U.S. approves first floating deepwater storage in Gulf

WASHINGTON/HOUSTON Thu Mar 17, 2011 4:44pm EDT

Related Topics

WASHINGTON/HOUSTON (Reuters) - The U.S. Interior Department said on Thursday it gave final approval for Petrobras to use the first ever deepwater floating production storage facility in the Gulf of Mexico.

The facility will be used when the company begins oil and natural gas production at its Chinook-Cascade project in the near future, the department said. Petrobras is based in Brazil.

A Petrobras official who asked not to be identified told Reuters that production would begin in May.

The floating facility has a daily production capacity of 80,000 barrels of oil and 16 million cubic feet of gas. It can be disconnected and moved out of the path of a storm, unlike permanently moored production platforms, preventing long-term supply disruptions because of storms.

"These regulatory approvals pave the way for safe, new production of oil and gas resources in the Gulf of Mexico," said Michael Bromwich, who heads the department's agency that oversees offshore drilling.

Such vessels are common for offshore production in other countries without seabed pipelines to transport oil and gas to shore, such as West Africa and Brazil. Petrobras has a fleet of them off Brazil's shores, and Exxon Mobil Corp uses one of the largest units in the world at one of its fields in offshore Angola.

Gulf operators so far have had little use for the units because the basin has such an extensive pipeline network. Even companies that operate in deeper waters where that network doesn't reach have had new pipelines built that hook into an established system, such as Royal Dutch Shell's Perdido project.

Cascade-Chinook is 165 miles off the Louisiana coastline in 8,200 feet of water, while Perdido is 220 miles south of Galveston in 8,000 feet of water.

Cascade and Chinook each have one production well that is ready to produce. Petrobras aimed to drill a second production well in Cascade last year, but was postponed by the temporary drilling ban after BP Plc's Macondo well ruptured.

Matt Pickard, analyst with Quest Offshore, said more of the units, known as FPSOs, could follow now that Petrobras is the first to clear the lengthy regulatory hurdle. Regulators approved Petrobras' development plan three years ago, but final approval came Thursday.

"We won't see an influx of FPSOs yet, but it's a step in that direction," Pickard said. "It's always good for operators to have another option on the table."

The Cascade-Chinook project will use the floating B.W. Pioneer vessel, which will process the oil and gas, store the oil in onboard tanks and offload it on to shuttle tankers that will take the oil to shore. Natural gas processed by the facility will be moved to shore by a pipeline.

The B.W. Pioneer is one of 16 floating production and storage vessels owned by BW Offshore. (Additional reporting by Brian Ellsworth in Brazil; editing by Sofina Mirza-Reid)

FILED UNDER: