOM Facts :– Over 50,000 wells drilled in

GOM,– 7,000 active leases,– About 3600 structures– About 3600 structures– 64% of leases are in Deep Water

(>1000 ft).– Nearly 4,000 wells drilled in

depths > 1000 ft– 700 wells in all Federal water

5,000 ft and greater– Gulf of Mexico (GOM) provides

97% of Federal OCS Production.

Source: Dept. of Interior, May 27, 2010, “Increased Measures for Energy Development on the Outer Continental Shelf,”

History of Drilling the Gulf of Mexico

• 1937 First Fixed Platform – 1 mile out: Pure Oil

• 1947 - 18 miles out: Kerr McGee & Superiorthe Kerr-McGee field produced >50 years

• 1966 – first subsea well, Sinclair’s Eugene Island 175

• 1979 – First deep water (>1000 ft) Shell’s Cognac Field• 1979 – First deep water (>1000 ft) Shell’s Cognac Field

• 2003 – first well drilled in 10,000 ft of water Chevron)

• 2004 – first producing field at 7500ft of water depth – Shell

• 2006 – MMS estimates GOM contains 45 billion barrels ofundiscovered technically recoverable oil and 3.9b proved.

• 2009 – second highest year for oil production.

Sources: 2003 AAPG Explorer and2004 “Deep Water – Where the Energy Is” MMS Publication

GOM Production

• In 2009, GOM production accounted for 31%of total domestic oil production and 11% oftotal domestic natural gas production.

• Oil production in 2009 represented the second• Oil production in 2009 represented the secondhighest annual production for the Gulf ofMexico OCS.


2006 NOAA Map of 3858 Oil and GasPlatforms in the Gulf of Mexico

There have been over 50,000 wells drilled in the Gulf of Mexico. About27,000 wells have been plugged and abandoned under DOI Regulations.

Gulf of Mexico OCS Active Leases

Offshore Production Facilities

Wikipedia

Gulf of Mexico OCS Production• Since the first major deepwater

leasing boom in 1995 and 1996, asustained and robust expansion ofdeepwater drilling activity hasoccurred, largely enabled by majoradvances in drilling technology.

• In 2001, U.S. deepwater offshore oilproduction surpassed shallow wateroffshore oil production for the firsttime.offshore oil production for the firsttime.

• By 2009, 80% of offshore oilproduction and 45% of natural gasproduction occurred in water depths>1,000 ft, and industry had drillednearly 4,000 wells to those depths.

• In 2007, a record 15 rigs were drillingfor oil and gas in water depths of5,000 feet or more in the Gulf ofMexico.

• Operators have drilled about 700 wellsin water depths of 5,000 feet orgreater in the OCS.


3,000,000

3,500,000

4,000,000

4,500,000

5,000,0004,900,000

Barrels of Oil Spilled

Spill Volumes 1960 to 2010What is Typical?

DeepWaterEra

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

1960-69 1970-79 1980-89 1990-99 2000-09 Macondoest.

99,000 106,000 7,000 2,000 18,000


4,000,000,000

5,000,000,000

6,000,000,000

3,455,000,000 3,387,000,000

4,051,000,000

5,450,000,000

Production

Spilled

Production vs. Spill VolumesBarrels of Oil

Deep Water Era

0

1,000,000,000

2,000,000,000

3,000,000,000

1960-69 1970-79 1980-89 1990-99 2000-09 Macondoest

1,460,000,000

099,000 106,000 7,000 2,000 18,000 4,900,000


OCS Blowout Events > 1,000 bbls1964-1970

After these blowouts, in the period from 1971 through 2009, a total of approximately1,800 barrels was spilled on the Federal OCS as a result of blowout events. Of thatamount, 425 barrels were blowouts resulting from hurricane damage. An additional 450barrels occurred at an oil pump during production operations. Since 1956, 15 blowoutsresulted in at least one fatality; three of these events occurred after 1986.


Blowouts – what type?

• Blowouts represent a type of loss of well control event that canresult in large discharges of oil into the natural environment.

• Since 1970, the number of blowouts per number of wells drilled hasvaried significantly from year to year.

• From 1964 through 1970, a total of approximately 178,000 barrelsof oil was spilled on the Federal OCS as a result of blowout events(see Table 2).(see Table 2).– About 13,000 barrels resulted from blowouts related to external

forces, such as hurricanes and ship collisions.– An additional 30,000 barrels were released when a production fire

resulted in the loss of well control of 12 wells on a productionplatform.

– The remaining 135,000 barrels that were released during blowoutsoccurred during drilling, well completion, or workover operations.


Deep Water Statistics

• Nearly 4,000 wells have been drilled in gulf water depth inexcess of 1,000 feet and 700 wells in all federal water 5,000feet or greater;

• 80 % of offshore oil production and 45 percent of naturalgas production came from DW in 2009;

• DW oil production surpassed shallow water production in• DW oil production surpassed shallow water production in2001.

• Economic Impact– In 2009, federal offshore leasing revenue was $6 billion.– All U.S. offshore operations provide direct employment

estimated at 150,000 jobs.– Since 1953, the federal government has collected $200 billion

from lease bonuses, fees and royalty payments from all offshoreoperators.


Offshore Spills and Blowouts

• From 1964 to 2009, 17.5 billion barrels of crude oil andcondensate have been produced in federal offshore waters,while 532,000 barrels have been spilled; meaning 30.3barrels have spilled per 1 million barrels produced;

• The number of spills jumped during the 2000-2009 decadeto 72 from 15 in the 1990s and the amount of oil spilledto 72 from 15 in the 1990s and the amount of oil spilledjumped to 18,000 barrels from 2,000 barrels in the 1990s.

• Seven offshore blowouts occurred in federal waters from1964 to 1970 that resulted in spills exceeding 1,000 barrels.Since 1971, blowout events have resulted in only 1,800barrels of spilled oil.


Historical Spills?Very Small Prior to April 2010

• The last major incident resulting in oil coming ashorefrom a blowout in the US OCS occurred 41 years ago, in1969. From 1970 until April 2010, a total of 1,800barrels of oil spilled due to blowouts. Allmeasurements of safety have shown a steady level ofimprovement since modern Minerals Managementimprovement since modern Minerals ManagementService regulations came into effect in 1970.

• The safety record in the Gulf of Mexico for offshoreworkers is much better than that of the average workerin the US, and the amount of oil spilled is significantlyless than that of commercial shipping or petroleumtankers.

Source: Society of Petroleum Engineers,SPE Notes, July 6, 2010

Historical US GOM Spills?Very Small Prior to April 2010

• The last major incident resulting in oil coming ashore from a blowout inthe US OCS occurred 41 years ago, in 1969. From 1970 until April 2010, atotal of 1,800 barrels of oil spilled due to blowouts. All measurements ofsafety have shown a steady level of improvement since modern MMSregulations came into effect in 1970. (SPE Notes, July 6, 2010)

• The GOM safety record for offshore workers is much better than that ofthe average worker in the US, and the amount of oil spilled from wells hasbeen significantly less than that of commercial shipping or petroleumbeen significantly less than that of commercial shipping or petroleumtankers. (SPE Notes, July 6, 2010)

• Over the past 45 years (to end 2009), 17.5 billion barrels of crude oil andcondensate have been produced in US federal offshore waters, while532,000 barrels have been spilled, meaning 30.3 barrels have spilled per 1million barrels produced (US DOI Statistics, May 27, 2010 report & Reuters, June 4, 2010).

• Natural Seeps, during the same 45 year time period, flowed an estimated50 million barrels of oil into US waters from natural subsea seeps (most inGOM and Southern California) (Source: Oil in the Seas III)

SPE Notes can be found at www.spe.orgOil in the Seas III, National Research Council of the National Academies), 2003

How Big is The Recent Spill?(Engineering Estimates of 4.9 Million Barrels?)

• The Macondo blowout is the largest offshore oil spill inUS history. It is not the largest spill in world history,nor the largest spill in US history.

• The largest spill in world history was likely during the1991 gulf war, when the Iraqi army caused between 5.5and 11 million barrels to be released.and 11 million barrels to be released.

• The largest spill in US history was onshore in Kern,California, when 9 million barrels was spilled onshorein 1910 and 1911.

• The largest spill to 2010 in the Gulf of Mexico was the1979-1980 Ixtoc well blow out in Mexican waters. Thatwell released between 3.3 and 3.5 million barrels.


Why So Slow?

• The very low rate of spills from wells in theGulf caught everyone off guard.

• The Macondo accident is unprecedented,and comprehensive studies of methodsfor more rapid and effective responses to apotential deepwater blowout are beingundertaken.undertaken.

• A rapid response effort has been proposedand funded by industry.

• The offshore industry has learned fromthis incident and is making changes inoperating practices, training andequipment to ensure that we are betterprepared to handle a subsea flow from afailed blowout preventer and riser. (SPE Notes,July 6, 2010)

What Changes Are Needed

• Safety can be increased quickly with theimplementation of safety recommendations made bythe US Department of Interior, including verifyingcompliance with existing regulations and a NationalSafety Alert, recertification of all BOP equipment, andnew casing and cement design requirements.new casing and cement design requirements.

• Additional safety requirements have been proposed forimplementation within one year, including taking afresh look at how to deal with a deepwater blowout.

• Other changes may be recommended after theaccident investigation is completed, and the rootcauses of the blowout are determined.


Basis of the Moratorium

• While the rate of blowouts per well drilled hasnot increased, even as more activity hasmoved into deeper water, the experience withthe BP Oil Spill illustrates the significantthe BP Oil Spill illustrates the significantchallenges in containing a blowout indeepwater, as compared to containing ablowout in shallower water.


What is the Impact of theMoratorium?

• The moratorium provides time for DOI to ensure new procedures are inplace to make operations safer. DOI organized a group of expertreviewers and contributors who agreed to a list of recommendations tomake drilling safer. Some of these recommendations take time to studyand adopt into regulations to assure compliance. In some cases the timeframes may be as long as 6 months and even longer in one or two cases.

• However, a drilling moratorium can itself create additional safety risks.However, a drilling moratorium can itself create additional safety risks.– Forcing existing drilling operations to stop as soon as possible without

finishing the drilling of wells. Discontinuous operations can increase risk.– It is possible that the best rigs could leave the GOM first and come back last,

creating a negative impact on the overall quality of the fleet.– Ceasing operations for six months and longer could lead to a loss of

experienced drilling staff. Staff experience is a key factor in safe operations.– More crude oil would have to be imported by tanker and the risk of spills

during tanker transport is greater than from drilling.


Is Deepwater Production That Important?

• In 2009, production from US OCS accounted for 31 % of total domestic oilproduction and 11 percent of total domestic, marketed natural gas production.

• Deepwater development is a key component of the US’s energy supply, with 80percent of US OCS offshore oil production and 45 percent of US OCS natural gasproduction in water depths greater than 1,000 feet.

• The deepwater GOM supplied approximately 25 percent of the US’s domestic oiland 14 percent of its domestic gas production in 2009. The 20 most prolificand 14 percent of its domestic gas production in 2009. The 20 most prolificproducing blocks in the GOM are located in deepwater.

• While drilling at depths of 5,000 feet or more was almost unheard-of 20 years ago,about 6 percent of world oil production now comes from deepwater wells,according to research from IHS Cambridge Energy Research Associations (CERA) on“The Role of Deepwater Production in Global Oil Supply.” Offshore oil is expectedto make up some 40 percent of world production at the end of this decade.

• Globally, 14,000 deepwater wells have been drilled. In 2008, the total amount ofoil and natural gas discovered in deep water globally exceeded the volume foundonshore and in shallow water combined, according to CERA.

Source: Society of Petroleum Engineers, SPE Notes, July 6, 2010

What About the Remaining Oil?

• Damage estimates vary widely from “WorldEnding Scenario” to moderate.

• Cleanup will take time.

• Real Time Information Is Available:• Real Time Information Is Available:

– What can be learned from previous spills?

– What can be learned from the thousands ofnatural oil seeps?

Natural Oil Seeps inthe Sea

• How much is there?

• Where did it come from?

• What will it do?

• What is the effect long• What is the effect longterm?

• Can it be totally stopped?

Geology.com

How Much Oil is There?Data to 2003

• 76,000,000 gallons (1.8 million barrels) enterNorth American waters every year and380,000,000 gallons (9 million barrels) enterthe world’s waters every year.

• Four Sources:– Natural Seeps

– Petroleum Extraction

– Petroleum Transportation

– Petroleum Consumption

Data from: Oil in the Sea III, Committee on Oil in the Sea, National Research Council of theNational Academies, The National Academic Press, Washington DC, 2003.

North America

• Natural Seeps – 62% - 47,000,000 gal/yr

– Principally, GOM, California, Alaska, Canada

• Petroleum Extraction – 1% - 880,000 gal/yr (to 2009)

– This is NOT trivial since it is often released in mass– This is NOT trivial since it is often released in mass

• Petroleum Transport – 4% - 2,700,000 gal/yr

– Again, not trivial

• Petroleum Consumption – 33% - 25,000,000 gal/yr

– Cars, boats, parking lots, roads, roofs


Natural Seeps

• Natural seepage from geologic formations below the seafloor to theseas off North America exceeds 47,000,000 gallons each year andworldwide 180,000,000 gallons each year.

• Natural seeps therefore flow over 60% of the oil into the seas inNorth America and 45% of the oil worldwide.

• In North America, the largest and best known seeps appear to berestricted to the Gulf of Mexico and the waters off Southernrestricted to the Gulf of Mexico and the waters off SouthernCalifornia. These regions also have extensive oil and gas production.

• Many of these oil seeps were known (and used by nativeAmericans) since the 17th century.

• Areas around seeps are extremely important laboratories forunderstanding crude oil behavior in the environment as well as howmarine life responds to the introduction of petroleum.


Extra Slides

• Who inspects what?

Review of Application for Permit to Drill (APD)

• DOI conducts an engineering review of the APD. Checks:– proposed drilling rig’s maximum operating limits for drilling depth and water depth– proposed procedure, including assessment of best available and safest technology– well location and directional program,– geological and geophysical hazards,– subsurface environment for pore pressure and fracture gradient,– wellbore design and schematic,– design calculations for pressure containment during drilling and completion,– cement volumes, and testing pressures for the well control equipment, casing and casing

shoe.shoe.– hurricane risk assessment is performed during hurricane season.– how the proposed operation satisfies regulations in meeting its objective of safely reaching a

target depth. Including an assessment of:• well casing setting depths determined by formation strength, predicted formation fluid pressure,

drilling mud weight limits, any anticipated subsurface hazards;• effectiveness of well casing strength for pressure containment at its specified depth;• effectiveness of cementing the well casing after successfully securing and isolating the hydrocarbon

zones or any encountered subsurface hazards; and• maintaining well control by adjusting drilling mud properties and the use of well control equipment

such as diverters and BOPs.

Upon completing the engineering review, the Department may approve the APDwith conditions if warranted, return it to the operator for modifications, or deny it. Ifthe applicant makes changes to the drilling application, the Department must grantapproval before the applicant performs its work.


DOI MMS Rig Inspections

• The Department maintains a comprehensive inspectionprogram to promote the safety of offshore oil and gasoperations on the OCS.

• This program places inspectors offshore on drilling rigs andproduction platforms to enforce operator compliance withFederal safety and environmental protection requirements.Federal safety and environmental protection requirements.

• When a drilling rig enters Federal waters to drill a well,Federal inspectors will meet the rig where it is moored toprovide training to the rig operators about the Federalregulatory structure. At this time, inspectors will conduct adrilling inspection of the equipment.

• It is Departmental policy for inspectors to inspect the rigonce on location every 30 days.


Inspections - Platforms

• For production platforms, it is practice for initialinspections to take place during the fabrication ofthe platform at a shipyard.

• Federal inspectors and engineers review the flow• Federal inspectors and engineers review the flowdiagrams and charts to determine if the specificfacility meets regulatory requirements.

• A complete production inspection of the facilityoccurs typically about 30 to 45 days after aproduction platform is installed.


Inspections - Producing Platforms

• After operations begin, the Department conductsadditional announced and unannounced inspections.

• Inspectors typically give the operator a few days notice forannounced inspections.

• Inspectors also fly to platforms or rigs unannounced, and insuch cases, inspectors contact the operator as theysuch cases, inspectors contact the operator as theyapproach the facility.

• These unannounced inspections foster a climate of safeoperations, maintain an inspector presence, and allowregulators to focus on operators with a poor performancerecord.

• They are also conducted after a critical safety feature haspreviously been found defective during previousinspections or by operator reporting.


Inspections - Drilling1. a general safety walk through of the facility looking for general housekeeping hazards related to

slips/trips/falls/railings/open gratings;2. verification of the location of gas detectors/hydrogen sulfide detectors/mud volume detectors;3. verification that the mud trip tank is operational and properly marked (graduated), that appropriate quantities of a mud

weighting material are onboard (barite), and that the drilling mud currently in use has been periodically tested and is of theproper density as indicated in the APD (viewing mud logger’s report);

4. verification that proper well control data relative to the well depth and type of tubulars (drill pipe, casing) in the well isclearly marked and posted on the rig floor and that there are remote BOP and Diverter control panels on the facility;

5. verification that equipment is properly grounded and that drill string safety valves with proper wrenches for the diameter ofdrill pipe or casing currently in the well are located on the drill floor in an open position and within easy access to rigpersonnel;

6. verification that the crown block safety device is installed and operational and that fresh air intakes are properly located onthe rig;the rig;

7. verification that diesel engines have required shut down devices, that breathing air is properly labeled, that engine exhaustis insulated;

8. verification that crane load charts on platform rigs have been recorded, that all equipment has proper catchbasins/drains/curbs/gutters/drip pans, that the facility is properly marked as to location, that the facility is properly lighted;

9. if drilling is being conducted on a production facility, verification that there is an operational Emergency Shut Down deviceon the rig floor;

10. verification of the status/switch position of the BOP pumps that the stand-by pump operates in an automatic fashion, thatthe accumulator bottles are in service;

11. review the BOP tests records;12. checks the Subpart O well control status of contractor and lessee employees;13. checks for certain Potential Incidents of Noncompliance, which allow the inspector to check for general competency related

to drilling operations; and14. inspectors may test, randomly or as a result of a safety concern, an offshore employee’s competency with various safety

devices.


Inspections by MMS GOM Region in 2009

• 561 drilling inspections;

• 3,678 production inspections;

• 268 well workover & completion inspections;

• 6,804 meter inspections;

• 82 abandonment inspections;

• 4,837 pipelines inspections; and

• 3,342 personal safety inspections, on behalf of the U.S.Coast Guard.


Inspections - PINC

• DOI maintains a National Potential Incident ofNoncompliance (PINC) List to help inspectors carry outenforcement actions: it contains a checklist ofrequirements for specific installations or procedures andprescribed enforcement actions consisting of writtenwarnings, shut-in of a component, including wells,equipment, or pipelines, or shut-in of an entire platform.warnings, shut-in of a component, including wells,equipment, or pipelines, or shut-in of an entire platform.

• When noncompliance with the National PINC is detectedand if the violation does not impose an immediate dangerto personnel or equipment, a warning Incident ofNoncompliance (INC) is issued.

• An INC must be corrected within 14 days from the timespecified on the INC, and the operator may not continuethe activity in question until it has corrected the INC.

DOI FundedStudies on Deep

Water

Source: Dept. of Interior, May 27, 2010, “Increased Measures forEnergy Development on the Outer Continental Shelf,”

A_Guide_to_Offshore_Oil_Production

Documents

total domestic oil production

federal ocs production

drillingfor oil

pure oil

recoverable oil

ft of water chevron

mms publicationgom production

water depths1