· Relief wells – As the Macondo containment attempts have had limited success in reducing the oil flow, there has been more talk concerning relief wells. Moreover, many are skeptical that the relief wells will be successful in stopping the Macondo blowout. Although BP has not provided much detail on the relief well operations, we are highly confident that the relief well(s) will be successful, and the major uncertainty is timing (not “if” but “when”) the relief well(s) will successfully penetrate and kill the Macondo well.
· Status of current relief wells? Both relief wells are targeting 18,000’ and the first relief well has reached 13,978’ and the second relief well is at 9,022’. BP still expects both wells to take 3 months from initial spud date….so still targeting early August assuming no major operational or tropical weather delays.
· Why two relief wells? Simple answer…Insurance. Drilling a deepwater well to 18,000ft takes time and drilling operations can encounter unplanned events that slow down/delay drilling. Two wells increases the odds that one of the wells can be drilled rapidly…with fewer delays and ultimately less spill oil.
· Relief well plans? BP plans for the relief well to intersect the Macondo well at 18,000ft and pump heavy weight drilling mud into the wellbore to stop the flow (link). They suggest August as their expected case for relief well intersection. A number of questions have arisen:
o Why 18,000ft and not shallower? True, a shallower well could be drilled more quickly, but the odds of a successful kill decrease in a shallow intersection.
· A shallower well would require penetrating multiple casing strings increasing the potential risks (the original Macondo well has nine separate casing/liner strings).
· A low penetration is optimal in a “dynamic kill”. It increases the chance that pumping heavy mud will control the Macondo well. Remember the top kill did not work as the injection rate could not overcome the well flow…same result could happen if the relief well intersected shallow. The dynamic kill is designed to pump heavy weight drilling mud in the lower portion of the well and fills it “bottoms ups”, until the weight of the fluid column in the well is greater than the formation pressure…ceasing the flow.
o Needle in the haystack? Not really. We have heard many skeptics of the relief well suggest that intersecting the Macondo well is the equivalent of finding a needle in a haystack.
· We disagree. It is like finding a needle in haystack…when you know roughly which part of the haystack the needle is in and employing high-tech detection equipment.
· Remember the Macondo well has metal casing (pipe) all the way to the bottom of the well. The relief wells will employ sensors to detect the existing casing (likely magnetic and/or conductivity measurement tools) to determine the proximity of the relief well to the blowout. It is unlikely that the relief well will intersect Macondo on the first try. But BP will be able to eventually narrow in on the relief well and,via a series if sidetracks, ultimately intersect and control the well. Hopefully this process wont resemble the way Pursell putts (a series of spastic over-corrections)….but does illustrate the reason we believe the relief well is a “when” not “if” proposition.
· What we don’t know? What type of directional surveys are available in the Macondo well (i.e, how accurately does BP know the position of the existing wellbore)? We assume directional measurements were taking during drilling operations but are not sure if a post casing gyro-survey was run (we think not but have not been able to verify).
· Risks
o Timing – as we previously mentioned, it may take several passes to actually intersect to Macondo well. Last year, a relief well to kill the Mantara blowout in Australia took five passes. Ugh. Delays in the intermediate hole due to normal drilling issues, difficulty “finding” the Macondo well, coupled with active tropical weather in the GOM (requiring relief well drilling ops to be suspended) that could push a successful relief well to the end of the year. We think base case is August/Sept with bias being longer not shorter.
o “Dynamic Kill” – Although we assign a 99+% probability of success to the relief wells, relief wells are not foolproof. A relief well in Tengratila Bangladesh experienced a blowout in 2005. Specifically, the Macondo well experienced a strong gas kick in a shallow zone which the relief wells will have to penetrate. Moreover, BP can’t be too aggressive with the dynamic kill. The high mud weight (14.4ppg) required to control the pressure at 18,000ft is only slightly below the mud weight of ~16ppg (our guess) that could induce fractures (this is no bueno when one is trying to control a hydrocarbon inflow). The kill weight fluid and pump rate will have to be carefully monitored to avoid “breaking down” (fracturing) the formation. Not insurmountable, but deepwater operations narrow the margin for error.
o Not new technology - Finally, we have lots of confidence as relief wells are “not new technology”. Relief wells are widely accepted as the most effective way to control a blowout. For example, in 1982 TXO drilled a 13,000ft relief well to control a blowout in East Texas which at the time was the second deepest relief well ever drilled with a wellbore intercept (ref SPE paper #18059). A study of this well concluded that “For the first time in the history of the industry, relief wells are a viable and reliable alternative in well control operations”. In the intervening 28 years, the technology and success have steadily improved. 99+% chance…not “if” but “when”.