1. Confidential to Subsea Mudlift Drilling JIP11/6/00DGD Template 1 of 64 Dual Gradient Drilling Basic Technology Lesson 1 Introduction to DGD Jerome J. Schubert

2. Confidential to Subsea Mudlift Drilling JIP11/6/00DGD Template 2 of 64 Introduction Current deepwater drilling problems

3. Confidential to Subsea Mudlift Drilling JIP11/6/00DGD Template 3 of 64 Introduction, con’t Brief history of DGD – Phase I – Phase II – Phase III

4. Confidential to Subsea Mudlift Drilling JIP11/6/00DGD Template 4 of 64 Introduction, con’t Describe the DGD System How can DGD can solve the existing drilling problems? Equipment overview

5. Confidential to Subsea Mudlift Drilling JIP11/6/00DGD Template 5 of 64 Current Deepwater Drilling Problems Deeper water results in longer and heavier drilling risers High pore pressures and low fracture gradients leads to more casing strings

6. Confidential to Subsea Mudlift Drilling JIP11/6/00DGD Template 6 of 64 Land Well 2 strings of casing after 20”

7. Confidential to Subsea Mudlift Drilling JIP11/6/00DGD Template 7 of 64 2 strings of casing after 20” 500’ Water Depth

8. Confidential to Subsea Mudlift Drilling JIP11/6/00DGD Template 8 of 64 1000’ Water Depth 2 strings of casing after 20”

9. Confidential to Subsea Mudlift Drilling JIP11/6/00DGD Template 9 of 64 5000’ Water Depth 3 strings of casing after 20”

10. Confidential to Subsea Mudlift Drilling JIP11/6/00DGD Template 10 of 64 10,000’ Water Depth 4 strings of casing after 20” with no kick or trip margins

11. Confidential to Subsea Mudlift Drilling JIP11/6/00DGD Template 11 of 64 0.5 ppg Standoff 6 strings of casing after 20”

12. Confidential to Subsea Mudlift Drilling JIP11/6/00DGD Template 12 of 64 Current Deepwater Drilling Problems Too many shallow casing points – May not reach TD – No contingency casing available This leads to larger wellheads, even larger and heavier risers, and finally to bigger and more expensive rigs

13. Confidential to Subsea Mudlift Drilling JIP11/6/00DGD Template 13 of 64 Current Deepwater Drilling Problems Well Control is more difficult - because of the pore pressure/fracture proximity, and long choke lines with high friction pressure drops

14. Confidential to Subsea Mudlift Drilling JIP11/6/00DGD Template 14 of 64 Kick w/ 750 psi SIP Pore Pressure Fracture Pressure Mud HSP (13.1 ppg) Mud HSP + 750 psi Formation has fractured

15. Confidential to Subsea Mudlift Drilling JIP11/6/00DGD Template 15 of 64 Current Deepwater Drilling Problems Very high riser loads (current and weight) Weight of the drilling riser increases with depth.

16. Confidential to Subsea Mudlift Drilling JIP11/6/00DGD Template 16 of 64 Current Deepwater Drilling Problems In 10,000’ of water – 21-inch riser has an internal capacity of ~4000 bbls! (~$1 million) – Weight of the riser itself is ~ 2million lbs – Weight of 16 ppg mud inside the riser ~ 2.7 million lbs

17. Confidential to Subsea Mudlift Drilling JIP11/6/00DGD Template 17 of 64 Current Deepwater Drilling Problems Water depths beyond rig fleet – New builds and major upgrades

18. Confidential to Subsea Mudlift Drilling JIP11/6/00DGD Template 18 of 64 Current Deepwater Drilling Problems Small wellbore at TD precludes large production tubing - limiting production rates Began 2nd quarter of 2000

19. Confidential to Subsea Mudlift Drilling JIP11/6/00DGD Template 19 of 64 Drilling’s Major Benefits of DGD l Reduces drilling cost by $5-15 MM per well in young depositional basins (4 casing strings) l Provides contingency casing for SWF’s, sub-salt

20. Confidential to Subsea Mudlift Drilling JIP11/6/00DGD Template 20 of 64 Drilling’s Major Benefits of DGD l Allows room for high rate completions l Expands capacity of existing rig fleet l Mitigates effects of high currents l Improves Well Control margin

21. Confidential to Subsea Mudlift Drilling JIP11/6/00DGD Template 21 of 64 Describe the DGD System  “DGD” Drilling, in the present context, refers to drilling where mud returns DO NOT go through a conventional, large-diameter, drilling riser.  Instead the returns move from the seafloor to the surface through one or more small - diameter pipe(s) separate from the drillpipe.  A Mudlift system is used in the Return Line  A Dual Gradient mud system is achieved.

22. Confidential to Subsea Mudlift Drilling JIP11/6/00DGD Template 22 of 64 12.4 ppg mud 13.5 ppg mud Single vs. Dual Gradient Concept Single Gradient Wells – Wellbore contains a single density fluid – Single pressure gradient Dual Gradient Well – Wellbore feels seawater gradient to the seafloor, and mud gradient to bottom Pressure, psi DepthftDepthft Seafloor @ 10,000’ Seawater HSP 23,880 psi @ 37,500’

23. Confidential to Subsea Mudlift Drilling JIP11/6/00DGD Template 23 of 64 Dual Gradient Achieved by: Placing SRD on top of the BOP stack and diverting the mud flow from the annulus to the MLP The MLP then pumps mud back to the rig via the return lines Suction pressure to the MLP is maintained at Seawater HSP + ~20 to 50 psi

24. Confidential to Subsea Mudlift Drilling JIP11/6/00DGD Template 24 of 64 Dual Gradient Heavier Mud w/ Seawater Above Mudline Same Bottom Hole Pressure Single Mud Weight Conventional Single vs. Dual- Gradient Mud Systems From the perspective of the well, there is no mud above the mudline in a dual-gradient system! Figure 3

25. Confidential to Subsea Mudlift Drilling JIP11/6/00DGD Template 25 of 64 How can DGD can solve the existing drilling problems? By placing the MLP on the seafloor we can reduce the pressure exerted on the shallow weak formations and still maintain the required pressure at the bottom of the hole to control formation pressure Riser margin is back - emergency disconnect and drive-off will not result in an automatic kick.

26. Confidential to Subsea Mudlift Drilling JIP11/6/00DGD Template 26 of 64 Pore and Fracture Gradients

27. Confidential to Subsea Mudlift Drilling JIP11/6/00DGD Template 27 of 64 Graphical Casing Seat Selection - Dual Density

28. Confidential to Subsea Mudlift Drilling JIP11/6/00DGD Template 28 of 64 Dynamic Casing Seat Selection D e p t h ft. Pressure, psi 1.0 ppg kick 0 bbl influx volume Frac. Press. Pore Press.

29. Confidential to Subsea Mudlift Drilling JIP11/6/00DGD Template 29 of 64 Dynamic Casing Seat Selection 1.0 ppg kick 50 bbl influx volume Frac. Press. Pore Press.

30. Confidential to Subsea Mudlift Drilling JIP11/6/00DGD Template 30 of 64 1.0 ppg kick, 50 bbl influx Kick Tolerance is Back 20” @ 12,500’ 16” @ 14,000’ 13 3/8” @ 17,000’ 11 3/4” @ 22,800’ 9 5/8” @ TD DGD Conventional 20” @ 12,500’ 16” @ 13,000’ 13 3/8” @ 14,000’ 11 3/4” @ 15,000’ 9 5/8” @ 17,500’ 7 5/8” @20,000’ 5 1/2 “ @ TD 0.5 ppg standoff no influx

31. Confidential to Subsea Mudlift Drilling JIP11/6/00DGD Template 31 of 64 Equipment overview Marine Riser SRD - SubSea Rotating Diverter DSV - Drillstring Valve MLP - MudLift Pump Return Lines Manifolding Dual Trip Tanks

32. Confidential to Subsea Mudlift Drilling JIP11/6/00DGD Template 32 of 64 Wellhead and BOP Return Line Drillpipe Rotating Diverter BHA Drill String Valve Mud Return and Pump Seawater-Driven MudLift Pump Seawater Filled Marine Riser SubSea MudLift Configuration Seawater Power Line, Control Umbilicals Seawater Pumps (Existing Mud Pumps)

33. Confidential to Subsea Mudlift Drilling JIP11/6/00DGD Template 33 of 64 Marine Riser Essentially a conventional riser filled with seawater

34. Confidential to Subsea Mudlift Drilling JIP11/6/00DGD Template 34 of 64 Wellbore Components Subsea Rotating Diverter (SRD) Return Outlets Riser Adapter

35. Confidential to Subsea Mudlift Drilling JIP11/6/00DGD Template 35 of 64 Drill String Valve (DSV) Flow Nozzle Closing Spring

36. Seawater Driven MudLift Pump Mud Enters the Diaphragm Pumps Mud Inlet Seawater Pumped from the Rig Displacing the Mud Back to the Rig Mud Outlet While Seawater Discharged to Sea

37. Confidential to Subsea Mudlift Drilling JIP11/6/00DGD Template 37 of 64 Stroke Indicator Sensor (Fixed) Hydraulic Fluid In/Out Mud In/Out Diaphragm Stroke Indicator Magnet Assembly Stroke Indicator Tube (Moving) Connection to Diaphragm Diaphragm Pump

38. Confidential to Subsea Mudlift Drilling JIP11/6/00DGD Template 38 of 64 Seawater Driven MudLift System 14’ x 17’ x 11’h 175,000 lbs plus Seawater Conduit Mud ROV-Style Cables B C K H Seawater

39. Confidential to Subsea Mudlift Drilling JIP11/6/00DGD Template 39 of 64 Return Lines Manifolding Seawater Trip Tank Mud Trip Tank

40. Confidential to Subsea Mudlift Drilling JIP11/6/00DGD Template 40 of 64 The End Jerome J. Schubert Introduction to DGD