TECHNOLOGY FROM EUROPE

World Deepwater Report, 2000 – 2004

Dominic Harbinson and John Westwood, Douglas-Westwood, Ltd., Canterbury, UK; and Dr. Roger Knight, Infield Systems

Expenditure in the global deepwater oil and gas market is set to double and could exceed $20 billion per annum by 2004 according to a new study, Deepwater 2 – The World Deepwater Report 2000 – 2004, from Douglas-Westwood, Ltd. of Canterbury, UK. The report contains 230 pages, 77 figures, 58 tables and 430 references.

The forecast growth in deepwater activity could require drilling and completion of over 1,400 wells, supply of more than 1,000 subsea trees, 300 templates and manifolds, nearly 6,200 mi of subsea control lines, 7,500 mi of flowlines and risers, and more than 100 floating and fixed platforms. In all, $76 billion in spending is projected over the next five years.

Deepwater oil and gas expenditures: $76 billion forecast spending. "Seven sisters" to dominate deep water.

Background. Up to 1960, the maximum water depth for hydrocarbon production was 200 ft. By 1990, it had passed the 2,000-ft mark, and by 2004, the authors expect 7,000-ft depths to be achieved. A major deepwater-field development is not only technologically demanding, it often requires a step change in approaches to human-resource organization on a global scale, together with considerable financial courage to go where no one has commercially ventured before.

What is driving this activity? Money! "A series of new discoveries – many up to a billion boe – were made at a relative per-bbl cost far less than that in shallow-water areas such as the North Sea," said the team’s field analyst, Dr. Roger Knight. "Our analysis of all offshore field developments proposed for 2000 – 2004 shows that in areas like the Gulf of Mexico, up to 90% of all new reserves come from water depths beyond 980 ft."

Future activity. Most future activity is sited in Brazil, West Africa and the Gulf of Mexico. The study shows that some of the greatest of these prospects lie off West Africa, including the $2.5-billion Girassol field located on Block 17 off Angola. During the next five years, the authors expect West African deepwater expenditures to accelerate, from about $800 million in 2000 to nearly $5.5 billion in 2004 – possibly eclipsing Brazil – to become the world’s largest deepwater market.

Accordingly, the sometimes conflicting demands of globalization and local needs will become more significant. "The growth of activity in areas such as West Africa brings new challenges, as host countries demand more local content in projects – which is not easily reconcilable in countries that lack basic industrial infrastructure."

The report further states that there are increasing opportunities for developing small fields, often as tiebacks to existing infrastructure. These bring with them opportunities for small operators and for contractors who may wish to take equity participation. "The oil majors may, however, perceive such moves from major contractors as a competitive threat; but the ability for contractors to offer financing may, as in other industries, become a key factor in winning large capital contracts."

Technology offers major challenges and cost-reduction opportunities, particularly in drilling, well productivity, and major platforms and flowlines. These subjects are interlinked; e.g., multilateral, extended-reach wells coupled to subsea processing addresses all three. In total, the study identifies 220 deepwater-field prospects worldwide, with a total 20 billion boe reserves. It also shows that deep water is becoming dominated by a few large players. "Only 29 operators are currently considering deepwater developments in the period to 2004, but just "seven sisters" – namely BP Amoco, Chevron, Total Elf, Exxon Mobil, Petrobras, Shell and Texaco – are responsible for over 77% of deepwater reserves."

How much more oil is down there? The report includes Internet access to the deepwater-sector data-base, DeepWater Online, which, at present, shows 265 future deepwater-field prospects. One of the largest players, Shell, has suggested that deepwater plays hold perhaps 100 billion boe in reserves. However, the authors believe that this may prove to be an underestimate, as the great majority of deepwater areas are unexplored.

Deep water is not the only opportunity for the oil and gas industry – there are still major prospects in the Middle East and Russia. "But we are confident that deepwater expenditure will grow as oil companies seek to balance the greater costs of deep water with the greater political risks of oil from other sources," said report editor John Westwood.

The forecast deepwater boom does bring the authors one concern: "We believe that the industry is slowly losing its ultimate resource – its people – and is not attracting new graduates in sufficient numbers. The oil industry still seems unable to describe to the public at large the remarkable achievement in finding deepwater oil and gas, and the huge challenges and great opportunities it offers the next generation."