During the 1970s, the excitement of technological breakthroughs was focused upon the North Sea, a region characterized by rough seas yet water depths which seldom exceeded 1,000 fsw. Subsea technology moved to offshore Brazil in the 1980s as exploration approached the then unheard of depth of 2,000 fsw. The new Deepwater frontier in the Gulf of Mexico has returned the technology center to the United States, where the offshore industry began 50 years ago. Over the past five years two-thirds of the wells in water depths beyond 1,640 fsw were drilled in the Gulf. The underwater industry is now poised to attempt completion and construction operations in water depths from 4,000 to 10,000 fsw as the Gulf remains the most active Deepwater play in the world.
Last year our report described a number of technical issues that the industry faced. Early in 1998 a number of wells were lost to shallow sand flow, a geological phenomenon apparently unique to the Deepwater Gulf. CDI, with alliance partner Fugro-McClelland, performed geotechnical sampling throughout the year to determine the possible presence of these underground aquifers at several prospects including Na Kika (6,700 fsw), Brutus (3,000 fsw), and Llano (2,600 fsw). Currently we are involved with DeepStar, the consortium of 22 oil companies having significant lease positions in the Deepwater Gulf, in the design of a hammer which can drive a 36-inch caisson 2,000 feet into the ocean floor to provide a drilling conduit through these aquifers.
A second major issue is that of hydrates, the waxy substance which impedes pipeline flow as the high paraffin content of the oil interacts with the extreme cold of the Deepwater. This situation presently limits offsets and step out wells as flowline insulation costs escalate to non-economic levels. CDI and alliance partner Ambar are developing an extended reach method of cleaning hydrates from the pipeline. A more cost-effective approach, now in the final stages of design, is a unique, retrievable pig. In each case CDI works in tandem with DeepStar with a goal of developing new Deepwater products which can be deployed from our fleet of DP vessels.
Of the fifteen 1998 Deepwater projects completed by CDI the accompanying chart highlights those which involve first ever or unique subsea applications. Installation of the catenary risers and commissioning of Baldpate required five CDI vessels over the course of several months. The Uncle John worked four months in support of the construction of the Genesis SPAR without a single hour of mechanical or weather downtime (even during Hurricane Georges). That vessel also conducted the abandonment of a subsea gas well which had 3,500-psi shut-in tubing pressure, a project that historically has required the use of a conventional drilling rig. The Witch Queen served as the work platform for the world's deepest removal and replacement of an electronic control module from a subsea tree. Well intervention projects included a complex wireline project for Sonat at East Cameron Block 378 and abandonment of the Seattle Slew subsea well where we also removed 12 miles of associated pipelines.
Recently the MMS released a projection of daily Deepwater oil and gas production rates from 1999 through 2003. While low oil prices have resulted in the delay or cancellation of five projects scheduled for 1999, at least ten fields are expected to come on line this year. The report also notes that average daily gas production is expected to increase from 13 BCF in 1995 to 17 BCF in 2001. Given that Deepwater gas reservoirs are less expensive to develop and that it is currently economical to subsea - complete isolated gas wells with tiebacks, the MMS gas projection may prove conservative. Although the Deepwater Gulf is viewed principally as an oil province, this additional natural gas supply may prove essential if shortages of the product develop in the United States.
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The Q4000, a totally new concept that will revolutionize the economics of Deepwater completion and construction support, is the CDI "Bridge to the Twenty-First Century." Much of the year was spent refining the design of this new build, sixth-generation vessel to incorporate current state-of-the-art features and those just over the horizon. The name of the vessel was changed from the MSV 3500 to the Quantum 4000 to highlight an essential capability: 4,000 metric tons of deck load. Our technology sharing alliance with R&B Falcon allowed us to incorporate the experiences of operating the Uncle John and the Iolair, two third-generation semi-submersible vessels into the Q4000 specifications. We are presently evaluating final cost estimates from a select group of shipyards and expect construction to commence by midyear. Adhering to that schedule would put the new vessel into the market in July 2001, timing which coincides with our forecast of the explosion in demand for Deepwater construction services.
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