GLOBAL OFFSHORE OIL-1: Exploration trends show continued promise in world’s offshore basins

March 5, 2007
The production performance of the global offshore has been remarkable, and it has not reached its full potential.

The production performance of the global offshore has been remarkable, and it has not reached its full potential.

Globally, 500 billion bbl of oil have been discovered, of which 200 billion bbl have been produced. Giant offshore fields represent 41% of the total oil discovered, and these are located in several regions albeit in few geological settings.

A heuristic approach developed in this article suggests that there could easily be 30% more oil than what is currently estimated. Further, there is large undiscovered potential as several regions remain underexplored and others have not been explored at all.

The ultimately recoverable reserves (URR) for the global offshore are close to 1 trillion bbl. Over the decades, E&P trends in the offshore have remained highly encouraging, particularly given that both yearly discoveries and average field sizes have remained the same over the last three decades.

Offshore is the next frontier in global oil supply. It’s amazing what $50 oil will do!

Offshore evolution

The oil industry has expanded consistently over the last decades from land operations to inland waterways and then to offshore.

Offshore barges for exploration began to be used in 1950, deepwater drillships in 1956, and semisubmersible rigs in 1964.

In the 1980s, deepwater exploration meant 800 ft of water. Today, 1,500 ft of water is considered shallow, 1,500 to 7,000 ft is considered deepwater, and over 7,000 ft is termed ultradeep water.

Offshore oil production started in the early 1940s and has grown from a modest 1 million b/d in the 1960s to nearly 25 million b/d in 2005 to represent one third of world crude oil production. Conversely, onshore crude production needed six decades to reach 25 million b/d in 1963.

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Unlike onshore oil production, offshore production has never experienced sharp downward fluctuations and has grown consistently over the years (Fig. 1). In fact, it has been the main source of growth for world crude oil production as the onshore has essentially remained at plateau for more than two decades.

In 2005, the Persian Gulf/Middle East topped the list of offshore producers, followed by the North Sea, West Africa, the Gulf of Mexico (US and Mexico), Asia/Australasia, Brazil, China, Caspian, and Russia/Arctic (Table 1). Of the total offshore crude, shallow water accounted for 20.3 million b/d and deepwater 3.5 million b/d. Other liquids such as natural gas liquids (NGL) totaled 1.6 million b/d, mainly from the shallow water offshore.

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Up through 2005,1 a total of 503 billion bbl (455 billion bbl of crude oil and 48 billion bbl of NGL) has been discovered offshore, of which 204 billion bbl have been produced, leaving estimated remaining reserves at nearly 300 billion bbl.

The most important offshore oil discoveries have been made in the largest producing regions mentioned above. Offshore China, Caspian, and Russia/Arctic exploration has been relatively limited, while in other producing areas exploration has only yielded relatively limited success.

In terms of yet-to-find (YTF) reserves, the only institution to have published undiscovered global estimates for oil that segregates offshore and onshore is the US Geological Survey.2 3 The USGS 2000 world petroleum assessment put the estimate for undiscovered offshore hydrocarbons at 306 billion bbl of crude oil and 95 billion bbl of NGL, representing 47% of total undiscovered oil in the world.

Therefore, there should be no doubt that from a resource and production perspective the importance of the offshore is paramount. However, most research fails to discern or disaggregate between offshore and onshore.

Furthermore, the growing significance of global offshore activities merits a reassessment of the classical Hubbert model predictions.4 This decline model is solid and handles adequately severe events5 such as sharp production fluctuations, new large discoveries, EOR, etc.

However the result of pooling production from different types of provinces-mature onshore with a strong emerging offshore-with different histories introduces interpretative distortions that inevitably lead to off-beam estimations of world oil resources, depletion, and maximum oil supply estimates.

In fact, the world crude oil (onshore and offshore) decline linear trend line has shifted its course6 after 1995 following the impact of offshore production. Eventually a new trend line will develop once the offshore effect reaches steady state, sometime in the distant future. A similar situation occurs with US natural gas.7

The objective of this two-part article is to estimate the potential of the world’s offshore oil provinces using an analogy of the size distributions of the giant onshore and offshore fields discovered to date and provide a medium-term production outlook for global offshore.

Largest regions

It is no coincidence that the world’s largest offshore oil producing regions are also endowed with rich onshore petroleum systems.

The Persian Gulf/Middle East is the world’s largest oil producer and has the largest concentration of reserves.

West Africa primarily produces hydrocarbons from two large offshore provinces, and it also has significant onshore reserves and production.

The Gulf of Mexico is a world class province surrounded by two countries that have significant onshore petroleum systems.

Asia/Australasia is a large region comprised of several countries, but the petroleum resources are found in tectonically linked basins that originated in the same process (i.e., Sunda). Oil production is primarily from offshore basins in this complex region, but it also has onshore oil provinces.

The North Sea and Brazil are in a class of their own as most oil reserves and production are in offshore settings.

The regions of China, Caspian, and Russia/Arctic share the following characteristics: a) onshore contains significant amounts of reserves and production, b) offshore oil production is presently either low or growing rapidly, c) limited number of offshore oil discoveries and exploration activity to date, and d) large geological petroleum systems.

Since the 1970s, the setting of the giant fields (500 million bbl or more recoverable) has been studied8 9 with the objective of understanding the geographical and geological settings of the world’s petroleum systems.

In one of the most comprehensive studies of this type, Mann et al.10 reviewed the setting of 877 giant oil and gas fields representing two-thirds of the petroleum resources and found that these were not only located in few geographical regions but that they are concentrated in few tectonic settings. The three types of settings are: passive margins (304 giants), continental rifts (271 giants), and collisional margins (173 giants).

That study and the USGS 2000 assessment also concluded the following regarding the known petroleum systems of the world:

a) The typical depositional environment of reservoir rocks is nonmarine to marine (43% of known reserves) and shallow marine (36% of known reserves).

b) Less than 11% of the known reserves have been deposited in deep marine environments (turbidites).

c) The age of the reservoir rocks is commonly Mesozoic (65% of the known reserves) and Cenozoic (20% of the known reserves); less than 13% of the known reservoirs are Paleozoic or older; and

d) regarding trapping mechanisms, the most common traps are structural (over 71% of the known reserves); and only 5% of the resources have been found in stratigraphic traps.

For the world giant offshore oil fields only, no similar assessment has been made. This study provides an assessment based on the classification proposed by Mann et al. and the USGS 2000 assessment using an updated database of 67 giant offshore oil fields that represent 211 billion bbl (41%) of the total oil discovered offshore. A synthesis for each region is provided in Table 2.

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Some discernable observations about offshore giants are:

a) The tectonic setting is commonly passive margin (45 giants).

b) The depositional environment of the reservoir rock is dominated by nonmarine to marine sands (43 giants).

c) The age of the reservoir rock is Cenozoic (33 giants) and Mesozoic (29 giants).

Accumulations in deepwater giants are exclusively associated with turbidite reservoirs (26 giants) of Cenozoic age. The typical trap is structural (34 giants) and a combination of structural and stratigraphic (31 giants).

Offshore trends

Since offshore exploration began in the 1940s, some 17,700 exploration wells have been drilled in shallow water resulting in 2,500 new oil discoveries.

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In deep water, exploration began in the late 1970s and since then nearly 2,000 exploration wells have been drilled resulting in 400 new oil field discoveries (Figs. 2 and 3).

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In shallow water, the number of exploration wells drilled has remained at around 500/year in the last 25 years. In contrast, the number of deepwater wells has been increasing steadily since 1997 and is now over 100 wells/year.

Over the last 25 years, the average number of new offshore oil field discoveries has remained close to 80/year and the success rate more than 30%. The highest number of discoveries was recorded in 1982 at 118; two other record years were 1990 with 109 new oil discoveries and 2003 with 104 new oil discoveries.

The above efforts have resulted in the discovery of 500 billion bbl of oil in three broadly defined exploration phases (Table 3).

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The first identifiable phase is from the 1940s to 1972.

This phase is characterized by the first offshore discovery made in the US Gulf of Mexico in 1947, the discovery of the supergiants in the Persian Gulf, the first discoveries in West Africa, and in the later part of the period, the first giant discoveries of the North Sea.

Elsewhere, two giant discoveries were made in Australia and one in China. During this initial phase, the cumulative oil discovered was 198 billion bbl, the yearly average discoveries totaled 8.3 billion bbl, and the discovery size averaged 770 million bbl.

The second phase is from 1973 to 1990.

This phase is characterized by giant discoveries in the North Sea, Mexico, Caspian, Russia/Arctic, and the first deepwater discoveries in the US Gulf of Mexico (1983) and Brazil (1984).

There are also two notable giant discoveries outside the previous regions: Bombay High off India and Hibernia field off Canada. Elsewhere, discoveries continued to be made in West Africa, Asia/Australasia, and shallow US gulf. During this phase, the cumulative oil discovered was 171 billion bbl, the yearly average discoveries totaled 9.5 billion bbl, and the discovery size averaged 135 million bbl.

The last phase began in 1991 and extends to today.11

This phase is characterized by giant deepwater discoveries in the Big 4 (Brazil, Angola, Nigeria, and the US gulf). However, several giant discoveries have been made in other regions including the North Sea, Caspian, and China; smaller discoveries were made in Asia/Australasia, shallow-water West Africa, and the Persian Gulf.

During this recent period, the cumulative oil discovered was 121 billion bbl, the yearly average discoveries totaled 8 billion bbl, and the discovery size averaged 116 million bbl. Of the total oil discovered, deepwater and ultradeepwater fields accounted for 44 billion bbl, 3 billion bbl/year.

Looking specifically at the deepwater, the geological evidence to date suggests that it is a play with limited prospectivity within the context of the global offshore, primarily due to the fact that the best quality reservoirs are exclusively associated with turbidities.

It should be noted that deepwater Mexico is considered the single largest prospective province of this kind remaining in the world. It has seen no exploration whatsoever with only three wells drilled in established areas.

Other deepwater provinces outside the Big 4 have seen some successes (i.e., Australia, Malaysia, Mauritania, Ivory Coast, China), but the global impact has yet to be seen. The ultradeepwater play has been much discussed following the recent Jack well in the US gulf.

No attempt is made in this article to evaluate the E&P record or address the potential of the ultradeep worldwide, as not enough information and history are available. However two points are worth making.

First, global prospectivity is very unique to geological settings only so far known in limited areas. Second, having the technology to go to ultradeep water does not mean one can go to any water depth to explore. In most parts of the world, 12,000 ft of water is touching the edge of the continental shelf, beyond which no sedimentary rocks can be expected.

Overall, measured in terms of cumulative exploration wells drilled and wells per square kilometer of sedimentary basin, the regions more explored have been the shallow US gulf, North Sea, Persian Gulf, and Australasia; West Africa, Mexico, China, Caspian, and Russia/Arctic are the least explored.

Offshore regions such as North Africa and eastern Canada have seen very limited exploration with some successes; others like deepwater Mexico, Red Sea, Pacific, and North Atlantic have seen no exploration.

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Fig. 4 shows the cumulative number of exploration wells drilled and oil discovered worldwide offshore. As can be seen, the global offshore does not show the signs of a mature exploration play.

Next: Estimating the global offshore oil reserve base.

The authors

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Ivan Sandrea ([email protected]) is the principal oil supply analyst for the Organization of Petroleum Exporting Countries. He previously worked as a global E&P analyst for Merrill Lynch in London and before that as an exploration geologist for British Petroleum International. He has a BS in geology from Baylor University, an MS in petroleum geology, and an MBA from Edinburgh University.

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Rafael Sandrea ([email protected]) is president of IPC, a Tulsa international petroleum consulting firm. He was formerly president and chief executive of ITS Servicios Tecnicos, a Caracas engineering company he founded in 1974. He has a PhD in petroleum engineering from Penn State University.