A Charred Life 
Oil and Water
Yes, they do mix in the Gulf of Mexico, where new technology has transformed a dead sea during the bust years into the site of a new oil boom.
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Because it was operating in deep water, where it is more difficult to explore, the company had ten years to find oil before the properties would revert to the federal government. To figure out where to drill, the offshore division shot a two-dimensional seismic survey from boats owned by Shell. The research was considered so confidential that some employees were not allowed to tell their own supervisors what they were doing—they reported directly to the division manager—to minimize the possibility of leaks. Teams of geologists and geophysicists pored over the surveys. “Out of the ten prospects, Auger rose to the top of the list,” says Forrest. “But part of the structure that looked really good was in two other blocks that we didn’t own yet. We were so afraid that other companies would go after the blocks in the next lease sale that we bid $5 million on one and $2 million on the other. It turned out we didn’t have any competition at all.”
Mike Dunn, the geophysicist who analyzed the seismic data, told his superiors that there were several interesting images in the Auger Field. “He told us about two promising pay sands at twelve thousand feet,” recalled Forrest. “Then he said, ‘We also have a riskier prospect at about eighteen thousand feet that we ought to at least talk about.’” Forrest, who had a reputation for taking calculated chances, decided to go for all of the possibilities and planned a deep well. Drilling began in 1987—right after the price of oil had plummeted. Now the Shell team was under tremendous pressure; any discoveries would have to be huge to justify the cost of building a deep-water production platform. The top two targets, which had looked so tempting, turned out to be gas fields. The reservoirs were large, but because they held gas, they probably wouldn’t justify building a production platform. It began to look like the prospect might not be economically viable. A sidetrack to test the deeper prospect began in late July. Within a couple of weeks, the drilling crew hit a third sand trap and found oil—but only in modest quantities. Finally, that September, at about 19,200 feet below sea level, they hit something else. It was oil, and it was mammoth.
The team’s elation lasted a few weeks and then there was bad news. Word came back from the lab: Core samples from the rig showed that the oil was “sour.” Up on the continental shelf, nearly all the major finds had consisted of “sweet oil,” which is low in sulfur and therefore sells for a premium. But as Shell was in the process of discovering, most of the oil farther out in the Gulf is full of sulfur, which has to be separated out at the refinery. Shell would have to discount the price, making its giant field worth perhaps 20 percent less than a comparable find of sweet oil. Operating as close to the profit margin as the company was, this posed a significant problem. Again, the team wondered if the site would pay off.
The key to the decision to go ahead came from the company’s experiences at Bullwinkle. There, Shell geologists were discovering that sands deposited by turbidity currents behave in an entirely different fashion than the deltaic sands found in shelf reservoirs. “That’s where we first got the confidence that these turbidites would produce at the kind of rates that we needed in deep water,” said Jim Funk, a general manager at Shell. “We’ve got a couple of wells at Bullwinkle that did eight thousand barrels a day.” Rates that high were practically unheard of in the region—a really good well on the shelf might produce two thousand barrels a day. Deep-water sands are unusually prolific because turbidity currents dump such immense quantities of sand in one place that the reservoirs tend to be far bigger than shelf reservoirs, meaning they hold more oil in the first place. In addition, deep-water sands tend to be less faulted—up on the shelf, pockets of sand shift and move around as the Mississippi continues to lay down sediment overhead, often causing a single pocket of oil to break into smaller compartments. Deep-water sands are also unusually porous, because as turbidity currents travel long distances, they cause a sifting process that results in clean sands and allows oil to flow through them faster. Finally, deep-water sands are often geopressured because the oil is tightly sealed below layers of dense mud. This prevents the liquid from moving up to balance the weight of the earth above, leaving it trapped under high pressure. “It’s like putting a brick on a balloon full of water,” says Alan Kornacki, an exploration geologist at Shell. “The water wants to burst upward. If you put a straw into that balloon, the weight of the brick will push the water out at a tremendous rate.”
Betting that Auger, like Bullwinkle, would flow at unusually high volumes, Shell decided to develop the field. The floating platform took four years to construct. Because there was no existing infrastructure that far out in the Gulf to pipe oil to shore, Shell laid down 72 miles of new pipeline to an existing production facility. Auger began operations in April 1994, and by that August, the platform had reached full capacity with only eight wells flowing. One of the wells has been producing as much as 13,000 barrels of oil a day, which is a record for the Gulf of Mexico (Auger’s well is producing 4,000 barrels more than the previous record). Shell had bet right—in fact, the company had underestimated the rate at which the field would flow. The Auger platform was designed to handle 42,000 barrels of oil a day, but was soon handling 60,000; recent expansions have boosted production to as much as 69,000 barrels, but even that isn’t enough to handle all the oil the wells are capable of generating. Geologists at rival companies suggest that Shell goofed, because it could be making even more money if it had built a platform with greater capacity, but Shell’s management responds that this is the kind of problem it likes to have.
After discovering Auger, Shell pursued its other deep-water projects with a new vehemence. In 1989 the company began drilling a prospect called Mars and stumbled onto a field twice as large as the Auger discovery. Production at Mars is scheduled to begin later this year. News of the Auger discovery, which was made public in 1989, electrified the industry—suddenly everybody knew deep water was viable. Since then, giants like British Petroleum, Exxon, and Mobil have stampeded to obtain leases in the region; more than 195 wildcat wells have been drilled in deep water to date, and 33 discoveries have been announced. “What Shell has done out there is truly extraordinary,” said John Kingston, the editor in chief of Platt’s Oilgram News, the preeminent industry publication. “They basically opened up a new vista.”
ALL OF THE ACTIVITY IN THE GULF OF MEXICO today has helped introduce a certain vigor into the Texas economy. Most of the new drilling is being done in federal waters, and Texas gets no royalties from the oil produced there, but the scramble for more reserves nevertheless has an effect on the state. Although many companies that supply services directly to oil rigs are located in small towns along the coast of Louisiana, most of the oil companies themselves have their headquarters in Houston, and that has attracted a panoply of additional white-collar and blue-collar service jobs to Texas too. “There are geophysical companies, exploration crews, drilling companies, and all the firms that supply seismographic data,” said Gerald Higgins, an oil expert with the state comptroller’s office. “There are aircraft companies that lease the helicopters that fly back and forth to the rigs. The operation and maintenance of the semi-submersible rigs is really a Gulf industry, and Texas gets a pretty good bite out of that.”
Profits for the companies that provide services to the oil industry swelled last year; in the second quarter, combined profits for eight firms tracked by the Wall Street Journal were $362 million, 62 percent higher than in the same period the year before. In the third quarter, profits were up again, though only by 6 percent. “Part of that has been that there’s been more work overseas lately, but the other part has been the work in the Gulf,” said Bill Gilmer, who researches the energy industry for the Federal Reserve Bank in Houston. Of course as the region gets busier, the risk of oil spills and other environmental hazards increases too. (Every year, billions of gallons of water containing heavy metals and toxic organic compounds are dumped into the Gulf from production platforms, and so are millions of barrels of mud and cuttings from well holes that contain lead, mercury, and arsenic, which kill organisms living on the seafloor.) And more damage is done to the fragile wetlands that border the Gulf. “You’ve got jobs, but the more activity you have, the more the coastline erodes,” said Bill Nevitt, a stockbroker who is active in the Sierra Club in Louisiana. “Then you have to spend more money to rebuild it. So you’ve got a push-pull situation.”
Finally, while a “managed boom” does generate profits, it does not generate that many new jobs. Oil-service companies have been hiring to keep up with the demand for their services, but the overall number of people employed by the oil industry continues to decline. After wells are completed, permanent production platforms are built to produce the oil, and that is where the majority of jobs in the Gulf of Mexico are. Twenty-four people operate the four manned platforms that Pennzoil owns in Eugene Island, and ten of them worked on the C platform, where I spent the night. One of the most common jobs is that of lease operator, someone who tends the machinery that siphons oil and gas out from under the ocean floor. When we visited, the men were joking with a black sense of humor about the skeleton nature of the crew left to man the platform. They had enough people when everything was going all right, but they didn’t like to think about what might happen if an emergency occurred. That is the story of the Gulf of Mexico today: Companies are finding more oil with fewer people. Yesterday’s boom was a miraculous time, when it seemed as though oil could magically transform the fortunes of everyone in the business. Today oil is an industry like any other—preoccupied with downsizing and the bottom line—and even the good times are hard.
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