Sunday, June 27, 2010

Estimated Oil Flow Rates From the BP Mississippi Canyon Block 252 “Macondo” Well


Estimates of flow rates for the BP Deepwater Horizon “Macondo” well now range from 1,000-100,000 barrels of oil per day (bopd). Initial estimates were 1,000 bopd. These increased to 3,000 bopd and then to 5,000 bopd. Now the U.S. Geological Survey believes the well is flowing 20,000-40,000 bopd but other experts believe that flow rates may be as high as 60,000 bopd. Some have even suggested rates as high as 100,000 bopd, and others as high as 250,000 bopd. The purpose of this post is to provide a calibration framework for probable flow rates.


More than 8,700 wells drilled in the Gulf of Mexico since 1996 were evaluated using publicly-available production data from the Minerals Management Service (MMS). Wells in the deepwater Gulf of Mexico dominate the highest flow rates in this data set. Approximately 4,000 wells have been drilled in water depths more than 1000 ft, and more than 700 in more than 5,000 ft of water during the past 20 years. The Macondo well was drilled in 5,067 ft of water to a total depth of 18,360 ft below sea level.


Historical Context for High Flow Rates in the Gulf of Mexico


The highest flow rate for a single well in the Gulf of Mexico is 46,467 bopd (Figure 1) based on the daily average of the peak month of production. The mean of the 50 wells with the highest oil flow rates is 27,753 bopd. A probability plot (Figure 2) of these wells indicates that the most likely case is about 27,000 bopd (P50). There is a 10% probability (P10) that a well will produce 37,000 bopd, and a 90% probability (P90) that it will produce 20,000 bopd.


There is no historical precedent for a single well producing more than 100,000 bopd. Among historical blowouts, the highest flow rates known are approximately 100,000 bopd at the Spindletop Field in Texas in 1901, the Midway-Sunset Field in California in 1910, the Long Beach Field in California in 1910, and the Lake Maracaibo Field in 1922 (http://en.wikipedia.org/wiki/Blowout_%28well_drilling%29). These were all open-hole completions drilled without casing or drilling fluid so they represent maximum unconstrained flow rates.


The BP “Worst Case Scenario” Document


An internal BP “worst-case scenario” document released June 20 has been mis-interpreted by some to indicate that the company believes that flow rates as high as 100,000 bopd are possible (http://globalwarming.house.gov/mediacenter/pressreleases_2008?id=0272#main_content). The document states that the probable range is 5,000-40,000 bopd (http://globalwarming.house.gov/files/WEB/flowrateBP.pdf). It further states that the maximum theoretical rate is 60,000 bopd. It is important to note that these values represent unconstrained, open-flow rates that might be expected after removing the BOP from the well, and are estimated to be at least 10,000 bopd more than present flow. The 100,000 bopd rate assumes that flow is occurring within the production and casing and around the annulus. It again is an unconstrained rate.



The Most Likely Case


We know that the well is producing at least 25,000 bopd because that much has been collected in a single day. It is impossible to know the flow rate until the well is brought under control and rates and pressures can be measured. It is possible that the welll is flowing at a rate 25% higher rate than any well drilled to date (60,000 bopd) in the Gulf of Mexico, but it is not likely. It is less likely that it is flowing at 110% of the rate of the highest rate well so far (100,000 bopd). It is reasonable that it may be among the highest rate wells, and was initially flowing at 40,000-50,000 bopd.



Saturday, June 12, 2010

Impacts of President Obama’s Order Halting Work on 33 Exploratory Wells in the Deepwater Gulf of Mexico

The Presidential Order does not affect the 4,515 shallow-water wells, and it does not affect 591 producing deepwater Gulf wells.

Roughly 33% of nation’s domestically produced oil comes from the Gulf of Mexico, and 10% of the nation’s natural gas.

80% of the Gulf’s oil, and 45% of its natural gas comes from operations in more than 1000 feet of water – the deepwater (2009 data).

Suspension of operations means roughly 33 floating drilling rigs – typically leased for hundreds of thousands of dollars per day – will be idled for six months or longer.

$250,000 to $500,000 per day, per rig – results in roughly $8,250,000 to $16,500,000 per day in costs for idle rigs;
Secondary impacts include:
• Supply boats – 2 boats per rig with day rates of $15,000/day per boat - $30,000/day for 33 rigs – nearly $1 million/day
• Impacts to other supplies and related support services (i.e., welders, divers, caterers, transportation, etc.)

Jobs –

Each drilling platform averages 90 to 140 employees at any one time (2 shifts per day), and 180 to 280 for 2 2-week shifts
Each E&P job supports 4 other positions

Therefore, 800 to 1400 jobs per idle rig platform are at risk
Wages for those jobs average $1,804/weekly; potential for lost wages is huge, over $5 to $10 million for 1 month – per platform.
Wages lost could be over $165 to $330 million/month for all 33 platforms

Secondary impacts: Many offshore workers live in Louisiana. The state is going to see a decrease in income taxes and sales taxes that would normally be paid by those employees. (The state does not collect a sales tax on oilfield supplies and equipment used offshore.)

Companies Impacted:

Oil Companies Impacted

Shell has seven (7) exploratory wells that will be impacted

Others include:
Chevron (4)
Anadarko (3)
Marathon (2)
Noble Energy (2)
Eni US Operating Co. (2)
ATP Oil & Gas (2)
Statoil (2)
ExxonMobil (1)
Petrobras America (1)
BHP (1)
BP (1)
Kerr McGee (1)
Murphy (1)
LLOG (1)
Newfield (1)
Hess (1)

The 33 gulf wells where operations are suspended were the ones inspected immediately after the Deepwater Horizon blowout (per Interior Secretary Ken Salazar); in those inspections, “only minor problems were found on a couple of rigs”. Salazar believes “additional safety measures can be taken including dealing with cementing and casing of wells and significant enhancements and redundancies of blowout prevention mechanisms. Although these rigs passed the inspections, we will look at standards that are in place.”

Longer term impacts include

Idle drilling rigs in the Gulf could mean that they will be contracted overseas for work in other locations, and if/when the halt is lifted, rigs will not be available for completing the work in the Gulf.

Loss of tolls on LA Highway 1 resulting from loss of traffic related to deepwater operations; tolls go directly to retiring the bond debt for construction of LA Highway 1 improvements, and if those tolls are lost, the state of Louisiana – as the other responsible party on the bonds - will have to pay to retire that debt, meaning loss of funding for some other programs in the state’s budget.

A 6-month halt in new drilling would defer 80,000 barrels/day, or 4% of 2011 deepwater Gulf of Mexico production. (Wood MacKenzie)

Higher drilling costs might jeopardize exploration in frontier areas. More immediately, estimates are that seven current discoveries could be rendered sub-economic, putting U.S. $7.6 billion in future government revenues at risk. Proposals to increase the cap on oil companies’ liability for oil spill damages to U.S. $10 billion could exclude U.S. independents from offshore Gulf of Mexico activities. (Wood MacKenzie)

Since these wells are not yet producing, there is no decrease in the available oil supply. However, it could lead to a decrease in the availability of domestic oil, and it is hard to tell how commodity speculators are going to respond over the next six months; there is the possibility for driving oil prices to levels well over $100 per barrel.

Prepared May 28, 2010, based on most recent data available; will be updated as needed.