Marathon Abandons $270 Million Ultra-Deepwater Project
Marathon Oil announced on Dec. 2 its decision to abandon a key deep-water oil project in the Gulf of Mexico.
The well that Marathon had been drilling had already caused the company some problems. Drilling the well took seven months, and mechanical problems delayed the project’s completion. Marathon said last week that upon completing the project, drilled at 34,600 feet, that it had plugged the well and released its rig. Marathon says that it has no further plans for the block.
The deal was a blow for the company that had already announced plans to abandon some offshore drilling assets in an effort to correct its balance sheet. The dry hole that Marathon drilled probably cost the company around $270 million. Meanwhile, Marathon became one of the largest companies to have announced a cut its dividend in the past quarter. Its upcoming payout will drop to 5 cents per share from the previous 21 cents per share.
But the well was also closely watched because it was located in the Lower Tertiary, an oil-bearing region located at ultra-deepwater depths that have largely been unexploited at this point. Drilling in the Lower Tertiary is technically expensive and difficult. When oil prices were in three-digit territory just a few years ago, interest in the Lower
Tertiary spiked. While more expensive, the frontier region made sense when it seemed as if low-cost oil had run out. Plus, the potential oil lying deep below in the Gulf of Mexico could be vast. Marathon’s Solomon well was thought to hold somewhere on the order of 450 MMbbls.
Marathon’s dry hole puts a chill on interest in the Lower Tertiary, although with today’s low oil prices, few companies are sanctioning new deepwater projects anyways. The latest result from the OPEC meeting likely ensures that oil prices will remain at $50 or lower for the coming months. Oil companies are increasingly deferring on drilling expensive deepwater projects like Marathon’s Solomon.
Marathon has plans to refocus its efforts on shale assets, which offer much lower upfront costs than deepwater drilling.
Related News
Related News
- Keystone Oil Pipeline Resumes Operations After Temporary Shutdown
- Freeport LNG Plant Runs Near Zero Consumption for Fifth Day
- Biden Administration Buys Oil for Emergency Reserve Above Target Price
- Mexico Seizes Air Liquide's Hydrogen Plant at Pemex Refinery
- Enbridge to Invest $500 Million in Pipeline Assets, Including Expansion of 850-Mile Gray Oak Pipeline
- Evacuation Technologies to Reduce Methane Releases During Pigging
- Editor’s Notebook: Nord Stream’s $20 Billion Question
- Enbridge Receives Approval to Begin Service on Louisiana Venice Gas Pipeline Project
- Mexico Seizes Air Liquide's Hydrogen Plant at Pemex Refinery
- Russian LNG Unfazed By U.S. Sanctions
Comments