Offshore Drilling Challenges and Opportunities Outline

Offshore Drilling 

Challenges and 

Opportunities 

J. Keith Couvillion 

Chevron U.S.A. Inc. 

October 18, 2012 

© 2012 Chevron U.S.A. Inc. 

Cautionary Statement 

CAUTIONARY STATEMENTS RELEVANT TO FORWARD-LOOKING INFORMATION FOR THE PURPOSE OF 

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

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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 

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of operations and development activities; the potential failure to achieve expected net production from existing and future crude oil and natural 

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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. 


2 

Outline 

• Offshore Defined 

• Drilling Vessels 

• Drilling Challenges 

• Permitting 

• New Technology Opportunities 

• The Future 

• Questions 


3 

1

Offshore Defined 


4 

Government Controlled Offshore Lands 

United States - Exclusive Economic Zone 

(3 Billion Acres – 4.1 Million Sq. Miles) 

Source: DOI 


5 

Gulf of Mexico Seafloor Bathometry -- 

Shelf, Deepwater and Ultra Deepwater 

Louisiana 

Texas 


6 

2

Deepwater Gulf of Mexico Bathymetry 

Texas 

Louisiana 

Continental Shelf 

Salt Province 

Green Canyon 

Atwater Valley 

Salt Province 

Abyssal Plain 

Walker Ridge 

48 km 

30 Miles 


7 

Walker Ridge Area Map 


8 

Deepwater Gulf of Mexico 

Technically Challenging Environment 

Much of the prospective Gulf of 

Mexico deepwater area is covered 

by layers of massive salt. 

Salt Canopy 

6,000’ (1800 m) 

7,500’ (2300 m) 

US 

10000’ (3000 m) 

Mexico 


9 

3

Gulf of Mexico Region 


10 

Drilling Vessels 


11 

Jack-up Drilling Rig 


12 

4

Semi-Submersible Drilling Rig 

Moored/Anchored 


13 

Semi-Submersible Drilling Rig - 

Dynamically Positioned 


14 

Drill Ship - Dynamically Positioned 

Length - 835 Ft. 

Breadth - 125 Ft. 

Max. Drill Depth – 35,000 Ft. 

Max. Water Depth – 10,000 Ft. 


15 

5

Platform Rig 


16 

Drilling Challenges 


17 

Industry Deep Water Gulf of Mexico 

Drilling Records 

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

0 

Pre 1950 

50-54 

55-59 

60-64 

65-69 

70-74 

75-79 

80-84 

85-89 

90-94 

95-99 

00-04 

05-09 

Today 

Future 

5000 

Water Depth 

Water Depth Record (’03) 10,011 ft 

Depth (ft) 

10000 

15000 

20000 

25000 

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. 

Water Depth Record (’08) 10,139 ft 

Offshore 

Offshore 

Exploration 

Exploration 

Drilling 

Drilling 

TD 

TD 

Total Drilled Depth 

Current Rig Capability 12,000 ft 

30000 

35000 

40000 

Records continue to be broken with current 6 th 

Generation drill ships able to drill in 12,000 ft 

water depth and to 40,000 ft total depth. 

Drilling Depth Record (’09) 35,955 ft 

Current Rig Capability 40,000 ft 


18 

6

Industry Deep Water Gulf of Mexico 

Subsalt Drilling 

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

0 

Pre 1950 

50-54 

55-59 

60-64 

65-69 

70-74 

75-79 

80-84 

85-89 

90-94 

95-99 

00-04 

05-09 

Today 

Future 

Depth (ft) 

5000 

10000 

15000 

20000 

25000 

30000 

35000 

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 continue to find reserves below thicker sect tions of salt 

40000 


19 

Technology is Pushing the Envelope on 

Water Depths 

Transocean Deepseas 

In 7,000’ of water and five 

miles below the seabed 

Drilling in depths that only yesterday seemed impossible… 


20 

Ultra-deep Water Gulf of Mexico 

Drilling Technical Challenges 

Storms and hurricanes 

Sea Level 

8,000’ 

Empire State 

Building ~500 

Meters 

Gulf of 

Mexico 

Suprasalt 

Sediment 

Loop and eddy currents cause 

vortex induced vibrations and 

motions to drill strings 

Unpredictable high pressure gas 

charged stringers and faults 

near surface 

16,000’ 

Allochthonous Sigsbee 

Salt Canopy 

Mobile/flow-able/dissolvable 

10,000 000’ thick salt canopy with 

unpredictable layers of highly 

variable trapped sediments 

24,000’ 

Upper Tertiary 

Sediments 

Unpredictable base of salt – 

rapid pressure differentials 

32,000’ 

Lower 

Tertiary 

Cretaceous 

Autochthonous Salt 

“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’ 

Basement 


21 

7

Permitting 


22 

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. 

Transocean Horizon 

Response Fleet 


23 

Subsea BOP 

LMRP – 

Lower Marine 

Riser 

Package 

Annular 

Control POD 

60 feet tall 

620,000 lbs 

Ram Bodies 


24 

8

Ram BOPs 

Insert 

Photo 

Blind Shear Ram 

shears smaller tubulars and then seals 

wellbore (or seals wellbore with no pipe) 

Insert 

Photo 

Casing Shear Ram 

shears large tubulars – does not seal 

Insert 

Photo 

Pipe Ram 

seals annulus around various drill 

pipe sizes 

© 2012 Management Chevron U.S.A. Committee Inc. May 2010 25 

BOP Emergency Systems 

1. Emergency Disconnect 

2. Deadman 

1 3. Autoshear 

2 4. Remotely Operated 4 

Vehicle (ROV) 

3 

Primary Methods to Secure the Well: 

• Emergency Disconnect System (EDS) 

• Autoshear/Deadman Backup 

• ROV Tertiary Intervention 


26 

New Regulations – Worst Case Discharge 

(WCD) Casing Design 

Pre-Macondo 

Post-Macondo 

SW 

Gas 

Oil Gradient 

Mud 


27 

9

GOM Deepwater Well Complexity 

A Bird’s Eye View 

Gulf of Mexico Deepwater 

Casing Program: 

36” – 7 3/4” 

Conventional Deepwater 

Casing Program: 

30” – 7” 


28 

WCD Casing Design - Challenges 

• Dynamic Drilling Casing Loads 

SW 

• 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 

Oil Gradient 

• 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 


29 

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 Group 

‣22 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 

30 

10

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 


31 

Optimistic Permitting 

Timeline Estimates 

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

Pre-incident Developed 

Application 

Plan Approval/ 

Permit Approval 

MMS EP 

Approval 

• Usually CE or EA-FONSI 

• State consistency review 

duration

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 


34 

New Technology Opportunities 


35 

Technology Enhancement Objectives 

• 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 

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 


36 

12

New Deep Water Drillships 

• Most advanced drilling 

capabilities 

• Dynamically positioned, 

with double-hull 

• Two drilling systems 

in a single derrick 

• Stronger and more efficient 

top drive so wells can be 

drilled deeper 

• Other unique features will 

target drilling wells up to 

40,000 feet of total depth 

Transocean’s Discoverer Clear Leader 

• Variable deck load of over 20,000 metric tons; capable 

of drilling in water depths of up to 12,000 feet 


37 

Effective Drilling and Completions 

Optimizing Performance 

Drilling and Completions 

Technology Today 

Integrated technology solution 

• Seismic imaging 

• Reservoir modeling 

• Rock mechanics 

• Drilling operations 

• Real-time monitoring 

(Live video camera 

and feed from rig) 


38 

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 


39 

13

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. 


40 

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. 

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). 


41 

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. 

Single 

Mud 

Weight 

Conventional 

Heavier Mud w/ 

Seawater 

Density Above 

Mudline 

Dual Gradient 

Same Bottom 

Hole 

Pressure 


42 

14

DGD - Production Benefits 

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 

possible. 

This can lead to higher rate 

wells and higher recovery 

factors in deepwater 

reservoirs. 

36 36 

26 SWF Zone 

20 

22 

16 

(Conventional) 

13-3/8 

11-3/4 

9-5/8 

7-5/8 

5-1/2" 

Tubing 

7" Tubing 

9-5/8 

(Dual Gradient 

(SubSea 

Drilling) 

MudLift) 

13-3/8 

5-1/2 


43 

Conventional (Single Gradient) vs. Dual- 

Gradient Drilling 

Surface 

• 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. 

• 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. 

© 2012 Chevron U.S.A. Inc. 44 

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 

riser. 

Pacific 

Santa 

Ana 

Drilling Riser 

Cross- 

Section 

Subsea 

Rotating 

Device 

(SRD) 

Choke 

Line 

Seawater Power 

Line 

Drill 

Pipe Kill 

Line 

Mud Return 

Line 

The riser is filled with a 

seawater-density fluid. 

Solids 

Processing Unit 

(SPU) 

A Subsea Rotating Device 

(SRD) sits above the 

MaxLift Pump which can be 

used to rapidly change the 

pressure profile in the well. 

MaxLift Pump 

(MLP) 

Drill String 

Valve (DSV) 


45 

15

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 

sea 

• Two interchangeable mirror image Triplex 

modules 

• Pump can be broken into ~ 50 MT lifts for 

initial lift onto rig 

(Specifications) 

80 gallon chambers 

1800 gpm max rate 

10,000’ WD rating 

Up to 18.5 ppg mud 

Size - 18’ x 18’ x 30’ 

Weight - 450,000 lbs 

Max Cutting Size - 1.5 in 

Triplex 

Pump 

Modules 

HPU’s 

Valve 

Manifold 


46 

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. 


47 

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 

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 


48 

16

Sonic Bit Monitoring 

Gulf of Mexico 

Post-Salt 

Sediment 

High Pressure Gas Stringer 

Sigsbee Salt 

Canopy 

Unpredictable Top 

and Base 

Trapped Sediments 

Non-Productive 

Time (NPT) 

Pre-Salt 

Sediment 

Ultra Deep Reservoir 

Thief Zone (loss circulation) 


49 

Sonic Bit Monitoring 

Gulf of Mexico 

Inficomm 

Post-Salt 

Sediment 

Sigsbee Salt 

Canopy 

Trapped Sediments 

High Pressure Gas Stringer 

Accusound 

Unpredictable Top 

and Base 

Pre-Salt 

Sediment 

Thief Zone (loss circulation) 

Ultra Deep Reservoir 


50 

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: 

• minimize the effects of 

lost circulation zones 

• drilling mud 

contamination 

• problems associated with 

placement techniques 


51 

17


Conventional 

Cement Job 


52 


Restricted Clearances 

Conventional 

Cement Job 

Drilling Mud Contamination 

Loss Circulation 


53 


Polymerizes with 

temperature or 

time 

Designer Cements 

•Geo-polymer 

•Graphite 

•Other non-Portland 


54 

18

The Future 


55 

Summary 

• Advances in technology 

have allowed industry to 

drill and produce offshore 

resources safely. 

• Many technical challenges 

remain to be solved, but 

the industry is focused on 

finding solutions. 


56 

“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 


57 

19

Questions 


58 

20

Offshore Drilling Challenges and Opportunities Outline

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