DEEPWATER WORK TO COMMAND GROWING SHARE OF OFFSHORE E&D

Deepwater activity will continue to command a growing share of the global offshore exploration and development industry.

Much of that thrust to date has come in response to the shrinking portfolio of commercial prospects in shallow waters.

In addition, as regulatory and political barriers continue to fall around the world, the amount of deepwater acreage available to private companies will continue to expand dramatically.

However, the main driver of industry's expansion into waters deeper than 200 m is advancing technology. The focus of those technological advances has been on cutting capital and operating expenses.

Accordingly, most deepwater technological advances are evolutionary in nature, as most of the feasible basic design concepts are well established. That in turn calls for a greater standardization of the hardware and methods used in deepwater E&D.

Those are among the key issues identified in papers presented at the Deep Offshore Technology conference last month in Rio de Janeiro.

Jean-Francois Giannesini, chairman of France's Nomad SA, provided an overview of oil and gas licensing, exploration, and development activity in deep waters around the world.

Joel Mendes Renno, president of Brazil's state owned Petroleo Brasileiro SA, gave an update of deepwater activity off Brazil. Petrobras is widely regarded as a leader in advancing deepwater technology.

A sampling of other papers presented at the conference yields a look at some recent advances in subsea technology and a review of lessons learned in the evolution of tension leg platform (TLP) technology.

Status of Woldwide Deepwater Acreage chart (229683 bytes)

DEEPWATER ACREAGE OVERVIEW

Giannesini analyzed some of the decisive milestones in the industry's campaign to exploit deepwater hydro-carbon reserves.

He focused on these indicators: evolution of deepwater acreage under license, status of reserves, the ratio of development wells drilled to exploratory wells, and projections of deepwater oil and gas production.

After evaluating the data gathered, he decided to define as "deepwater" water depths greater than 200 m, "not pretending to fix a standard, but because this figure corresponds more or less to the extent of the first part of the continental shelf."

Currently, 56 countries are engaged in deepwater exploitation or at least in the licensing process, compared with 42 as of yearend 1992, Giannesini said.

"Setting aside Mexico and Brazil-the cradle of deep offshore exploitation with a deepwater territory of about 720,000 sq km- where exploration and production in deep waters is still restricted to national oil companies, by yearend 1992 acreage under license was around 1 million sq km. During 1993-95, a 60% increase in licensed areas took place, reaching 1.6 million sq km by yearend 1995, thanks to Southeast Asia and West Africa-a newcomer to the play.

"Obviously not all square kilometers are equal in terms of interest. The interesting point concerns the policy followed by countries in their licensing process, especially the newcomers such as West African and Southeast Asian countries that followed a gradual process compared with that of Pakistan. In these new regions, it is expected that major fields will be discovered in coming years."

DISCOVERIES, RESERVES

Giannesini noted a total of 301 deep-water discoveries has been disclosed since deepwater exploration began.

Of those, the U.S. has the most at 121, followed by Norway with 60 and Brazil with 35. In terms of reserves volume, the deepwater sector is dominated by large oil discoveries off Brazil and major gas discoveries off Norway.

As for the number of wells drilled per discovery, Giannesini said, for a decade that was established as a ratio of 5.75:1, or 301 discoveries for 1,732 exploratory wells drilled, compared with a ratio of 5:1 in medium to shallow water depths. The most encouraging aspect, he said, is that the average size of deep offshore discoveries is much bigger than those in shallower waters.

"The costs are obviously higher, but the rewards are also," he said.

Geographically, the deepwater picture presents sharp contrasts. Most deepwater oil reserves are concentrated off Brazil, Norway, and the U.S., with Brazil taking the lead with 36% of the deepwater oil reserves. For deep-water gas reserves, the dominant regions are the nations of the former Soviet Union (FSU), Norway, and Australia, with the FSU leading with 42% of deepwater gas reserves.

Worldwide, remaining reserves in deep waters total 24 billion bbl of oil and 267 tcf of gas. Sorted by water depth, about 81% of gas reserves are in water depths shallower than 400 rn. For oil, water depths of 200-400 m account for 54% of total reserves.

"The apparent lack of reserves from the intermediate section of 400-800 m results more from a lower volume of acreage rather than from natural distribution. Thus, while oil development will most probably concern all water depth ranges, gas development will mainly concern the upper section.

"The incentive to develop gas in the deepest water sections is weak, considering the huge amount of reserves already discovered in the upper one. Most energy officials recognize gas will be the major deepwater issue in coming decades. The location of gas reserves in terms of geography and water depth is therefore a major factor for designing a strategy of production and access to the market."

Deepwater Drilling Chart (203938 bytes)

DEVELOPMENT DRILLING SHARE

Giannesini noted that until 1986, most offshore wells were drilled in less than 400 m of water, and deepwater wildcatting was sustained by expectations of relatively high oil prices.

During 1987-91, low oil prices resulted in reduced overall deepwater drilling activity.

Although exploration in 200-400 m of water still accounted for most deep-water drilling during this period, expectations of an oil price recovery and the hope of finding larger fields resulted in an increasing number of wells drilled in more than 1,000 m of water, Giannesini said.

By 1992, in spite of flat oil prices, the number of deepwater wells drilled had doubled. More significant, noted Giannesini, is the fact that this increase was fueled by accelerated drilling in water depths greater than 400 m.

"This illustrates one of the characteristics of this industry: the need for stability to develop long term strategies. A stable price around $16/bbl is better than a chaotic oscillation between $12/bbl and $20/barrel," he said.

The increase in deepwater development drilling has been especially dramatic. Until 1987 the number of deep-water development wells drilled was marginal, less than five per year. During 1988-95 this number jumped twenty fold to reach 100 development wells in 1995, with all ranges of water depths well represented, except for those greater than 1,000 m.

The changes occurring in deep offshore activity are more clearly highlighted by the ratio of development wells to total wells, Giannesini said.

Globally, for all wells drilled in waters deeper than 200 m, this ratio has remained at 0.4-0.5:1 since 1992. In mature deepwater areas such as the North Sea and Gulf of Guinea, the ratio has topped 0.5:1 in waters less than 1,000 m deep.

Taking these figures into consideration, Giannesini concluded that 1992 projections of development activity in deep waters shallower than 1,000 m have been confirmed by data of the past 2 years.

Deepwater Production Chart (105990 bytes)

DEEPWATER PRODUCTION

The outlook is for a big surge in deepwater oil and gas production after the turn of the century.

Looking at available data for fields expected to go on stream by 2000, Giannesini projects deepwater gas production will rise substantially to 2010, mainly because of developments off Norway.

He notes this outlook could change dramatically if the huge gas reserves off the FSU were to go on stream in the intervening years.

Giannesini thinks the deepwater gas production outlook also hinges on the choice for marketing the gas-pipeline or liquefaction-specially for Europe. About 80% of that gas production will come from the shallower portion of the deepwater areas-consistent with reserves distribution-and most of the remaining production will come from the 800-1,000 m water depth portion.

"For oil, Brazilian and Norwegian peak production tends to occur slightly after 2000, not taking into account the fields coming on stream after this date."

Worldwide, the 3.5 million b/d production target could be reached at the turn of the century.

"This means that deepwater production could be for the first decade of the next millennium what the North Sea is for the last decade of this one."

In coming years, the importance of deepwater production in terms of technology, investment, and activity will be greatest in water depths at 200-400 m, Giannesini said. Although acknowl- edging this is a pessimistic forecast in terms of the proportion of activity in deeper waters, he contends that work in waters deeper than 400 m will maintain, if not increase, its production.

Giannesini's forecast assumes an oil price of about $15- 18/bbl but does not omit the possibility of a price collapse.

He estimates industry will invest $20,000/b/d of production for deep-water work, leading to a sum of $70 billion to be invested by 2000. That compares with a total petroleum industry capital investment he puts at $77 billion in 1995.

"Thus if the target of producing 3.5 million b/d is to be reached, 10-20% of the oil industry's annual capital investment will have to be directed to deep offshore exploitation."

Giannesini also questions the availability of technical resources, drilling rig capacities, and enough drilling rigs to underpin this potential deepwater development activity while still maintaining deepwater exploration at a healthy level. He notes the recent increase in day rates for offshore drilling rigs reveals a tightening supply of rigs, a trend that could prove even more critical for deepwater drilling rigs.

"In countries where there is not a strong national incentive to develop deeper water reserves, development deeper than 1,000 m could remain marginal for more than a decade. Because we can now affirm that technology is available and that from all aspects deepwater production is possible, the move into deeper waters will result from a deliberate choice of business strategy, dictated by the laws of economy."

PETROBRAS EFFORTS

Renno estimated that of Brazil's total oil production of about 800,000 b/d, more than 500,000 b/d is produced off Rio de Janeiro state, of which 50% comes from waters deeper than 300 m.

Of Brazil's total potential offshore oil and gas resources pegged at 10.3 billion bbl of oil equivalent (BOE), 37% is in 400-1,000 m of water and 22% in more than 2,000 m of water.

"Prospects are that in 2000, 60% of the oil produced in Brazil will be recovered from deep and ultradeep waters, with the challenge now being to produce from the 2,000 m water depth."

Petrobras contends deepwater activity has become crucial for Brazil's exploration and development goals. During 1985-94, Petrobras drilled 173 deepwater wells in waters as deep as 500 m, almost as much as the 188 deep-water wells drilled by all other petroleum companies in the world in that period.

In the Campos basin, 202 deepwater wells have been drilled in waters as deep as 400 m, or 19% of a total 1,071 wells drilled in the basin as of April 1995. Petrobras estimates the Campos basin's potential oil and gas resource at 6.3 billion BOE. Of this total, 8% is in water depths to 400 m, 17% at 400-1,000 m, and 75% in waters as deep as 1,000 m-of which 51% is at 1,000- 2,000 m.

Petrobras' current production target is an average output of 1.5 million b/d of crude oil and 231 MMcfd of gas by 2000. Of this total, about 530,000 b/d is to come from Marlim supergiant oil field in as much as 2,000 m of water. To reach this goal, Petrobras is carrying out an ambitious development program to further improve production results in the offshore Campos basin.

PETROBRAS CASH CRUNCH

The big obstacle to achieving the Petrobras goals is cash.

In 1988, Petrobras said that with a capital investment of $11.1 billion, it could reach a production level during 1989-91 of 1 million b/d of crude oil and 1.54 bcfd of gas. Further, it also had planned that by 1997 production would reach 1.5 million b/d of oil and 2.45 bcfd.

Petrobras instead produces about 800,000 b/d of crude oil and 875 MMcfd of gas, and no one believes that the targets were not reached through lack of technological know how, Renno said. The central government simply did not approve the projected budgets Petrobras requested, despite the fact that the company's discovery costs dropped to $2/bbl in 1994 from $4.20/bbl in the last decade.

The latest investment program Petrobras presented the government was $19.7 billion for 1995-99, of which $11 billion would be for exploration and development. That would support a goal of 953,000 b/d of crude oil in 1997, with a projected growth to 1.4 million b/d in 1998, and 1.5 million b/d by 2000. That compares with a projected domestic oil consumption of 1.8 million b/d in 2000.

With the imminent end to Petrobras' monopoly (OGJ, Nov. 20, Newsletter) and the government's expectation that foreign investment will pour in as a result, Petrobras was again ordered to review its plans of investing almost $20 billion by the turn of the century.

Of the $4.2 billion investment budget projected for 1996, only a little more than $2 billion was approved by the government. Expectations are that the same cuts will continue in subsequent years.

SUBSEA TECHNOLOGY ADVANCES

Advances in subsea technology will continue to be a critical element in pushing the frontier of deepwater development, according to John Holmes and Joe Verghese of the U.K.'s ABB Lummus Ltd.

Holmes and Verghese noted the major challenge in subsea development in deep waters involves bolstering the economics of projects through steep cuts in capital and operating costs.

As development moves into deeper water, the subsea industry has successfully focused on systems and hardware configuration. The result is that capital outlays for such developments have achieved a cost profile similar to that of deployments in shallow water, the Lummus officials said. They cited $45/bbl as a capital expenditure target commonly seen in recent industry projects.

Holmes and Verghese said, "A viable cost reduction strategy includes the drive to greater standardization of equipment and system interfaces, the adoption of functional specifications, and enhancing the profile of the supplier in focusing innovation.

"A principal catalyst to this process is the formulation of contracting strategies that unleash the potential and the synergy in operator, contractor, and supplier relationships."

As a result, more deepwater developments are employing partnering/ alliance approaches that replace conventional contracting strategies with umbrella risk and reward mechanisms.

HOST PROGRAM

Norway's Kongsberg Offshore, Den norske stats oljeselskap AS, and Mobil R&D Corp. are jointly undertaking a 3 year, $12.5 million program to develop what they expect to be the next generation subsea system, HOST 2500.

Their emphasis is on configurational flexibility and cost effectiveness using rig/moonpool deployable modules as the standard building blocks.

This system, designed to work in water depths as great as 2,500 m, employs as its central building block a hinge over subsea template (HOST). In a base case, the HOST system is deployable from a semisubmersible rig through a moonpool as small as 6 m by 5.5 m with a maximum target weight of 25 tons/module. It can be configured to accommodate on-template wells, predrilled wells, and conventional cluster and near-manifold cluster solu- tions.

A noteworthy feature of the HOST system is that it can accommodate changes in development plans even after the system has been installed, according to a paper by Kongsberg's Bjorn Saettenes, Mobil's Pete Aston, and Statoil's John Willows.

The goal of the HOST program is to cut costs in subsea hardware by 25% and installation/operating costs by 40% compared with typical recent North Sea deepwater developments.

The first application of HOST technology is the Yme/Beta field development project for Statoil, scheduled for delivery in first quarter 1996. This project will employ a HOST type template system with hinged guide bases and a lightweight protection structure that can be installed with a drilling rig. Because the HOST christmas tree and associated hardware are still under development, the christmas trees, choke bridges, and running tools developed for the Statfjord satellite development program will be used in the Yme/Beta project.

The paper's authors found that the HOST program's cost cutting goals have been realistically demonstrated through competitive bidding and comprehensive comparisons. The next major hurdle is to adapt the HOST system to deepwater without appreciably changing its current capabilities.

CONOCO'S TLP EXPERIENCE

Conoco, a pioneer in TLP technology, concluded this technology has proven itself a viable option in a wide range of development applications, environments, and water depths.

Conoco authors E.G. Stokes, E.R. Jeffreys, W. Mcintosh, and R.A. Zimmer contend that similarities among the various TLP designs need to be exploited to help continuing efforts to cut costs. They called for an industry-wide standardization of components, procedures, and methodologies to further this effort.

The authors focused on TLPs installed in Hutton oil field in the U.K. North Sea, Jolliet oil field in the Gulf of Mexico, and Heidrun oil field in the Haltenbanken area off Norway.

Among the key. design issues and lessons learned related to the evolution of the TLP are:

A need to reduce pre-tension by using smaller loads- designed to minimize wave loads, using the best criteria. This leads to lower maximum tension and lower utilization or component cost.
Comparative advantages of internal and external mooring systems. The internal mooring compartment/tether shroud approach used in Hutton and Snorre fields provides tension measurement above water level, and tether changeout is protected from weather and requires no other vessel to be involved in the operation. The external mooring system can be installed before platform installation to minimize the weather window needed for these critical operations.
Fatigue calculations must be improved using validated resonant response theory, and the low amplitude fatigue cutoff should be validated, with the goal of eliminating inspection.
Concrete foundations can be cheaper than piling, depending on soil conditions.
Reduced riser stroke results from smaller offset estimates, reduced elevation differences between riser and tendon tie-off. Active tensioners thus might be eliminated in deeper water.
Reduce the hull/deck weight through innovative design, such as three-columns configuration, cantilevered deck, and the like.
Simplify installation, eliminate the need for big vessels, and increase towing speed.
Design facilities for plateau production and balance peak limits/outages with cost cutting.
Develop global economic analysis to maximize potential tradeoffs and develop "interface costs" to simplify local opportunities.
Develop internationally acceptable codes based on physical principles that are valid for innovative structures. Avoid rule-based design that may not be safe or optimum under unconventional conditions.
Eliminating the need for internal hull inspection has reduced the need for access to the hull. This has in turn eliminated the requirement for an environment and associated systems to perform inspections, thus reducing complexity and saving costs.
Surface access for well reentry can cut long term operating costs depending on intervention frequency.
Low angle flexible flowlines between the christmas trees and production header eliminate the need for trees to be elevated above the tree deck.
Lower height of the surface christmas trees in the tree deck eliminates the need for tree access platforms, hoops to restrict access to the opening below trees, and provides better access to trees for servicing.
Operating input is crucial to maximizing benefits of the most recently installed concept to the next generation.