Abstract

The paper presents an overview of the Canyon Express project, with the "industry firsts" and some of the pitfalls encountered in project execution. The project is the first of a new kind of joint development that allows otherwise un-economic fields to be developed profitably, thanks to subsea multiphase metering and unprecedented cooperation between field owners. The paper then describes how the business challenges were met to create a novel business structure between the owners of the three fields that participate in the Canyon Express development.

Figure 1 depicts the progression in the deep water frontier immediately proceeding Canyon Express. Canyon Express is the world's deepest development at 7200 ft/2200 m. water depth, with a record flowrate for subsea tieback at 500 MMSCF/d, and takes commingled flow from three fields with different owners, Operators and royalty obligations.

Introduction:

By Fall of 1999, three neighboring and moderate size gas discoveries had been made in water depths up to 7200 ft. in the Mississippi and Desoto Canyon areas of the US Gulf of Mexico, located approximately 150 miles southeast of New Orleans.

These discoveries are owned by different joint ventures, operated by TotalFinaElf, BP and Marathon respectively for the Aconcagua, King's Peak and Camden Hills fields. The two remaining Working Interest Owners are Nippon with ownership in Aconcagua and Pioneer Natural Resources with ownership in Aconcagua and Camden Hills. All five Working Interest Owners (WIOs) became owners in the TotalFinaElf operated Canyon Express (CE).

The size of the fields did not justify stand-alone development, in view of the water depth and the distance of some 50 miles to existing facilities. If combined in one development, however, the sharing of costs and risks while combining the reserves of the three fields would allow favorable overall project economics. The success of the Project then became dependent on each component (Individually operated Fields, Shared Canyon Express subsea infrastructure and third party Canyon Station production processing) being incorporated physically and commercially into one venture, which has become known as the Canyon Express Project. Major challenges of the Project were:

  • Agreement on a novel business structure to share in a subsea system infrastructure (common flowline and control system), while field Operators retained risk and responsibility for the wells

  • Agreement on the decline of system pressure over time and the sharing of declining system capacity

  • The need for deepwater multiphase wet gas metering for fiscal allocation, because of subsea commingling

  • The technical challenges of installing and operating a long tieback in world record water depth of 7200 ft.

  • The coordination and system integration of a third-party processing facility for Canyon Express production.

  • The need for intelligent well technology for the completions to produce from two zones in record ater depth

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