WPC: Deep water holds industry's greatest challenges, opportunities

A panel of international experts Thursday explored the promise of deepwater operations, which offer the best chance for major oil and gas discoveries around the world. Activity will increase and competition will become more intense, with the industry expected to spend some $76 billion to find and develop some 19 billion boe in deep waters around the globe through 2004, said Luiz Rodolfo Landim Machado, a Petroleo Brasileiro SA executive.


CALGARY�A panel of international experts Thursday explored the promise of deepwater operations, which offer the best chance for major oil and gas discoveries around the world.

Activity will increase and competition will become more intense, with the industry expected to spend some $76 billion to find and develop some 19 billion boe in deep waters around the globe through 2004, said Luiz Rodolfo Landim Machado, a Petroleo Brasileiro SA executive.

Some 32% of those reserves will be developed in deep waters off West Africa, 27% in the US sector of the Gulf of Mexico, and 22% off Brazil, said Machado, who chaired the panel discussion on deepwater production options at the World Petroleum Congress here.

Most of those reserves, some 13 billion boe, will be developed in water depths of 500-1,500 m, he said.

Gulf of Mexico
The deepwater Gulf of Mexico frontier provides some of "the greatest challenges in scope and opportunity," said David T. Lawrence, vice-president and general manger of Shell Exploration & Production Co.

"It is a frontier that has started to be settled but still has large areas that are wide open," he said. And as with any frontier, said Lawrence, "The penalties for failure are high, but the rewards are great."

The gulf is a "salt-dominated basin," where the movement of salt deposits over the ages has created multiple subterranean traps where many plays can be accessed, Lawrence said.

Shell has been a leader in exploring and developing the deep waters of the gulf, participating in 38 of the 79 total discoveries in those waters thus far.

In the process, Shell has followed a strategy of placing platforms on some of its larger discoveries, which it then uses as production hubs to which it can tie-back smaller nearby finds through subsea systems. In that way, the company is advancing its production infrastructure into deeper waters.

Shell has taken a long-term approach to its deepwater operations in the gulf, acquiring its first deepwater acreage in the early 1980s.

It also approaches deepwater development on something of the same level that the US National Aeronautical and Space Administration approaches its space projects, Lawrence said. Deepwater projects "are as remote as the moon" and it costs about as much to work there, he said.

Like outer space, exploration of deep waters poses huge risks, where even a minor glitch can be disastrous. It therefore requires detailed advanced planning and is driven by the development of new technology, said Lawrence.

The "drilling the limit" approach developed by Shell has helped the company reduce deepwater drilling times by 40%, which also cuts costs (OGJ, Apr. 3, 2000, p. 47). And the company has a stringent personnel and environment safety program to ensure fewer accidents and releases, which adds to the bottomline, Lawrence said.

Production methods
Most of the deepwater concessions off West Africa have been awarded in the last 5 years, so there is nothing like the offshore production infrastructure in those waters that has been developed in the last 50 years in the shallow waters of the Gulf of Mexico and that are now being extended into deep waters.

As a result, floating production, storage, and offloading vessels (FPSOs) have proven invaluable there, said Jean F. Duhot, technology manager of West African operations for TotalFinaElf SA.

That company is now building the world's largest FPSO, capable of storing 2 million bbl of oil and treating 200,000 b/d of oil, to develop Block 17 off Angola. That vessel is expected to be in operation next year, Duhot said.

The US Minerals Management Service is now considering whether FPSOs can be used as safely as alternative systems to produce isolated deepwater oil reserves in the US Gulf of Mexico. Lawrence said he expects to see the first FPSO project in the gulf within 5 years.

Harsh environments
Meanwhile, Thore C. Thuestad, an advisor on deepwater technology at the Norsk Hydro E&P Research Center in Norway, is among those studying ways of producing oil from water depths of 1,000 m in the harsh environment of the Atlantic Margin off Europe.

Winds and waves in that exposed area make weather conditions even rougher than are usually found in the North Sea. Wave peak periods are longer and higher than those measured during hurricanes in the Gulf of Mexico, Thuestad said.

Moreover, water temperatures along the deeper floor of the Atlantic Margin are even colder than in much of the North Sea, increasing the threat of hydrates and wax buildup that could block lines.

Norsk Hydro researchers are looking at the use of floating pipelines to span some of the wide and deep crevasses on the ocean bottom in that area. They also are looking further in the future to the use of subsea production systems that tie back to shore-based processing facilities, Thuestad said.

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