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LLOG-operated Buckskin well to come online in US Gulf of Mexico by mid-June: executive

Highlights

Remote field is LLOG's first ultra-deep project

Two initial wells to be brought online

Later, Leon remote well will be drilled

New Orleans — LLOG Exploration, one of the largest private US Gulf of Mexico operators, expects the Buckskin oil development it operates to come on stream in June, making the company an ultra-deepwater producer, a top executive said Wednesday.

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Buckskin, in the remote Keathley Canyon area of the Gulf not far from Mexican territorial waters, will bring on two wells and tie them into the Anadarko Petroleum-owned Lucius production hub six miles away, Eric Zimmerman, LLOG's vice president of geology, told S&P Global Platts following a panel discussion at the annual Louisiana Energy Conference.

"We'll start with two wells," Zimmerman said. "Some of that will be capacity-driven, as the opportunity makes itself available" as room in the production spar opens up. At that point, a decision will be made on the next step, he added.

Zimmerman declined to say how much the two wells will produce even at peak, saying internal estimates were confidential. Lucius has a capacity of 80,000 b/d of oil and 450,000 Mcf/d of natural gas.

FIELD CONTAINS NEARLY 5 BILLION BARRELS OF OIL

LLOG has estimated that Buckskin, located in about 6,900 feet of water and drilled to a depth of 29,400 feet, contains nearly 5 billion barrels of oil in place.

Zimmerman said LLOG sees "a tremendous resource asset," in Buckskin, but added that "there's only so much capacity on Lucius available."

Moreover, the performance of the wells will also determine future activity at the field.

"There is so much variability based on how many wells we drill," he said. "I don't know that we have a peak production target necessarily."

Buckskin is an example of a new model that US Gulf producers are pursuing at a time of lower and fluctuating oil prices - tying discoveries into nearby existing infrastructure fairly quickly and cheaply.

Buckskin, first operated by Repsol and later by Chevron, was announced in 2009 as a Lower Tertiary discovery, a play found at deep water depths and even deeper subsea depths (29,000 feet) in remote US Gulf locations. Chevron left the project in 2015 during the industry downturn as it pursued shorter-term projects onshore.

Repsol has remained as a partner in Buckskin, along with several smaller companies.

LLOG'S FIRST OPERATED ULTRA-DEEPWATER FIELD

The field represents LLOG's first foray into the US Gulf's ultra-deepwater. Historically, most of LLOG's recent production has come from Miocene plays closer to the Louisiana coast.

As US WTI oil prices recovered last year from an average of just under $50/b in 2015-2017, oil companies found US Gulf returns from tied-back wells were in many cases competitive with shale because existing infrastructure vastly lowered the cost of supply.

What had previously taken long lead times and billions of dollars to design and build a separate facility for each deepwater discovery became a much simpler and relatively easier process of hooking up wells to the subsea production facility.

Bringing on just two initial Buckskin wells will provide immediate revenues and a path to using an existing infrastructure to develop discoveries in stages, Zimmerman said.

"If we can have limited initial investment to first production that allows us turn cash flows and [eventually have] a broader development, we see a lot of logic to that as well," he said.

Next well up is Leon, an appraisal well also being drilled with Repsol. Two wells have already been drilled at that field, which Repsol announced as a discovery in 2014. Zimmerman said he does not know if Leon, also sited in Keathley Canyon, will be also be tied back to Lucius.

"We'll evaluate different ideas of how we might do a development" for Leon, he said. "But first you have to drill the well and see the results."

"The reality is, each project ends up being its own creature," he added.

-- Starr Spencer, starr.spencer@spglobal.com

-- Edited by Jennifer Pedrick, newsdesk@spglobal.com

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