The Marcellus shale gas play is located in the Appalachian region in north-east USA. In November 2008, we entered into a strategic alliance with Chesapeake Energy, acquiring 32.5% of Chesapeake's 1.8 million acres in Marcellus. We have continued to acquire acreage within the play, with a net acreage position of over 689,000 acres at the end of 2011. Marcellus provides Statoil with a long-life gas asset with considerable optionality in relation to the timing of drilling and production from these leases. Statoil's daily equity production was 28,700 boe from 300 wells by year-end 2011.
Our joint venture acreage is concentrated around the developing core regions, most notably north-east Pennsylvania (PA), south-west Pennsylvania and north-west West Virginia (WV). We have engaged in a number of trades and purchases to consolidate our position in these areas. We see encouraging signs concerning estimated ultimate recovery rates (EUR), very strong initial production rates from north-east PA, and above proforma production rates in south-west PA and WV, with an upside on liquids. Statoil and Chesapeake will continue to acquire high-grade acreage around the most prospective areas of the play and will build up production from the areas. The operator was running 23 rigs in the play at the end of 2011.
Through agreements with Enduring Resources, LLC and Talisman Energy Inc., Statoil acquired 67,000 net acres in the Eagle Ford shale formation in south west Texas in 2010. Statoil and Talisman formed a 50/50 joint venture for the purpose of developing assets in the Eagle Ford shale formation. Together, Statoil and Talisman initially held 134,000 net Eagle Ford acres and associated assets and production in the joint venture. The venture has continued to acquire acreage within the play, with a net acreage position of over 87,974 acres at the end of 2011. Statoil's daily equity production was 5,200 boe by the end of 2011 from 100 wells. The operator was running ten rigs in the play at the end of 2011.
The acquisition of Brigham Exploration Company, which was finalised in December 2011, gives Statoil strategic exposure to US unconventional plays, which are believed to contain a substantial resource base and represent an increasingly important part of future energy supplies. Statoil's daily equity production was 26,200 boe for December. For more information on the acquisition, please refer to the section Global Strategy and Business Development (GSB) Key events in 2011.
Offshore Gulf of Mexico
Statoil's production from the Gulf of Mexico is anticipated to increase in the next few years as a result of incremental production from development fields, despite the decline experienced in the producing fields.
Fields in production
Production started in May 2009 from the Chevron-operated Tahiti oilfield in which we have a 25% interest. The field is located in Green Canyon blocks 640/596. It consists of seven wells in three locations connected to a floating facility with a processing capacity of approximately 155,000 barrels of oil per day. Gross average daily production was 110,000 boe in 2011. The second phase of the Tahiti development, which will mitigate the decline from the initial phase, was sanctioned in 2010 and is now in the execution phase.
Production started in July 2009 from the Thunder Hawk oilfield located in Mississippi Canyon block 734. We have a 25% interest in this Murphy Oil-operated development, which consists of a semi-submersible floating production facility located in Mississippi Canyon block 736. The processing capacity is approximately 45,000 boe/d. The gross average daily production is declining and was 12,900 boe in 2011. A fourth well has been approved by the partners. It is expected to be in production by the middle of 2012.
Spiderman, a deepwater gas field, is part of the Anadarko-operated Independence Hub, which is a floating production facility located in Mississippi Canyon block 920. Statoil has an 18.3% interest in the field. The gross average daily production in 2011 was approximately 22,000 boe/d. The Independence Hub is owned by third parties. It has a processing capacity of approximately one billion cubic feet of natural gas per day. Statoil has contractual rights to 12.7% of the total capacity through May 2012 and 6.4% for five years thereafter.
The Murphy-operated Front Runner oilfield is located in Green Canyon blocks 338/339/382. Statoil has a 25% interest in Front Runner, which started production in 2004. The field produces while carrying out simultaneous drilling activities from a rig situated on a spar floating production facility. Gross average daily production was 7,000 boe/d in 2011.
In addition Statoil has a 30% interest in the Noble Energy-operated Lorien oilfield located in Green Canyon block 199, and 30% in Zia, located in Mississippi Canyon block 299.
Fields under development
Statoil has a 23.6% working interest in the Anadarko Petroleum-operated Caesar Tonga Unit in Green Canyon block 683. Development of the four-block unit was sanctioned in 2009 as a four-well subsea tie-back to Anadarko's Constitution platform. First production at the Caesar Tonga development in the Green Canyon area of the deep-water Gulf of Mexico was on 7 March 2012. Current Production is approximately 40,000 barrels of oil equivalent (BOE) per day from the first three subsea wells in about 5,000 feet of water. A fourth development well is expected to be drilled and completed later this year as part of the planned phase one development.
Tahiti Phase 2 will add two producing and three water-injection wells to the existing architecture. Injection from the first two water-injection wells is expected to start in the first quarter 2012, while first oil from additional producers is expected in the first quarter 2013.
Statoil has a 25% working interest in the Jack oilfield, located in Walker Ridge blocks 758/759, and a 21.5% working interest in St. Malo, located in Walker Ridge block 678. St. Malo and Jack are located at a water depth of approximately 2,000 metres and are approximately 40 kilometres apart. The two fields are operated by Chevron and will be developed jointly with subsea wells connected to a centrally-located production platform. The Jack and St. Malo projects were sanctioned in September 2010 and the first oil is expected in late 2014.
Statoil has a 27.5% interest in Big Foot, located in Walker Ridge block 29. Big Foot is operated by Chevron and will be developed with a dry tree tension leg platform with a drilling rig. The Big Foot project was sanctioned in December 2010. The first oil from Big Foot is scheduled in late 2014.
Discovered in 2007, Julia (ExxonMobil 50% and Statoil 50%) is one of the major discoveries in Paleogene, with a significant in-place volume. In October 2008, ExxonMobil (operator) filed for Suspension of Production (SOP) based on a subsea tie-back concept or, alternatively, a stand-alone facility; which was denied by Minerals Management Service (now Bureau of Ocean Energy Management - BOEM). In May 2011 the Director of Hearing and Appeals ("OHA") issued a decision upholding BOEM's SOP denial and overruling the prior Interior Board of Land Appeals ("IBLA") decision (2009), which was in favour of the Julia partners. In August 2011, Statoil and ExxonMobil filed separate appeals in the federal court system challenging the OHA Director's decision. In parallel, Julia owners were engaged in settlement negotiations with the Department of Interior (DOI) and Department of Justice (DOJ) to resolve the SOP issues. At the same time, the Julia partners negotiated with the Jack and St Malo partners to secure an amendment to the production handling agreement (PHA) for Julia's re-entry into the Jack and St Malo host. A settlement agreement was signed with DOI and DOJ at the end of December 2011. On 18 January 2012, the US District Court signed and filed its order approving the Julia settlement and dismissed the case. The settlement is final. In early January 2012, the PHA amendment was also signed by the Jack and St Malo host owners and Julia partners. ExxonMobil, operator for Julia, is gearing up and plans to restart the project in the second quarter of 2012. The first oil is expected by mid-2016.