Warren True
Chief Technology Editor-Pipelines/Gas Processing
HOUSTON, May 9 -- US independent oil and gas companies have been increasingly active and productive in the US Gulf of Mexico. And access to new areas as well as some royalty relief in existing areas will allow them to continue playing this vital energy supply role for the US in the near term.
That was the message of Chuck Davidson, CEO, president, and chairman of Noble Energy Inc., Houston, speaking at this week's Offshore Technology Conference in Houston. Davidson made his remarks as part of a panel representing the US Independent Producers Association of America.
Industry condition
Davidson said the events of the past 2 years have shown how closely coupled is the energy industry's health with energy prices. He said that high levels of activity and costs in early 2001, in response to the high prices commodities were attracting, led to increases in gas supplies. And he noted how rapidly US gas drilling faded as inventories grew and those same prices began to sag.
At present, a reviving economy is driving up gas demand—and prices—along with the natural gas rig count. But the underlying long-term demand for natural gas in the US remains strong, he said, although both producers and consumers continue to see highly volatile prices.
The IPAA's objective, said Davidson, is to obtain access to the new resources so important for future supply growth.
Among issues the industry faces, however, is continuing consolidation as companies work to increase efficiency and gain access to capital. Technology is playing a huge role in these efforts, specifically by making more mature areas more productive and aiding efforts in newer, more difficult regions.
Davidson noted that there are about 8,000 independents currently active in the US who have drilled more than 85% of all wells in 33 states with oil and gas. He also showed how independents' involvement in US oil and gas development has increased, to 60% of US upstream investment in 2000 from 35% in 1980.
Independents hold nearly half the federal leases nationwide, 80% of the shallow-water leases in the Gulf of Mexico, and 50% of the deepwater leases. Davidson said that in the recent federal gulf lease Sale 182, independents had apparent high bids on more than 80% of the tracts.
Deep tracts
In the gulf, independents face fewer and smaller prospects and a higher rate of decline in existing fields, which Davidson said advances in technology are helping to mitigate. Deep water presents longer development times, risks more capital, and raises significantly more difficult technical challenges.
Davidson particularly noted the challenges of the deeper-strata Outer Continental Shelf—wells to below 15,000 ft—where advanced seismic technologies have enhanced prospectivity. There, the target sizes are larger than on what he called the "conventional" shelf.
He said US Minerals Management Service studies put the gas potential below 15,000 ft at 5-20 tcf. In 2001, with 35,000 wells drilled to date on the shelf, only 5% had penetrated below 15,000 ft.
It's at these drilling depths that producers receive some favorable royalty consideration.
Also using MMS data, Davidson pointed out how production from deepwater tracts has, beginning in the mid and late 1980s, allowed total Gulf of Mexico production to continue to grow. Shelf production has been flat and, since the mid-1990s, declined to about 15 bcfed in 2002, while production from the deepwater gulf in the same year pushed total gulf production to about 23.5 bcfed.
Contact the author at [email protected]
