OGJ Senior Editor
HOUSTON, May 4 -- Deepwater oil and gas exploration will remain one of the world’s “pillars of supply” for its energy needs despite its high-risk exposure to remote locations and commodity price volatility, according to industry panelists at the 41st annual Offshore Technology Conference in Houston.
Offshore fields have yielded nearly 70% of the major oil and gas discoveries in the last 10 years, said Bob Fryklund, a director with IHS CERA and a panel moderator.
Major discoveries “are still being made” around the globe, said panelist Jim Demarest, director of international exploration for Noble Energy Inc.
These discoveries are being found through the use of ever-advancing seismic technology, Demarest said, among other things. These advances have shown industry “things we never thought possible,” he said.
Demarest noted, however, that technology largely resides in service companies and quickly becomes available to everyone, making it difficult for companies to maintain a “technical edge.”
Access to acreage also continues to challenge industry, Demarest noted. Higher commodity prices have created pressure for a “larger slice of pie” for governments, he said, speaking of rights to access acreage, particularly in sovereign nations. He said countries with a solid track record of “sanctity of contract” will continue to attract investment.
Demarest said Noble’s exploration budget for 2010 is the largest in the company's history. But the company has a disciplined approach to acquisitions, not “buying resources for resources’ sake,” he said.
As for where exploration is headed, Demarest said technology will continue to improve, but he believes that targets will continue to get smaller. At the same time, companies’ success rates also will continue to improve. “On average, the size of fields will go down, but will remain profitable,” he said.
In short, Demarest said, if industry players do not excel at exploration, they should “buy, don't try." He noted that exploration companies must have several core competencies including dealing with market volatility, having the technological know-how, and exercising financial discipline.
Being a “first mover” is risky, but “you better not be far behind,” he noted, adding, “It is not about luck.”
ConocoPhillips, meanwhile, has changed its direction in recent years to organic growth, said Larry Archibald, senior vice-president. The major is choosing to expand through exploration and “high-impact wildcats,” he said, adding, “There’s lots of running room in resource plays.” The company intends to continue expanding its footprint in deepwater plays, he said.
Archibald added that there are many deepwater plays that remain lightly tested. Other areas have been off-limits because of being tied up in boundary disputes.
Overall, Archibald said, “The revolution has been in horizontal drilling and completion.”
World consumption growing
“The world is consuming a major deepwater Gulf of Mexico field every day,” observed Frank Patterson, vice-president, international, Anadarko Petroleum Corp. The average discovery in the gulf is about 83 million boe, Patterson calculates, and the world consumes about 85 million bo/d. Of that total, the US consumes about 20 million bo/d. The average global field size (in 2000-09), meanwhile, is about 22 million boe, he said.
Anadarko is looking for oil internationally and has had “a good run on exploration in the last few years,” Patterson noted. Good technology is key, he said, but how that technology is applied is just as important.
In short, Patterson said, the exploration game is “not about unconventional resources” as it is “about unconventional thought.”
Like other panelists, he agreed access remains a challenge. Patterson pointed out, “Fields do not abide by political and geographical boundaries.”
Other strengths of Anadarko include consistent and efficient investment as well as alignment with the right partners. “It can be contentious at times,” between partners, but it’s about “communication, communication, communication,” he said.
Regarding technology, it is most important to use “the right tool, at the right time, at the right price,” Patterson said.
In the end, he said, companies need to remain “committed to the process.”
Advances in the computing environment has been one of the major developments behind the improvement of seismic technology and imaging, said Jeff Spath, president, reservoir management, Schlumberger.
Advances in technology used to measure and log while drilling, for example, allow for companies to have the “ability to image where we’re going, and while we’re going.”
Separately, the panelists opted not to comment directly to questions posed by the press about the Deepwater Horizon semisubmersible incident now spilling crude oil into the Gulf of Mexico. Officials from BP PLC, which was leasing the semi from Transocean Ltd., also cancelled at least one planned appearance at the conference so that it could concentrate efforts on continuing spill-response efforts.
Contact Steven Poruban at firstname.lastname@example.org.
OTC: Panel weighs in on future of offshore exploration