Elf Aquitaine SA appears to have cornered the market for big finds with its recent string of oil strikes off West Africa (OGJ, Oct. 25, 1999, Newsletter).
Yet Pierre Senequier, Elf's vice-president for technology, told the Deep Offshore Technology conference in Stavanger last month that big is no longer beautiful unless it is also cost-effective.
Eight months ago, when the Brent price was about $11/bbl, Senequier's group was asked to give a presentation to financial analysts on Elf's deep offshore program.
Because nobody was prepared to be "a scapegoat or sacrificial anode," the presentation concentrated on the medium term rather than the immediate future, preaching optimism based on technological progress.
Refreshingly, at a time when research and development budgets are viewed as optional, Elf persuaded its bean-counters to think beyond the fiscal yearend.
Size matters
Senequier asked rhetorically whether the deep offshore could be economical with crude at less than $13/bbl or if only elephants can bring value there.
"Deep offshore," said Senequier, "is a fantastic challenge, for now and the next 10 years. It was already a challenge when the price was $16/bbl. Now we are asked to implement projects economically resistant to prices down to $12/bbl and even $10/bbl." He said it is certainly worth oil companies taking up this challenge, because the deep offshore area is one of the last new plays in the world with the potential to make discoveries amounting to more than 100 million bbl.
"The deep offshore is a play that gives a frequent combination of size and high productivity," said Senequier. "It is worthwhile because it is a play where seismology is at its best, and don't forget that knowing before drilling is one of our Holy Grails."
Today, the industry can get a good return on its investment for a field development in 5,000 ft of water at $13/bbl, said Senequier, but a minimum of 500 million bbl of oil reserves is typically required for viability in an isolated area.
Commitment
Elf reckons that deepwater exploration, development, and production costs can be reduced though an array of technologies to the extent that discoveries will be declared viable at an oil price 30% lower than today's.
"In Elf," said Senequier, "we think that the deep offshore is one of the most promising plays of the next years; one of the strongest at a time of depressed prices, too. That's why 60% of our exploration budget is dedicated to deep offshore for the next 3 years.
"The development of the fields we have recently discovered already represents 30% of our effort in the years to come and should reach 60% with a cautious rate of success for our exploration.
"We had a success ratio of 60% for the period 1997-98 in the deep offshore in the Gulf of Guinea. This effort should lead deep offshore to represent 35% of our production by 2008.
"But this progress in technology is not on the shelves waiting for you when you need it. That is why we'll keep a high standard of R&D within the company, especially in deep offshore, although it would be very tempting to cut deeply into that budget to make the annual profits look better."
