November 2003

Drilling advances

Gas supply/ demand; GOM Loop currents; IADC safety program
Vol. 224 No. 11

 Natural gas supply/ demand. With 85% of active US rigs drilling for gas, and customers expecting higher gas prices going into winter, the topic is receiving high-level study. The Natural Gas Supply Association (NGSA) says in a recently released study that customers are facing a second straight heating season of potentially tight supplies. “Fears of a major upheaval in the marketplace have eased due to the strong summer recovery of inventories; but that doesn’t mean we’re out of the woods in terms of supply costs,” said NGSA.

 The analysis, based on publicly reported data, anticipates about the same degree of pressure as last heating season on key supply/demand components: weather, the economy, storage and production. Thus, the scenario has changed little from last winter, when the US experienced a dramatic increase in both consumer demand and average wholesale costs, due to colder temperatures than the prior heating season. Even though storage is likely to reach levels that are 99% of the average peak for the last five years, that supply will re-enter the market this winter at higher-than-previous summer costs.

 NGSA relies on National Oceanic and Atmospheric Administration forecasts for a near-normal heating season, with continued strong demand for home heating in Mid-Atlantic, Northeast and Upper Midwest regions. Industrial demand is expected to be off somewhat, as manufacturers respond to the tight market conditions by conserving, suspending production or switching fuels. 

 Producers are responding aggressively to these ongoing market demands. “Even so, it’s clear that we are working a lot harder just to maintain a steady supply. Even with these increases, production is expected to remain almost flat – about 50.6 Bcfpd,” NGSA says. Additional heating season demand will be met by Canadian gas and LNG imports, with the first expected to be down slightly due to accelerating decline rates, to be partially offset by increases in LNG from overseas. 

 NGSA says Congress may soon pass a comprehensive energy bill, but it will not ease our long-term market constraints. “More than 50% of the nation’s undiscovered gas lies beneath non-park government lands. An estimated 225 Tcf is prohibited from entering the market because of drilling moratoriums or extensive and costly permitting requirements.” And NGSA remains committed to focusing lawmakers and the Federal Energy Regulatory Commission on long-term supply solutions to ensure an adequate, reliable and cost-effective supply of this clean-burning fuel. NGSA’s Winter Outlook publication materials are available at

 In a related study, the National Ocean Industries Association says the National Petroleum Council has released some updated information and recommendations on gas supply/ demand issues, with its comprehensive report to come. Some of the early report findings indicate traditional North American producing areas will provide 75% of long-term US gas needs, but can’t meet projected demand.

 The report recommends lifting moratoria on selected OCS areas with high resource-bearing potential. Federal and coastal state governments should work with industry to develop plans to identify such areas in the Eastern US Gulf, and the Atlantic and Pacific Coasts, with a view toward lifting moratoria, starting in 2005.

 Loop current problems. Loop currents have disrupted operations this year in the deepwater Gulf of Mexico. Reportedly, they are more persistent and have moved a little farther north. A report in the Offshore International Newsletter says deepwater operations in the Mississippi Canyon area have been disrupted on numerous occasions, even though it remains unclear if the above-normal activity this year is causing some operators to report an increase in disruptions. In fact, Texas A&M’s Department of Oceanography, which studied the GOM Loop Current as part of a Minerals Management Service – backed research project, says current activity this year may be on par with previous years, and increased deepwater activity is behind the increase in reports of incidents.

 In any case, Noble Drilling and Transocean both have had rigs forced to wait on location while loop currents subsided. In August, Shell was forced to wait for the loop current to subside before moving ahead on its Na Kika field. Total also ran into loop current issues during installation of its Matterhorn field TLP. Devon Energy and partner Kerr-McGee have waged an ongoing battle with loop current disruptions involving Diamond Offshore’s Ocean America semi in Mississippi Canyon. Due to the persistent loop current in effect, drilling was shut down for more than three weeks.

 IADC’s offshore safety program recognized. The Offshore Energy Center inducted the International Association of Drilling Contractors into the Center’s Hall of Fame as a Technology Pioneer in the category of Health, Safety and Environment, for outstanding development of Offshore Safety Programs. Permanent recognition of IADC’s role will be displayed aboard the Ocean Star Rig Museum in Galveston. 

 IADC’s safety committees have worked diligently to improve industry’s attitude toward safety and build commitment to a safer workplace at all levels of drilling companies. With participation of members, it has held many successful safety conferences, workshops and seminars over the years, targeting specific safety goals. Its multi-pronged strategy has resulted in a 96% reduction in serious drilling accidents on the US OCS. In the quarter century from 1977 to 2002, the rate of serious incidents has plummeted to 0.50 from 11.83 injuries per 200,000 manhours worked. 

 In addition, IADC members have developed numerous practical rig-site tools aimed at safer work behavior. These important communication tools include industry-standard: IADC accident prevention guides; 52 safety topics; five-minute rig safety meeting topics; a rotary rig safety inspection checklist; and deepwater well control guidelines.

 IADC has also introduced two landmark training programs that have established firm, industry-defined benchmarks for training: RIG PASS is the definitive drilling industry accreditation program for basic wellsite training, and has issued more than 108,000 RIG PASS certificates. And the IADC WellCAP program is for accrediting well-control training. WellCAP schools operate in 268 locations in 52 countries; and 65,300 certificates have been issued to date.  WO 

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