RD130 - Virginia Offshore Oil and Gas Readiness Study - March 2015


Executive Summary:
Fugro Consultants Inc. (Fugro) was contracted by the Commonwealth of Virginia Department of Minerals, Mines and Energy (DMME) to prepare the Virginia Offshore Oil and Gas Readiness Study. With the announcement in early 2015 that the Bureau of Ocean Energy Management (BOEM) has included the Mid-Atlantic region for evaluation and inclusion as part of the upcoming 2017-2022 offshore Oil & Gas (O&G) lease program, with possible sales planned for 2021, Virginia embarked on an in-state evaluation of their potential to assume a leadership role in the exploration, development and production of new petroleum resources within the eastern United States of America.

DMME’s Request for Proposal called for a three-part evaluation of the readiness of the Commonwealth for the anticipated future offshore O&G industry. The first was to identify and assess the adequacy of legacy geophysical data, collected in the 1970s and 1980s, for characterizing the known geologic plays and their potential for hydrocarbon exploitation. The second was to review existing port infrastructure within the region and compares the present state with equivalent port infrastructure in the Gulf Coast region, and accesses potential gaps in the existing facilities. The third was to review Department of Defense (DoD) concerns on potential conflicts of ocean usage expressed during the previous 2010 cycle of potential lease sales, to identify potential conflicts and means by which to alleviate those conflicts in a manner that would allow O&G exploration and production to proceed, as they have elsewhere in US waters, including the Gulf and West Coasts.

TASK 1

Task 1 consisted of three separate subtasks. In subtask 1A, Fugro studied and described the existing G&G datasets presently available to companies interested in pursuing petroleum exploration in the offshore Mid-Atlantic margin. In agreement with DMME, the study area was narrowed to concentrate on offshore Virginia and northernmost North Carolina. Fugro compiled representative examples of each available dataset and tabulated the types of data originally collected, and current formats of the data. A GIS database was created specifically for this project and extends over a large portion of the U.S. Atlantic Margin. The primary type of data that was inventoried includes:

• 2-D multichannel seismic (MCS) reflection surveys,
• Shallow-penetrating wells and oil and gas exploration wells,
• Seismic velocity information (i.e., checkshot surveys, sonic logs, and velocity analysis
from seismic surveys), and
• Published reports and geologic maps.

This industry seismic data, along with data from Atlantic OCS exploratory drilling (e.g., well logs), is publicly available from the BOEM at (www.data.bsee.gov). The United States Geological Survey’s (USGS) National Archive of Marine Seismic Surveys (NAMSS) also maintains a large amount of seismic data on their website (walrus.wr.usgs.gov/NAMSS).

In total, detailed information for 19 different seismic surveys were collected in the waters off of Virginia and the northern portion of North Carolina. For each survey, summary sheets including seismic trackline maps and a listing of the field parameters (i.e., equipment used during seismic data acquisition and survey geometry) were presented. Seismic data examples for each survey and the various data processing sequences employed were also presented. For each survey, key components constraining the data were identified and tabulated, including field parameters (line spacing, seismic source, streamer configuration, navigation, etc.), processing techniques and sequence, availability of wells or other boreholes for control, and seismic velocity calculations.

For subtask 1B, Fugro assessed the survey parameters (line spacing, source specifications, streamer configurations, navigation and other factors) of existing seismic data coverage and the ability/inability of these datasets to image potential reservoirs in the various hydrocarbon plays identified by BOEM. This provided both quantitative and qualitative assessments of the data quality and its potential utility for modern day applications. In general, the older data is inferior to modern equivalents due to factors including less accurate navigation positioning which impacts confidence levels of target locations; smaller and weaker seismic sources and shorter streamer lengths with fewer hydrophones which combine to result in shallower penetration and lower resolution of the data; more primitive computational methods that resulted in more simplistic and less precise processing of the dataset; and relatively poor documentation of the field surveys which result in uncertainties in seismic velocity corrections and accurate depth modeling of geologic features of interest. Based on the above criterion, the available data should be used to provide geologic framework for the major plays and perhaps be used for delineation of future lease block sales, but should not be considered adequate for identifying exploration targets or assessing potential and recoverable hydrocarbon quantities.

In subtask 1C, Fugro created a theoretical regional seismic survey grid and schedule required to cover the initial issuing of a tender through final delivery of a report containing the results of interpreting the fully-processed new survey data. The survey would be intended to both provide additional modern survey data to better understand geologic context for the individual geologic plays, and would provide an analog for comparison with legacy datasets to assess their ability to accurately image potential targets. Additionally in subtask 1C, Fugro presented an assessment of the application of modern data processing techniques to the existing data and provided suggestions (based on experience in reprocessing of legacy data) on processing techniques that could be utilized might improve the imaging of the 1970’s and 1980’s data in a timely and cost-efficient manner.

TASK 2

This task was completed by our sub consultant Moffatt & Nichol, who were tasked with preparing an overview of the infrastructure needed to support future O&G exploration and development in the Mid-Atlantic region. This task was also divided into three separate subtasks. In subtask 2A, Moffatt & Nichol examined the U.S. Gulf Coast to develop a typical profile for O&G infrastructure and qualifying the extent of the existing industry within the Gulf Coast, including the number of active lease blocks and existing platforms. This initial step was obtained by examining eleven major offshore support terminal complexes, including three Louisiana ports: Fourchon, Grand Isle and Cameron. These three complexes, along with eight other terminal sites from Freeport, Texas to Pascagoula, Mississippi were evaluated to develop a relationship between overall port acreage and offshore platforms served.

U.S. Gulf Coast O&G exploration and production was evaluated from the perspective of total lease blocks, total lease area, and active platforms. A database of ArcGIS shape files containing specific production information related to offshore lease blocks is maintained by BOEM. Queries to this database resulted in a general profile of offshore production activities. A set of metrics was developed to relate the lease areas to actual platform development. As initial exploration in the Mid-Atlantic region will be driven by leased area, the relationship between lease areas and platform development will be the more important metric for determining infrastructure in the early stages. Later, as production wells are drilled, the platforms will become the key driver of infrastructure needs.

If U.S. Gulf operations are used as benchmark, this becomes a very conservative approach due to the O&G support of active offshore platforms that also takes place. Currently in the Gulf there are about 18,000 acres of offshore lease area per acre of onshore support terminal. It can be equated to projected lease sales and could provide guidance as to support terminal phasing. In the U.S. Gulf, one acre of onshore support terminal is required for every 3.5 active offshore lease blocks. Based on the U.S. Gulf Coast model, approximately one acre of support terminal is required for every 1.5 active platforms in the region.

Subtask 2B developed a high-level assessment of the existing infrastructure in the Mid-Atlantic region that could be adapted to development of offshore O&G support terminals, ship repair and construction, transportation, emergency services and oil spill response. This assessment was based on current usage and evaluated the potential for implementing changes to include offshore O&G infrastructure within their terminals. A total of fourteen terminals were evaluated from Baltimore southward to Wilmington NC. Seven terminals, both public and private, within the Commonwealth of Virginia were included in the evaluation.

Several other aspects of support requirements were assessed, including the types and sizes of typical vessels utilized in varying support roles for offshore drilling. Channel dimensions, cargo loading/unloading facilities, storage areas, pipeline transport, and heliport facilities required for future O&G development were also addressed during this subtask.

The final subtask combined the findings from subtasks 2A and 2B to develop a description of the anticipated port and waterborne infrastructure necessary in the future to explore and develop O&G along the Mid-Atlantic coast, specifically focusing on Virginia and northernmost North Carolina. This assessment concluded that the existing infrastructure in the area from Baltimore, MD to Wilmington, NC, and including the Hampton Roads area in Virginia, are adequate to support the initial seismic exploration and exploration well phases. Once actual commercial extraction begins, probably no sooner than 2024, there will be a requirement for additional storage and transportation infrastructure including pipelines, but it is anticipated that adequate port facilities will exist to cover an estimated 40 producing fields and 160 offshore platforms. Importantly, concerning emergency oil spill response, there will be a requirement to build this capacity in the region as current support structure is considered inadequate for future offshore O&G production.

TASK 3

Task 3 of this study provided a background and perspective on the concerns of the military regarding O&G structures and activities in the Mid-Atlantic region. Parsons Government Services was subcontracted to perform this phase. The first portion of this task commenced by gathering background and historical information to gain a better understanding of what were the nature and background of the DoD’s concerns.

The Norfolk Fleet military assets are the world’s largest concentration of ships and aircraft, and the support infrastructure for those assets. The primary mission of the DoD is to ensure they remain in a high state of training and readiness for deployment in case of national emergency. In its Compatibility Report for the previous round of potential lease block sales, the DoD used a comprehensive approach for its analysis of activities on the OCS. Four categories of potential compatibility were developed. Definitions of these four categories include:

• No O&G activity,
• No permanent O&G surface structures,
• Site specific stipulations, and
• Unrestricted.

Parsons lead several meetings and phone calls with DoD personnel to confirm how these individual categories were originally developed and to plan what potential future avenues were available to re-characterize select areas previously considered as restricted to either less restrictive status, or entirely unrestricted. A similar, successful approach had previously been adopted during negotiations with the DoD for the upcoming installation and operation of offshore wind turbines in the area immediately offshore from Hampton Roads.

Although the DoD was identified as a stakeholder with potentially conflicting use of the waters offshore of Virginia, they are by no means the only stakeholder within this region. NASA Goddard Space Flight Center (GSFC) owns and operates NASA WFF (NASA, 2012). The WFF is located in the northeast portion of Accomack County, Virginia on the Delmarva Peninsula (See Figure 9.3-3). The 6,000-acre facility employs nearly 1,700 civil service and contractor employees in addition to military personnel assigned to the U.S. Navy’s SCSC at WFF. The U.S. Environmental Protection Agency (USEPA) is the lead federal response agency for oil spills occurring in inland waters, and the U.S. Coast Guard is the lead response agency for spills in coastal waters and deep water ports (United States Environmental Protection Agency, 2011). Marine commercial and recreational fishing are important industries in the Mid-Atlantic Planning Area. The waters off the coast of Virginia constitute one of the busiest areas in the world for maritime traffic (DoN, 2014).

The next step taken as part of the investigation was to explored examples of O&G and DoD conflict resolution in other Outer Continental Shelf (OCS) regions. Two examples are provided for conflict resolution in the Gulf of Mexico where Navy training and testing (e.g., Naval Support Activity Panama City) and Air Force (USAF) training (e.g., Eglin Gulf Test and Training Range) occur in the vicinity of one of the most developed O&G regions of the world. Two additional examples of conflict resolution are presented from the Pacific OCS (one from the Hawaiian Islands and another from Southern California). The goal of this section is to glean success stories from other OCS regions and look at these areas as models for how conflicts might be resolved in the Mid-Atlantic.

The final step set forth several plan elements, both borrowed from successful resolutions in other regions and natural outcomes from DoD meetings or involving technological considerations, for successful future DoD conflict resolution in the Mid-Atlantic OCS planning area. Section 9 of this report provides further details of key suggestions into preparing for compatibility in the Mid-Atlantic planning area.

In summary, the three greatest issues that could impact future O&G exploration in the Mid-Atlantic Region have been assessed separately in the three tasks of this report. While the limitations imposed by the quality of the legacy seismic data, the lack of O&G “ready” infrastructure and the potential conflicts over use of the OCS with the various government agencies all pose significant challenges for inclusion of offshore Virginia acreage the proposed 2017-2022 leasing plan, this report has highlighted possible methods to overcome these obstacles.

The vintage seismic datasets can be reprocessed or used as-is to perform a preliminary analysis of the Atlantic Margin in order to help guide future seismic data acquisition. Existing infrastructure in the Mid-Atlantic Region is not currently adequate for handling O&G development on the same scale as the Gulf Coast, although the existing seaports and terminals are more than capable of handling the early stages of exploration seismic and drilling activities. Once significant quantities of hydrocarbons are found offshore, new facilities including storage and transport structures will need to be built which will result in bringing new jobs to the Commonwealth. Finally, concerns that future O&G exploration will impinge upon the operations of the military and other stakeholders have been successfully addressed and mitigated in other regions of the U.S. Most recently for offshore Virginia, the Wind Energy Industry and DoD came to an agreement on deconflicting ocean usage so that both groups could continue towards a future of shared offshore resources, both powering and defending the nation.