Hunting for oil in deep water

May 6, 2002, 01:00 CEST

More than 320 kilometers out in the Gulf of Mexico, Hydro is looking for oil in the deepest-ever well in the area.

The "Deepwater Pathfinder" is drilling an exploration well in Walker Ridge 285. This well will be the deepest ever drilled in the Gulf of Mexico in terms of total depth - the water depth is 6,654 feet (2,016 meters), with a planned total drilling depth of around 31,000 feet (9,400 meters). The drill ship's dimensions were impressive too, allowing it to drill in up to 7,500 feet of water.

Hydro is a 25 percent partner in this Conoco-operated well. In addition to being deep, it is expensive, but also with high potential. Hunting for oil in the Gulf of Mexico is yet another move in the internationalization of Hydro's oil and gas activities.

Having been active on the Norwegian continental shelf for more than 30 years, Norsk Hydro is now aggressively building oil and gas exploration and production portfolios outside Norway. The Gulf of Mexico is the latest addition. The intention is that the new business unit - Norsk Hydro E&P America - will strengthen, diversify and grow Hydro's exploration and production activities.

Why has Norsk Hydro found the mature Gulf of Mexico an interesting area?

"We believe there is still potential for making significant commercial discoveries in the Gulf of Mexico and that we will be among the ones to do it," explains Erik Finnstrøm, exploration manager in the Gulf of Mexico business unit.

Even after many years of offshore exploration and production, the Gulf of Mexico still has a large remaining deep-water volume of remaining reserves to be produced - 14.6 billion barrels of undiscovered oil, according to WoodMacKenzie. For comparison, the Norwegian Petroleum Directorate estimates that there are 19.2 million barrels of remaining reserves on the Norwegian continental shelf.

The Gulf of Mexico is an area where Hydro has a potential to build on the company's strong offshore expertise. Additionally, the area offers investors a stable and attractive fiscal regime.

The Gulf of Mexico is a dynamic region, a commercial and technological front-runner in many areas. As an oil company, Hydro will gain valuable knowledge and expertise from working in this region.

The latest in technology is being applied to master the deep waters of the Gulf of Mexico. Drilling in deep water takes specialized equipment and skills. The drillship sported the latest outfitting and systems in drilling technology.

After more than 20 years of deepwater exploration activity and production in the Gulf of Mexico starting in the late 1980s, the activity level is still high and expectations remain for new large finds. Around 600 exploration wells have been drilled to date at water depths greater than 400 meters, and in 2001, 93 exploration wells were drilled. Comparable numbers for the Norwegian continental shelf are a total of 24 exploration wells in water depths greater than 400 meters, and 28 exploration wells being drilled in 2001 in total in Norwegian waters.

There are 530 oil-related companies in Houston, confirming the belief in the potential that the Gulf of Mexico still has to offer. Confirming also the extremely tough competition, but also the potential for Norsk Hydro to succeed and acquire knowledge that can be applied to oil and gas activities elsewhere.

The joint venture with Conoco provides Hydro with a good exploration starting position. On September 5, 2001, Norsk Hydro and Conoco entered into a joint venture agreement. Five firm and three contingent exploration wells will be drilled under the agreement. A longer-term goal is to establish the Gulf of Mexico as a formal core area, with a production rate of at least 50,000 barrels per day.

"Success will require quick learning and hard work, but we all have the fire within to succeed," says Helge Hove Haldorsen, head of Hydro's Gulf of Mexico business unit in Houston.

Gulf of Mexico office officially opens