Review of the Kilauea Development Strategy

Abstract

ABSTRACT The strategy employed by Texaco to develop the Green Canyon Block 6 field was new to its Gulf of Mexico operations. The platform, located in 622 feet of water, is Texaco's deepest Gulf of Mexico structure. The field is small by deep water standards, requiring only five development wells to recover the proven reserves. The economics associated with these reserves and the deep water site necessitated minimal investment costs and a quick on-line date to assure the development's profitability. This paper discusses the fast-track turnkey competitive bidding strategy used to design fabricate, and install the 16 slot deep water platform. This strategy and the excellent performance provided by our various contractors resulted in a minimal cost facility which was delivered several months ahead of schedule. Without this approach, this field might not have been developed. BACKGROUND Texaco acquired the Green Canyon Block 6 lease in April 1984 for a 100% bonus of $7.0 million. The lease is located approximately 123 miles south-southwest of Morgan City, Louisiana (see Fig. 1) in water ranging from 400 feet to 880 feet in depth. The Block 6 reservoir play was named after the Hawaiian volcano "Kilauea" by Texaco's geologists. The Project Team used the Kilauea name for the platform as well. A discovery well drilled in March 1985 found several natural gas sands. Two subsequent wells drilled later that year delineated and confirmed the presence of commercial gas reserves and discovered various oil sands. In October 1985 engineering commenced for a platform in 690 feet of water capable of producing 60 million cubic feet per day of gas and 10,000 barrels per day of oil. The proposed schedule (see Fig. 2) had 10 months of engineering followed by two years to bid, fabricate, install, drill and complete the first development well. First production was projected for November 1988. Project On Hold In July 1986 the project was put on hold. The major factor led management to this decision was that the industry wide gas bubble was not evaporating and the projected gas prices for first production in late 1988 were very low. The development was very gas price sensitive because the potential oil reserves had been downgraded. The project remained on hold until the late spring of 1987. At that time, a second potential gas play was identified in the northern part of Block 6. These additiona1 potentia1 reserves plus improving price projections for gas in 1989 once again made the development viable. Additionally, the Block 6 lease was due to expire in April 1989. If Texaco was going to develop this lease, it was time to begin. Selling The "New" Kilauea The reactivated Kilauea project had been significantly modified. Downgraded oil reserve potential caused the oil processing facility to be sized for 2,500 barrels per day instead of 10,000 barrels per day. Also, the northern reservoir play required a change in the platform location of 2,850 feet. This revised the platform water depth from 690 feet to 622 feet.