Fanning the (E&P) flames

All eyes may be on Guyana, but there’s plenty of other countries worthy of attention in South America. Audrey Leon surveys the current spike in exploration activity in the region.

Image from Anadarko Petroleum’s Q4 Operations Report.

While the downturn in oil prices has cooled many companies offshore exploration aspirations, more than a few majors and small firms are taking the plunge in South America.

After ExxonMobil’s massive 2015 Liza find offshore Guyana, there are many who are interested in that upcoming oil-bearing country, as well as others, including neighboring Suriname. South of Brazil, there is Uruguay, where Total drilled the then-world’s deepest water well, Raya, in 2016.

Traditional oil-bearing countries such as Colombia are also seeing renewed exploration investment from both international and national oil firms.

Colombia

Colombia is South America’s third largest oil producer after Venezuela and Brazil, according to the US Energy Information Administration. At the end of 2016, the country’s state-owned oil company Ecopetrol announced that it intended to ramp up exploration in 2017, both off- and onshore, to curb its falling production. In November, Ecopetrol’s Exploration Vice President Max Torres noted that of the 15 exploration wells the Colombian operator planned to drill in 2017, five would be offshore (OE: January 2017).

US Independent Anadarko Petroleum is drilling offshore Colombia. In February, during its Q4 earnings call, the Houston-based oil company confirmed that the Purple Angel exploration well spudded in December and, as OE went to press, operations were ongoing, using Fred. Olsen’s Bolette Dolphin drillship.

“We are testing effectively the Kronos discovery in this Purple Angel location right now,” said Ernest A. Leyendecker, executive vice president of International and Deepwater Exploration, during the call. “When we’re done, we’re going to go up north and test another analogous structure to the feature we’re on right now, called Gorgon. So, really a lot more to come in the context of the Grand Fuerte area gas frontier in the future.”

Anadarko also said that it is evaluating multiple large-scale opportunities identified from the Esmeralda 3D seismic survey, which covers about 30,000sq km and potential drilling locations for possible operations in 2018 are being evaluated.

“We’re obviously pretty encouraged about what we’re seeing,” Leyendecker added, who described the acreage as “pretty deepwater out there in the Grand Col area.”

Anadarko has a 50-50 partnership with Ecopetrol on Purple Angel. Anadarko holds 100% working interest in the Gran Col area (Blocks Col 1, Col 2, Col 6 and Col 7), where the Esmeralda survey was conducted.

In early January, Spain’s Repsol contracted Maersk Drilling’s Maersk Developer semisubmersible drilling rig to drill the Siluro-1 exploration well in block RC-11, offshore western Colombia. Drilling is planned for Q2 2017 and will take about 42 days. The estimated contract value is US$12 million, including mobilization and demobilization, Maersk Drilling says.

According to a 2014 presentation by Repsol, Siluro is a lower Micocene Carbonate prospect, with 1.6 Tcf gas resources, in 90m water depth.

The Bolette Dolphin drillship offshore Colombia. Photo from Anadarko Petroleum.

Guyana

Arguably, all eyes will be on Guyana in 2017, as US supermajor ExxonMobil aims to fast-track its recent major finds in the country. According to Exxon’s Q4 earnings call late January, the firm expects final investment decision on Liza by year’s end, with start-up possible by 2020.

In mid-2015, ExxonMobil confirmed the huge Liza discovery, in the Stabroek block, 120mi offshore Guyana. Ever since, the supermajor and its partners have been evaluating and increasing potential recoverable resource estimates at the block, which are thought to hover well over 1 billion boe.

Source: Wood Mackenzie.

The Stabroek block comprises 6.6 million acres (26,800sq km). Exxon subsidiary Esso Exploration and Production Guyana operates the block with 45% interest. Its partners include Hess (30%) and CNOOC Nexen Petroleum Guyana (25%).

In January 2017, ExxonMobil then made the ultra-deepwater Payara-1 well, inside the Starbroek block, which was drilled using the Stena Carron drillship to 18,080ft (5512m) in 6660ft (2030m) water depth.

Payara-1 encountered more than 95ft (29m) of high-quality, oil-bearing sandstone in two upper Cretaceous reservoirs of Maastrichtian-Aptian age – like those found at the Liza discovery, says analysts Wood Mackenzie. Exxon said a production test is planned to further evaluate the discovery and appraisal drilling is planned for later this year to determine the full resource potential. The Payara field is about 10mi (16km) northwest of the Liza discovery.

During its Q4 earnings call, Exxon said that two sidetracks have been drilled at Payara. “We moved very quickly to drill additional sidetracks in order to better define the reservoir,” said Jeff Woodbury, vice president of investor relations and secretary, ExxonMobil. The company said a well test is underway, which would help the company better understand the full resource potential and development options.

In addition to Payara, Exxon also said that appraisal drilling at Liza-3 identified an additional high-quality, deeper reservoir directly below the Liza field, which is estimated to contain between 100-150 MMboe. This additional resource is currently being evaluated for development in conjunction with the Liza discovery.

The Stena Carron drillship will move next to the Snoek exploration prospect, about 6mi (10km) south of the Liza-1 discovery well.

In December 2016, Exxon awarded contracts to SBM Offshore for a 100,000 b/d floating production, storage and offloading (FPSO) vessel, a key step in moving the Liza field toward first production. SBM Offshore will perform front-end engineering and design for the FPSO, and, subject to a final investment decision on the project in 2017, will construct, install and operate the vessel.

At the time, Exxon also said it had applied for a production license and submitted its initial development plan for the Liza field to the Guyana Ministry of Natural Resources. The plan includes development drilling, operation of the FPSO, and subsea, umbilical, riser and flowline systems.

Wood Mackenzie said in early February that there are huge expectations for Guyana to become a serious upstream player by the next decade, despite the challenges associated with developing an oil industry from the ground up. “It’s not often that a country goes from zero to 60 so fast like this,” Matt Blomerth, Wood Mackenzie head of Latin America upstream research, told the New York Times in January.

“After [Exxon] drilled a dry hole at the Skipjack prospect in September, Payara and Liza-3 reconfirmed the high potential of the Cretaceous play in Guyana’s deepwaters,” Wood Mackenzie said in a statement in January. “Payara’s proximity to Liza enables economies of scale for the area’s development. The Guyanese government’s approval of a $500 million oil and gas service hub on Crab Island will give added impetus.”

Of course, there are challenges ahead, including a lack of infrastructure. Wood Mackenzie estimates wellhead gas volumes of 2.1-2.5 Tcf between Liza and Payara. “With no offshore infrastructure or nearby gas market, the partners will face high costs to dispose whatever gas that cannot be reinjected or flared,” the consultants said.

However, Wood Mackenzie’s analysis of Guyana remains optimistic, saying in January that Guyana’s production could reach 350,000 b/d by 2023.

To address some of the country’s growing needs, Guyana’s Ministry of Natural Resources announced in January that it plans to have a new petroleum directorate established and functioning during Q1 this year.

The ministry says the new directorate will follow international models that separate policy development from regulation monitoring. A $965,000 (GY$200.7 million) budget was allocated in the 2017 for petroleum management.

Elsewhere in Guyana, UK Independent Tullow announced in February that it plans to acquire 3D seismic data over the offshore Orinduik license, awarded in 2016, and the Kanuku license. Both are up-dip of the Liza discovery. The two programs are expected to cover up to 6000sq km and will enable evaluation of attractive leads mapped on existing 2D seismic data.

Source: Wood Mackenzie.

Suriname

Tullow’s Exploration Director Angus McCoss referred to the Guyana-Suriname basin as the industry’s “hotspot at the moment,” in the company’s Q4 earnings call early February, and its Araku prospect there, a “game-changer.” The company is calling its test of the Araku prospect, in offshore Block 54, its “main drilling event” this year.

Tullow plans to drill the high impact Araku prospect in 2H 2017. McCoss said that the reservoir Tullow is targeting is a Maastrichtian, a younger Cretaceous turbidite sand, and a similar-aged rock to what Payara is targeting off Guyana.

The block has a large structural trap with resource potential of 500 MMbo, and has been significantly de-risked by a 4000sq km 3D seismic survey carried out in 2015, says Tullow. A rig is currently being sourced for the well, which is expected to cost $14 million net to Tullow to drill. The Block 54 contract area is 8824sq km and is about 200km offshore in the Suriname-Guyana Basin.

“It’s a giant prospect over a 300sq km closure,” McCoss said. “It’s a four-way structural closure. This is a structural closure, it’s a dome-shaped structure, which is a good, safe, lower risk type of prospect to go for.

“[There] is a lot of follow-up potential in this area,” he continued. “It’s not just this play. There are other plays there are stratigraphic plays, carbonate plays. A great set of opportunities. We’re hopeful for Araku. [It] is our best prospect in the portfolio. But, should it not [be], there are a lot of alternative play types to follow-up on in this rich acreage.”

For Tullow and its partners Statoil and Noble Energy, the well is not just about opening a new play area, but also an exercise in keeping well costs down.

“The $14 million net to Tullow relates to about $40-45 million gross well cost,” McCoss explained. “Now, if you compare that to previous years that would have cost about $100 million to drill. So, you can see [there is] quite a very significant offshore cost deflation in the sector that we’re taking advantage of.”

The Maersk Venturer drillship, which was used by Total for its Raya-1 exploration well offshore Uruguay. Photo from Maersk Drilling.

Other players with acreage in Suriname include US independent Hess, which is partnering with Exxon for Liza offshore neighboring Guyana. In May 2016, Hess picked up a one-third stake in Block 42 offshore Suriname from US-based explorer Kosmos Energy.

In Kosmos’ Q3 earnings call, the firm said that it began a new 3D seismic survey of Block 42 in Suriname near the Peruvian-Guyana Suriname Basin, adjacent to the Liza discovery, in October 2016. Results are expected in early 2017. Kosmos’ Chairman and CEO Andy Inglis said that the firm hopes to drill toward the end of 2017, into 2018, into Turonian-aged source rock. Inglis says there is a drill-ready prospect in Block 45, different from the trend seen in Liza offshore Guyana.

US-based Apache has interest in Blocks 53 and 58 offshore Suriname. In the company’s Q3 earnings call, CEO John J. Christmann said the firm is very excited about its prospects in Suriname.

Timothy J. Sullivan, executive vice president, operations support, said during the call that Apache completed a 3D seismic shoot on Block 58 in September 2016, and expects to have a fully processed data set by Q3 2017. In Block 53, Apache will drill an exploration well in Q1 2017.

“While this is an attractive and sizable exploration prospect (in Block 53), very few wells have been drilled to this depth offshore Suriname, and as such, carries a significant amount of risk,” Sullivan said during the call in November. “The dry hole cost to Apache for this well is estimated at less than $40 million.”

Peru

In February, Regulator PeruPetro approved UK-based Baron Oil and partner Uruguay-based Union Oil and Gas Group’s (UOGG) plan to drill the Cuy-Z34-13-1X exploration well offshore of northwest Peru in Block Z-34, some 15km from an existing producing field in the offshore/onshore Talara Basin.

The well will be drilled in 5764ft of water to a total depth of 12,553ft. Block Z-34 is in an undrilled deepwater basin and covers a 3713sq km area. Baron’s internal estimates of gross unrisked best estimate (P50) prospective resources for the Cuy prospect is 413 MMbbl recoverable.

UOGG, which holds 80% interest, is continuing farm-out efforts for a partner to share the drilling costs. Baron hold the remaining 20%. The well, according to Baron, cannot be drilled until another partner comes on board, in addition to contracting a semisubmersible drilling unit, and all permits in place.

Uruguay

Source: Wood Mackenzie.

Uruguay has been in the spotlight because French oil major Total drilled the then-deepest water well in the world, Raya-1, there in 2016, using Maersk’s ultra-deepwater Maersk Venturer drillship. However, while the Raya reservoir was believed to be good, not much more information has been released about the prospect since.

“Uruguay has been successful in making attractive offshore areas open for exploration activities,” says Adrian Lara, senior upstream analyst, GlobalData. “So far key major companies have participated and some, such as Shell, BG, Tullow Oil, ExxonMobil and Inpex, remain in the country doing exploratory activity. Round 3 is supposed to be announced soon and is aimed at continuing collecting exploratory information on the offshore areas.”

In January 2017, Tullow started a 2500sq km 3D seismic program offshore Uruguay to capture data over high-quality leads identified in Block 15 in the Pelotas Basin.