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Over the past 6 months, I’ve talked about several emerging geographic and technology frontiers in the oil and gas industry. One of the most exciting and prolific emerging technology frontiers is also geographic in a way—the seafloor of deepwater basins around the world. Since the first installation of a subsea production tree in the Gulf of Mexico in 1961, the surge in the deployment of subsea wells has resulted in significant economic and environmental improvements in deepwater development.
High oil prices, technological developments, and the need to counterbalance declining production in mature shallow-water basins have been driving the move of offshore oil and gas operations into deep and ultradeep (>10,000 ft) waters. Growth in this sector has been momentous over the past few decades. Subsea installations will grow from roughly 2,000 in 2001 to an estimated 8,500 by 2018. Growth in capital expenditure (Capex), driven primarily by Asia, Africa, and the North Sea is estimated to grow by 120% between now and 2018.Increasingly, operators are cost-effectively targeting reservoirs over a much wider area, tying back subsea wells both to fixed platforms in shallow waters and to floating infrastructure in deeper waters. In fact, capital-intensive ultradeepwater developments are expected to capture 48% of Capex and 23% of tree installations in 2014–2017, in contrast to 37% of Capex and 15% of installations in 2008–2013.
Copyright 2012, Offshore Technology Conference This paper was prepared for presentation at the Offshore Technology Conference held in Houston, Texas, USA, 30 April-3 May 2012. This paper was selected for presentation by an OTC program committee following review of information contained in an abstract submitted by the author(s). Contents of the paper have not been reviewed by the Offshore Technology Conference and are subject to correction by the author(s). The material does not necessarily reflect any position of the Offshore Technology Conference, its officers, or members. Electronic reproduction, distribution, or storage of any part of this paper without the written consent of the Offshore Technology Conference is prohibited. Permission to reproduce in print is restricted to an abstract of not more than 300 words; illustrations may not be copied. The abstract must contain conspicuous acknowledgment of OTC copyright. Abstract The research and development (R&D) of new technology is an essential activity for the oil and gas industry and is undertaken by a range of organisations for a variety of reasons. These organisations may carry out R&D in order to reduce costs and increase profits, maximise recovery, find new hydrocarbon resources, improve QHSE performance (Quality, Health, Safety and Environment), or gain competitive advantage. New technologies will be required to meet operational demands.
Ongoing advances in subsea technologies and their proven application in offshore regions around the world mean that there can be few, if any, other areas of the upstream industry that can claim such strong prospects for the future. With exploration and development projects routinely taking place in waters well beyond 1500 m, and with some nearing the 3000 m mark, the need for reliable subsea systems and hardware—and continued essential R&D—remains paramount if oil and gas companies are to access the new and increasingly remote reservoirs they need to replenish their own reserves and meet the demands of an ever-thirsty global energy market. The future of the subsea market looks remarkably promising. The case looks even more solid when you consider that many observers appear to forget that subsea does not just mean deep water and harsh environments—there are dozens of developments currently under way or in the pipeline in much less than 400 m of water that will require subsea systems and hardware. When you consider that whatever the basic offshore design or concept—drilling rig, fixed production platform, floating production facility, or total seabed-to-shore package—subsea equipment of one form or another is required, the view gets even better. Add to this the increasingly cost-effective subsea systems also being introduced to the market or further refined, with various seabed processing, separation, boosting, and compression designs either in action or emerging for pioneering projects around the world within the next year or two, and the fundamentals become even more reassuring, not only for the industry itself but also for shareholders and an investment community looking for lower-risk options post-Macondo. Some of the offshore industry’s leading authorities are forecasting that, despite some relatively short-term delays in the US Gulf of Mexico, the future for the subsea market is healthy up to 2014 and beyond. Infield Systems says in its latest market update that the subsea sector’s future looks good due to the basic factors of reserve depletion in shallow-water regions, increased deepwater activity, and enhanced-oil-recovery efforts and techniques. “More than USD 87 billion will be invested in development drilling and the manufacturing and hooking-up of subsea units to 2014. This represents a substantial 30% increase over the previous 5 years,” it states.
Shallow-water developments are now more mature and operators are looking toward deepwater frontiers to further develop their oil and gas portfolios. What these new deepwater developments have in common is that they face a challenging risk reality that demands a substantial degree of technical innovation.
It is crucial to identify and understand the risks related to any offshore oil and gas operation particularly when moving into more challenging environments with remote locations, increasingly complicated reservoirs, harsher environments and more environmentally sensitive areas. The risks will be site, operation and time specific and it is important to maintain a holistic view of risk through a lifetime perspective to manage these in an acceptable way. New geographical areas for oil and gas development may not have the benefit of well-developed regulatory regimes to guide risk-based approaches. In addition, safety and environmental performance cannot be assured through technical solutions alone. Safe operations are also dependent on effective organizations, strong managements and motivated, competent people.
This paper looks at the overall challenges of ensuring the safety and reliability of deepwater exploration and production, while addressing the opportunities and dangers of recent business growth. The risks described are related to regulations, safety and environmental impact, technology and innovation, cost and time, competence and quality, and harsh climates. The authors draw on the experience gained over more than 30 years from oil & gas frontiers such as the North Sea, the Gulf of Mexico, offshore Brazil, offshore West Africa and offshore Western Australia. Developers and other stakeholders are encouraged to draw lessons from these experiences when attempting to model the interplay of regulatory, commercial and technical factors in project developments.
Deepwater oil and gas are a vital part of the mix of energy resources. Hydrocarbon reserves in deepwater basins are vast, particularly in the so-called ‘Golden Triangle’, a region formed by the US Gulf of Mexico, Brazil and West Africa. Until recently, high development costs and technological limitations discouraged deepwater offshore oil exploration and development. However, with the boom that started in the late 1990s and accelerated from 2000 onwards, technological innovation has increased the economic viability of these projects. Still it requires enormous investments to push the industry frontiers to new extremes, but against a backdrop where nearly 60% of world oil production happens in areas of high geopolitical risk, coupled with the fact that worldwide oil production for the eight majors has declined 2% per annum since 2004, the net result is that International Oil Companies (IOCs) have little recourse but to explore for oil deposits in these challenging areas. The added incentive is that these more remote basins may hold the promise of significant deposits of hydrocarbons with 200 million barrels or more of recoverable reserves. This is attractive, as it provides economies of scale, the possibility to lower operating cost per barrel, and produce profitably in very high cost areas.
The 2013 outlook for the deepwater business indicates significant long-term opportunity. As deepwater projects become increasingly capital intensive, there are economic challenges for exploration and production (E&P) companies and a potential prize for international oilfield service and equipment vendors. Douglas-Westwood's report, the Deepwater Market Forecast 2013–2017, forecasts global capital expenditure (Capex) of more than USD 223 billion over the period, double the amount spent in the preceding 5-year period. The Golden Triangle of deep water--which includes west Africa, the Gulf of Mexico (GOM), and Brazil--will account for 80% of this expenditure. African and Brazilian developments are expected to drive the forecast spend, with developments of the former largely concentrated in Angola, Ghana, and Nigeria. Brazil is likely to experience substantial growth, exceeding Africa's deepwater expenditure toward the end of the forecast period.