Offshore Drilling Challenges and Opportunities - … · Offshore Drilling Challenges and Opportunities ... Offshore Defined Drilling Vessels Drilling Challenges Permitting New Technology

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Offshore Drilling Challenges and Opportunities

© 2012 Chevron U.S.A. Inc.

J. Keith CouvillionChevron U.S.A. Inc.

October 18, 2012

Cautionary StatementCAUTIONARY STATEMENTS RELEVANT TO FORWARD-LOOKING INFORMATION FOR THE PURPOSE OF

“SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This presentation of Chevron Corporation contains forward-looking statements relating to Chevron’s operations that are based on management’s current expectations, estimates and projections about the petroleum, chemicals and other energy-related industries. Words such as “anticipates,” “expects,” “intends,” “plans,” “targets,” “forecasts,” “projects,” “believes,” “seeks,” “schedules,” “estimates,” “budgets,” “outlook” and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond the company’s control and are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. The reader should not place undue reliance on these forward-looking statements, which speak only as of the date of this presentation. Unless legally required, Chevron undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Among the important factors that could cause actual results to differ materially from those in the forward-looking statements are: changing crude oil and natural gas prices; changing refining marketing and chemical margins; actions of competitors or regulators; timing of exploration


oil and natural gas prices; changing refining, marketing and chemical margins; actions of competitors or regulators; timing of exploration expenses; timing of crude oil liftings; the competitiveness of alternate-energy sources or product substitutes; technological developments; the results of operations and financial condition of equity affiliates; the inability or failure of the company’s joint-venture partners to fund their share of operations and development activities; the potential failure to achieve expected net production from existing and future crude oil and natural gas development projects; potential delays in the development, construction or start-up of planned projects; the potential disruption or interruption of the company’s net production or manufacturing facilities or delivery/transportation networks due to war, accidents, political events, civil unrest, severe weather or crude oil production quotas that might be imposed by the Organization of Petroleum Exporting Countries; the potential liability for remedial actions or assessments under existing or future environmental regulations and litigation; significant investment or product changes under existing or future environmental statutes, regulations and litigation; the potential liability resulting from other pending or future litigation; the company’s future acquisition or disposition of assets and gains and losses from asset dispositions or impairments; government-mandated sales, divestitures, recapitalizations, industry-specific taxes, changes in fiscal terms or restrictions on scope of company operations; foreign currency movements compared with the U.S. dollar; the effects of changed accounting rules under generally accepted accounting principles promulgated by rule-setting bodies; and the factors set forth under the heading “Risk Factors” on pages 29 through 31 of the company’s 2011 Annual Report on Form 10-K. In addition, such statements could be affected by general domestic and international economic and political conditions. Other unpredictable or unknown factors not discussed in this presentation could also have material adverse effects on forward-looking statements.

Certain terms, such as “unrisked resources,” “unrisked resource base,” “recoverable resources,” and “oil in place,” among others, may be used in this presentation to describe certain aspects of the company’s portfolio and oil and gas properties beyond the proved reserves. For definitions of, and further information regarding, these and other terms, see the “Glossary of Energy and Financial Terms” on pages 58 and 59 of the company’s 2011 Supplement to the Annual Report and available at Chevron.com.

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Outline

Offshore Defined

Drilling Vessels

Drilling Challenges

Permitting

New Technology Opportunities

© 2012 Chevron U.S.A. Inc. 3


The Future

Questions

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Offshore Defined


Government Controlled Offshore Lands United States - Exclusive Economic Zone(3 Billion Acres – 4.1 Million Sq. Miles)


Source: DOI

Gulf of Mexico Seafloor Bathometry --Shelf, Deepwater and Ultra Deepwater

Texas

Louisiana


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Deepwater Gulf of Mexico Bathymetry

Atwater ValleyGreen Canyon

Salt Province

TexasLouisiana

Continental Shelf


Green Canyon

Salt Province

Abyssal Plain

30 Miles

48 km

Walker Ridge

Walker Ridge Area Map


Deepwater Gulf of MexicoTechnically Challenging Environment

Much of the prospective Gulf of Mexico deepwater area is covered by layers of massive salt.


US

Mexico

10000’ (3000 m)10000’ (3000 m)

7,500’ (2300 m)7,500’ (2300 m)

6,000’ (1800 m)6,000’ (1800 m)

Salt Canopy

4

Gulf of Mexico Region


Drilling Vessels


Jack-up Drilling Rig


5

Semi-Submersible Drilling RigMoored/Anchored


Semi-Submersible Drilling Rig -Dynamically Positioned


Drill Ship - Dynamically Positioned

Length - 835 Ft.Breadth - 125 Ft.Max. Drill Depth – 35,000 Ft.Max. Water Depth – 10,000 Ft.


6

Platform Rig


Drilling Challenges


0

5000

Pre 1

950

50-5

4

55-5

9

60-6

4

65-6

9

70-7

4

75-7

9

80-8

4

85-8

9

90-9

4

95-9

9

00-0

4

05-0

9

Futur

e

Water Depth

Water Depth Record (’03) 10,011 ftWater Depth Record (’03) 10,011 ft

Land Rig Platform Rig Jack-up Rig Semi-Submersible Rig Dynamic Positioned Drill Ship

To

da

y

Industry Deep Water Gulf of Mexico Drilling Records


10000

15000

20000

25000

30000

35000

40000

Dep

th (

ft)

Offshore Exploration Drilling TDOffshore Exploration Drilling TD

Total Drilled Depth

Drilling Depth Record (’09) 35,955 ftDrilling Depth Record (’09) 35,955 ft

In the middle of last century the industry started exploring below the worlds oceans. Since then new technology has consistently pushed the industry into deeper water depths and total drilled depths.

Records continue to be broken with current 6th

Generation drill ships able to drill in 12,000 ft water depth and to 40,000 ft total depth.

Current Rig Capability 12,000 ftCurrent Rig Capability 12,000 ft

Current Rig Capability 40,000 ftCurrent Rig Capability 40,000 ft

Water Depth Record (’08) 10,139 ftWater Depth Record (’08) 10,139 ft

18

7

0

5000

Pre 1

950

50-54

55-5

9

60-64

65-69

70-7

4

75-79

80-8

4

85-89

90-94

95-9

9

00-04

05-0

9

Futur

e

tio

ns

of

salt

?T

od

ay

Land Rig Platform Rig Jack-up Rig Semi-Submersible Rig Dynamic Positioned Drill Ship

Industry Deep Water Gulf of Mexico Subsalt Drilling


10000

15000

20000

25000

30000

35000

40000

De

pth

(ft

)

It wasn’t until the early 1980’s that explorers started looking for oil below salt. With the advancement of seismic imaging and drilling technology the industry has been successfully pushing these limits deeper.

Most of the Wilcox reserves in DW GOM are covered by a salt canopy, in some cases up to 20,000 ft thick.

Salt drilled

Will

we

co

nti

nu

e t

o f

ind

re

serv

es

be

low

th

ick

er

sec

t19

In 7,000’ of water and five miles below the seabed

Technology is Pushing the Envelope on Water Depths

Transocean Deepseas


Drilling in depths that only yesterday seemed impossible…

Ultra-deep Water Gulf of MexicoDrilling Technical Challenges

Storms and hurricanes

Loop and eddy currents cause vortex induced vibrations and motions to drill strings

Unpredictable high pressure gas charged stringers and faults near surface

Mobile/flow-able/dissolvable 10 000’ thick salt canopy with

Sea Level

8,000’

Allochthonous Sigsbee

Suprasalt Sediment

Gulf of Mexico

Empire State Building ~500 Meters


10,000 thick salt canopy with unpredictable layers of highly variable trapped sediments

Unpredictable base of salt –rapid pressure differentials

“Thief zones” of significantly lower pressure which cause lost circulation – fluid loss

Ultra-deep reservoir with high temperatures, high pressures and low natural flow-ability

40,000’

16,000’

24,000’

32,000’

Allochthonous Sigsbee Salt Canopy

Cretaceous

Upper Tertiary Sediments

Autochthonous Salt

Basement

Lower Tertiary

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Permitting


Offshore Event(BP’s Macondo Prospect)

An explosion and fire occurred on the Deepwater Horizon on April 20, 2010 in the US Gulf of Mexico, about 52 miles southeast of Venice, LA. The Horizon was engaged in drilling activity on behalf of BP at Mississippi Canyon Block 252. Eleven people were lost. The Deepwater Horizon sank on April 22, 2010 in nearly 5,000 ft of water.


y ,

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Transocean HorizonResponse Fleet

Subsea BOP

LMRP –Lower Marine

Riser Package

Control PODAnnular


Ram Bodies

60 feet tall620,000 lbs

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Ram BOPs

Blind Shear Ramshears smaller tubulars and then seals wellbore (or seals wellbore with no pipe)

Insert Photo

Casing Shear Ram


Pipe Ramseals annulus around various drill pipe sizes

Casing Shear Ramshears large tubulars – does not sealInsert

Photo

Insert Photo

Management Committee May 2010 2525

BOP Emergency Systems

11

22 44

1. Emergency Disconnect

2. Deadman

3. Autoshear

4 Remotely Operated


Primary Methods to Secure the Well:

• Emergency Disconnect System (EDS)

• Autoshear/Deadman Backup

• ROV Tertiary Intervention

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4. Remotely Operated Vehicle (ROV)

New Regulations – Worst Case Discharge (WCD) Casing Design

SW

Gas

Pre-Macondo Post-Macondo


Oil G

radien

t

Mu

d

s

27

10

GOM Deepwater Well ComplexityA Bird’s Eye View


Gulf of Mexico DeepwaterCasing Program:

36” – 7 3/4”

Conventional Deepwater Casing Program:

30” – 7”

WCD Casing Design - Challenges

OS

W

Dynamic Drilling Casing Loads

• Thermal Annular Pressure Build-Up from WCD

• Deep Collapse from WCD

• Thermal induced upward forces on hanger from WCD

• Approach load limits of most rigs due to heavier wall pipe

Extreme Cement Hydraulics


Oil G

radien

t

Extreme Cement Hydraulics

• Tight annulus for circulation

• Centralization near impossible

• Approach limit of software

Casing Points

• WCD flow - causing deep collapse and formation broaching

Hole size

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Well Containment

Marine Well Containment Company

10 Members (Chevron, ExxonMobil, Shell, ConocoPhillips, etc…)

Rapid response system available to capture and contain oil in the event of a potential underwater well blowout

The system will be flexible and able to


begin mobilization within 24 hours and can be used on a wide range of well designs and equipment, oil and natural gas flow rates and weather conditions.

The interim system (15,000 psig capping stack) is engineered to be used in deepwater depths up to 10,000’ and have initial capacity to contain 60,000 barrels & 120 MMCFG per day with potential for expansion.

Helix Well Containment Group22 Members

Operate in up to 8,000 feet of water

10,000 & 15,000 psig capping stacks

Intervention equipment to cap and contain a well

Capture and process 55,000 BOPD & 95 MMCFPD

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11

Well Construction Impacts

Extended time required for internal well planning

Was ~21-27 weeks

Now ~27-36 weeks = New Norm


Extended time required to receive permit approvals

Was ~14-21 days

Now ~30-45 days or more = New Norm

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Optimistic PermittingTimeline Estimates

1 2 3 4 5 6 7 8 9 10 11 12

Pre-incident Plan Approval/Permit Approval

DevelopedApplication

• Usually CE or EA-FONSI• State consistency review

duration <30 daysMMS EPApproval

APD

App 4.5 Months

Resume Suspended Well

Develop EP Amendment

• Requires EP Amendment• State scrutiny increased:Less certainty of approval timelineMMS & State

Review & APD


APDApp 6 Months

New DeepwaterEP/APD

Develop APPPackage

• Requires new NEPA Analysis (EA or similar)

• No site specific EIS• Increased state – 3rd

Party scrutinyMMS Review, State Consistency

APDR&A 10 Months

“Exempt” APD

Apply • Key uncertainties− Submittal requirements− Oil spill requirementsApprove 3 Months

Shallow water APD

Apply • Assumes clear guidance and limited recycle

• Assumes BOEM/BSEE OCsufficient to process

Appr

ove

1.5 Months

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Permitting Challenges

Exploration Plans

Development Operations Coordination Documents● Deepwater Operating Plans

● Conservation Information D t


Documents

Development and Production Plans

Application for Permit to Drill

Application for Permit to Modify

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Permitting Challenges

Notices to Lessees

New Rules

New Legislation

Higher Level of Scrutiny


Oil Pollution Act

National Environmental Policy Act

Coastal Zone Management Act

Endangered Species Act

Marine Mammal Protection Act

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Identify technologies that can be developed and applied which will have a reasonable opportunity to:

reduce the ranges of key uncertainties

enhance safe operations and

Technology Enhancement Objectives


enhance safe operations and environmental protection

increase rig efficiency

lower non-productive rig time

The goal of implementing new technologies is to ensure the successful execution of offshore well operation

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New Deep Water Drillships

Most advanced drillingcapabilities

Dynamically positioned,with double-hull

Two drilling systemsin a single derrick


Stronger and more efficienttop drive so wells can bedrilled deeper

Other unique features willtarget drilling wells up to40,000 feet of total depth

Variable deck load of over 20,000 metric tons; capableof drilling in water depths of up to 12,000 feet

Transocean’s Discoverer Clear Leader

Effective Drilling and Completions Optimizing Performance

Drilling and Completions Technology Today

Integrated technology solution

Seismic imaging

Reservoir modeling


Reservoir modeling

Rock mechanics

Drilling operations

Real-time monitoring

(Live video camera and feed from rig)

Drilling and Completion Technology Enhancement (near term)

• Risers (esp. High Pressure and High Temperature)

• Managed pressure drilling

• Dual gradient drilling


• Sonic Bit Monitoring

• High strength light weight cements

• Single trip multi-zone frac packs completions

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Dual Gradient Drilling

Dual Gradient Drilling (DGD) is a step-change deepwater drilling technology that should enhance safety and environmental performance, as well as drilling performance.


Awareness of these potential benefits led to the technology’s development in the late 1990’s by a consortium of industry operators, drilling contractors and service companies.

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Definitions

Managed Pressure Drilling (MPD) is an adaptive drilling process used to precisely control the annular pressure profile throughout the wellbore. The objectives are to ascertain the downhole pressure environment limits and to manage the annular hydraulic pressure profile accordingly. It is the intention of MPD to avoid continuous influx of formation fluids to the surface. Any influx incidental to the operation will be safely contained using an appropriate process.

D l G di t D illi (DGD) i f th 4 i ti f MPD It i th


Dual Gradient Drilling (DGD) is one of the 4 variations of MPD. It is the creation of multiple pressure gradients within select sections of the annulus to manage the annular pressure profile. Methods include use of pumps, fluids of varying densities, or combination of these.

SubSea MudLift Drilling is the method of DGD developed by the SubSea MudLift Drilling Joint Industry Project from 1996 until 2001. The project resulted in Industry’s first successful DGD well. The core technology is the MudLift Pump (MLP). Now made by GE Oil and Gas, this pump has been renamed the MaxLift 1800 Pump (still MLP).

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Dual Gradient

Heavier Mud w/ Seawater

Density Above Mudline

SingleMud

Conventional

Dual Gradient Drilling - Comparison

With DGD, we Literally replace the mud in the drilling riser with a seawater-density fluid and use a denser mud below the mudline.


Mudline

Same Bottom Hole

Pressure

Mud Weight

42

15

DGD - Production Benefits

36 3626 20

22

SWF Zone

Fewer strings of casing can lead to larger casing at TD. Higher rate, designer completions, for example, horizontal or multi-lateral wells, may then become


13-3/8

(Conventional)5-1/2" Tubing

(SubSea MudLift)

9-5/8

7-5/8

7" Tubing

5-1/2

11-3/4

9-5/8

16

13-3/8

(Dual Gradient Drilling)

, ypossible.

This can lead to higher rate wells and higher recovery factors in deepwater reservoirs.

Conventional (Single Gradient) vs. Dual-Gradient Drilling

• Formation Pressures (FP) and Formation Strengths (FS) are functions of the weight of the water and sediments above them.

• In deepwater, the lower density seawater can dominate FP and FS.

Surface


• Conventional drilling uses a single density fluid to manage FP and FS.

• Dual Gradient Drilling uses two fluids: seawater density above the seabed, and a higher density fluid below the seabed.

• This is more in harmony with natural pressure profiles.

SubSea MudLift Drilling

A sea-water driven positive displacement pump is located above the BOP/LMRP. It withdraws the mud from the well and pumps it back to the surface through a line attached to the drilling

Choke Line

Kill Line

Mud Return Line

Seawater Power Line

Drill Pipe

Drilling Riser Cross-Section

Subsea Rotating

Pacific Santa Ana


attached to the drilling riser.

The riser is filled with a seawater-density fluid.

A Subsea Rotating Device (SRD) sits above the MaxLift Pump which can be used to rapidly change the pressure profile in the well.

Rotating Device (SRD)

Solids Processing Unit

(SPU)

MaxLift Pump (MLP)

Drill String Valve (DSV)

45

16

The Heart of the System: MaxLift 1800 Pump (MLP) Positive Displacement Pump installed above

BOP

Pumps drilling mud from sea floor up mud return line to rig for processing

Driven hydraulically by conventional mud pumps converted for seawater installed on the rig and available for maintenance

Powered by seawater which is returned to

TriplexPump


(Specifications)80 gallon chambers1800 gpm max rate10,000’ WD ratingUp to 18.5 ppg mudSize - 18’ x 18’ x 30’Weight - 450,000 lbsMax Cutting Size - 1.5 in

ysea

Two interchangeable mirror image Triplex modules

Pump can be broken into ~ 50 MT lifts for initial lift onto rig

Modules

HPU’s

Valve Manifold

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Dual Gradient Advantages

Dual Gradient Drilling is a step-change deepwater drilling technology that has been under development for over 15 years.

DGD has the ability to enhance drilling safety, efficiency and environmental performance.


DGD can lead to improved deepwater production and reservoir recovery.

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Well Construction Sonic Bit Monitoring (Accusound & Inficomm)

Advance preparation for operational changes that mitigate non-productive time (NPT) encountered above, within and below the salt canopy

Capture and transmit high frequency acoustic signatures from the drill bit to the surface in real-time


g

Sonic signature measures bit/bearing wear, actual weight on bit, and formation changes developed by Accusound

Transmission to surface using a new electromagnetic pulse (EMP) technology commercially developed by Inficomm

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Sonic Bit Monitoring

Gulf of Mexico

Sigsbee Salt

Post-Salt Sediment

High Pressure Gas Stringer


Sigsbee Salt Canopy

Ultra Deep Reservoir

Pre-Salt Sediment

Trapped Sediments

Thief Zone (loss circulation)

Unpredictable Top and Base

Non-Productive Time (NPT)

Sonic Bit Monitoring

Gulf of Mexico

Sigsbee Salt

Post-Salt Sediment

High Pressure Gas Stringer

Accusound

Inficomm


Sigsbee Salt Canopy

Ultra Deep Reservoir

Pre-Salt Sediment

Trapped Sediments

Thief Zone (loss circulation)

Unpredictable Top and Base

Well Construction High Strength, Light Weight Cements

Geo-polymer and graphite reinforced light weight cements with very high strengths and very low permeability

New cements could:


New cements could:

• minimize the effects of lost circulation zones

• drilling mud contamination

• problems associated with placement techniques

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High Strength, Light Weight Cements


Conventional Cement Job


Restricted Clearances


Drilling Mud Contamination

Conventional Cement Job

Loss Circulation


Designer Cements


g

•Geo-polymer

•Graphite

•Other non-Portland

Polymerizes with temperature or time

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The Future


Advances in technology have allowed industry to drill and produce offshore resources safely.

Summary


Many technical challenges remain to be solved, but the industry is focused on finding solutions.

“The Offshore Drilling New Normal”

Rebuilding government confidence

Assurance future incidents will be minimized


Greater worker and environmental safety

Enhanced well containment and spill response

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Questions ?????
