Drilling advances

	Vol. 225 No. 6
ROBERT E. SNYDER, EXECUTIVE ENGINEERING EDITOR

Oil price increases likely? “Due to increasing demand and reducing reserves, oil prices at $40 are likely to soon enter a period of sustained rises, resulting in a need to massively develop natural gas and renewable energy resources,” according to John Westwood of energy analysts Douglas-Westwood. “Oil reserves are depleting and demand is growing. Recent increases in demand from China, for example, are likely to accelerate. 

“The average American consumes 25 times as much oil as the average Chinese, yet China has five times the population and is industrializing rapidly. Vehicle growth in China is rising and this will cause global demand for oil to continue its increase.”

Quoting from a number of new studies on oil, gas and renewable energy published by his firm, Westwood said, “Any growth in global economic activity increases oil demand such that, at 1% demand growth, a production peak occurs in 2016; at 2% it occurs in 2012; and at 3% it occurs in 2008. The world's known and estimated yet-to-find reserves and resources cannot satisfy even the present level of production of some 76 million bpd beyond 2020.”

Dr. Michael R. Smith of Energyfiles says, “Although 99 countries have produced or can produce significant oil, 52 are well past their production peak, including the US, and this is happening in several more, including the UK. Another 16 are at peak or will reach it soon. Large capital investments within OPEC countries are already required to rapidly increase production after 2008 by at least an additional 1 to 2 million bpd every year to offset declines elsewhere. It is by no means certain that such growth in output will be achieved as fast as is required. It is likely that the world will then begin to see sustained growth in oil prices.

“Once oil supplies begin to peak, oil prices could double within three or four years, as the world changes from oil abundance to oil scarcity. Then prices will continue to rise until sufficient falls in oil demand are achieved. Price rises will depend on the real global response to impending and actual shortfalls – a response that needs to be implemented immediately. Without early remedial action, the discussion is not if oil prices will massively increase, but when they will.

“Natural gas is the only viable fuel that can link the carbon-based global energy supply used today to a renewables-based energy supply that will have to be used in the future,” said Smith. “It is the only relatively clean alternative to oil and coal, fully supported by commercially effective production and distribution technologies – there is little doubt that gas will be the key fuel of the future.

“Total remaining gas reserves and resources are huge, estimated at 275 Tcm, almost double oil resources in oil equivalent terms. Russia holds the largest share, but a significant portion is also located in the Middle East. Global production of gas, now some 2,600 Bcm/yr, is expected to grow to 4,755 Bcm/yr by 2025, an average increase of 2.75% per year.

“Environmentalists argue that the world should not wait for a catastrophe before doing anything about global warming. Under the same logic, it would be unwise to wait before trying to develop real substitutes and learn to cope with less oil,” says Westwood. “The future driver for renewable energy will not be global warming, but security of supply.” For further information contact John Westwood at Douglas-Westwood via their website: www.dw-1.com.

Meanwhile, more USA gas imports. The Natural Gas Supply Association (NGSA) and the Canadian Association of Petroleum Producers (CAPP) have stressed the importance of policy-maker support for gas imports to meet growing US demand. They are concerned that policy makers have not fully understood the ramifications of not embracing all new sources of supply, such as non-traditional Canadian gas and LNG.

CAPP stressed Canada's large gas potential as the number one exporter of gas to the US. While Canada tripled its US gas exports from 1988 to 2003, it has vast untapped resources remaining, such as gas from coal and northern gas. While traditional North American producing areas today supply almost 100% of US and Canadian demand, these same areas are expected to provide only 75% of US gas needs in 20 years, creating a strong need for more imports to the US.

In 2003, Canada supplied 87% of US imports (14% of total supply), and LNG comprised 2% of the supply. Analysts estimate that LNG will increase to about 11% of US supply by 2015. Record Canadian drilling for gas in 2003 is resulting in rebounding production and export levels for 2004. And application for a Mackenzie Delta pipeline is expected this year, which would provide the needed infrastructure to open up access for northern gas, CAPP reported.

Gas from CBM is a promising resource just emerging in Canada. CBM provides almost 10% of the US domestic gas supply, and there is 167 Tcf in Western Canada. Fewer than 800 CBM wells were drilled in Canada in the last 20 years, but in 2004, there are likely to be 1,000 drilled. The bottom line is that North America will need all forms of natural gas to meet growing demand.

Deepwater completion record. The ultra-deepwater semisubmersible Deepwater Nautilus team of Transocean accomplished the world's deepest subsea completion while working on the Shell-operated Coulomb project C-2 well in the US Gulf at 7,570 ft of water. That water-depth record eclipsed the previous one held by Transocean's Discoverer Spirit also set in the US Gulf in 7,209 ft of water.

Setting the subsea tree was part of a two-well subsea tieback to the Na Kika project in Mississippi Canyon Block 613, where the Nautilus team completed the first well, Coulomb C-2, in 13 days, earlier in May, and is working on completing the second well, Coulomb C-3. Petrobras is a partner in the C-3 well, and the Na Kika project is co-owned by Shell and BP.

Transocean says working with the other team members, including Transocean's clients and FMC, the subsea tree manufacturer, was personally rewarding for everyone involved in the new record. Intensive planning efforts are paying off as the team is conducting operations without a lost-time incident and within clients' schedules and budgets. The team also holds the world water-depth record for a rig operating in moored configuration in 8,717 ft of water, a mark set last year for Shell in Alaminos Canyon Block 857 in the Gulf.