Christopher E. Smith
Managing Editor-Technology
Time moves quickly. No less so in the oil and gas industry than anywhere else. By the time you're reading this I will have just returned from dropping my son off at Vanderbilt University to begin his sophomore year. It's a time for reflection.
When he was born, oil markets were approaching a post-1986 bottom, and major oil companies were merging with each other rapidly. BP Amoco was born, beginning life as the largest producer of both oil and gas in the US. ExxonMobil Corp. entered the world a year later, followed in 2000 by ChevronTexaco Corp. The average West Texas Intermediate spot price for 1998 ended up being $14.42/bbl.
I was covering petrochemical markets at the time. Feedstock was cheap, and demand was expected to grow. Producers were expanding their capacity.
Projections in 1997 called for a huge production surplus to be in place by 1999. "From what we know now," Chemical Markets Associates Inc. Pres. Patrick E. Bagget said, "the large capacity wave is coming and will hit our shores by 1998. It will last until early into the next decade. With new capacity and the resulting decline of petrochemical operating rates, the degree of world competition will certainly increase."
Time warp
Production from the Anadarko Petroleum Corp.-operated Independence Hub started in 2007. My son was 9, and he and I were experiencing all the joys of parent-led youth athletics. The price of oil had recovered to average $91.69/bbl in December of that year on its way to its July 2008 peak of $133.37/bbl.
Independence Hub was an epic project, gathering natural gas from six Gulf of Mexico fields in 7,800-9,000 ft of water and shipping it at rates up to 1 bcfd via a 140-mile pipeline to a Tennessee Gas Pipeline tie-in at West Delta 68 and on to the US Gulf Coast. Enterprise Products Partners LP owned both the hub and the 24-in. OD pipeline.
I had the fortune of visiting Heerema Marine Contractors' deep sea construction vessel Balder shortly after it had completed lifting the hub's export riser. The scale of the vessel was impressive, dwarfing the hub itself, the technology and engineering at work even more so. The Indonesian chow line was also great. Between it and the American line featuring nonstop beef tenderloin, it's a good thing those guys work as hard as they do, otherwise they'd all come home weighing 300 lb.
The hub is now talked about in the past tense because, despite its grandeur and seeming permanence, it transferred its last gas in December 2015: mission accomplished.
Not all projects move as quickly, however. Kashagan field, discovered in 2000 off Kazakhstans in the Caspian Sea, exported its first crude oil in October 2016 after multiple development delays centered mostly on its cold and simultaneously fragile and harsh shallow-water environment and subsequent need to use manmade islands for production instead of the more typical fixed platforms.
An initial attempt to start production in 2013 was halted by a gas pipeline leak. Now production is approaching 370,000 b/d out of a total designed capacity of 450,000 b/d. Kashagan, operated by North Caspian Operating Co.-comprising KazMunaiGaz, Eni SPA, Royal Dutch Shell PLC, ExxonMobil, Total SA, China National Petroleum Corp., and Inpex Corp.-has an estimated 35 billion bbl of oil in place.
And it's not the only crude weighing on the market. Oil prices struggle to remain stable at the "low" price of $50/bbl as the Organization of Petroleum Exporting Countries tries to maintain production quotas and the drilled-but-uncompleted well inventory in West Texas mounts.
As one cycle teeters near completion the next begins, in both the oil and gas industry and life itself.