What's new in production

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

OTC, North Sea, US Gulf. The 36th Offshore Technology Conference held in Houston, May 3 – 6, was its usual exciting event, including miles of walking back and forth to sessions and through the massive 300,000-ft 2 Reliant Center exhibition hall, featuring more than 2,100 companies. Final attendance was over 50,900, representing 110 countries, the highest since 1985. And several thousand of those saw a mass evacuation late Tuesday afternoon for a small electrical fire somewhere in the complex. Other than that, the most excitement came from the huge exhibit display and some 320 technical presentations.

   For the North Sea, at a press conference, Scottish Enterprise's Director of Energy, Brian Nixon, gave an upbeat appraisal of Scotland's and the UK's future oil/gas prospects. “The North Sea is now a mature oil and gas province with 30 years of exploration and production activity under its belt. However, only half of the estimated reserves in the region have been exploited, and there is every indication that the North Sea will continue to be an important production region for decades,” said Mr. Nixon.

The most recent survey by UKOOA showed that the UKCS remains a world-class production region which, in 2003, produced over 4 million bopd; received investments of around £3.4 billion in drilling, new facilities, projects and new field developments; and will produce about 10 billion boe by 2010, with more than £15 billion of investment forecast between now and then. The North Sea faces issues of rising production costs coupled with declining output, now estimated at 3.7 million boe/d.

The key challenges are reducing the production decline, increasing exploration/ appraisal activity and finding new ways to make the development of remaining reserves more economically attractive. The entry of more than 60 new operators to the UKCS in the past decade, coupled with new incentives in the latest government licensing round were cited as a cause for optimism. “The North Sea has a stable political and regulatory environment, a relatively attractive fiscal regime, extensive existing infrastructure, plus 300 fields in production, and a relatively liquid asset market,” Nixon added.

Some 43 new UKCS entrants in the last 10 years acquired interests in commercial fields, while an additional 15 have acquired an interest in exploration acreage only. The vast majority of these companies have been from the independent sector. While the majors and super-majors still dominate the UKCS to a greater extent than the new entrants, exploration and appraisal trends suggest that the new players are accounting for an increasing share of well operatorships.

Nixon says, “If they are to be successful, they will have to be prepared to focus on developing the smaller opportunities that exist in the mature North Sea basin. The super majors and majors will, of course, continue to play a very crucial role in the North Sea and are expected to make investments in brown-field areas and developing fields around key assets.

Another key OTC session, the Active Arena panel, “Independent operators – The future of the North Sea,” included eight panelists featuring operators, service companies, contractors and five UK department/ division heads. In the panel, Simon Toole, Director of Licensing, Exploration and Development for the UK DTI, said that over the past few years, the UK has been actively promoting its continental shelf for E & D. The recent 21st licensing round featured Promote Licenses. The 22nd round launched in March and due in June, will stress Frontier Licensing. Joint government and industry initiatives will emphasize fallow assets, including block sub-areas, and mature and decommissioned fields.

   The US Gulf of Mexico, of course, drew high interest, particularly deep water (>1,000 ft). The highlight of the US Gulf presentations was official announcement of the Minerals Management Service's new 150-page report, “ Deepwater Gulf of Mexico 2004: America's expanding frontier .” This is a fantastic publication, full of charts, tables, color photographs and detailed historical data on: Background, Leasing, Drilling/ Development, Reserves/ Production, Summary/ Conclusions, and a major appendix of historical development tables.

A particularly impressive presentation is a series of 3D, color illustrations of the entire Gulf, with offshore developments represented by vertical, color-coded columns representing well production rates and lease water depths. One glance shows immediately the locations of deepwater wells and their maximum historical oil/gas rates.

Introducing the new report, MMS Gulf of Mexico OCS Region Director Johnnie Burton said in a press conference, “The deepwater Gulf of Mexico continues to be an expanding frontier, with 90 deepwater projects on production at the end of last year, a 48% increase in the past two years. Production from the deepwater frontier grew to an estimated 959,000 bopd and 3.6 Bcfgd by the end of 2002. Deepwater oil production accounted for some 61% of the Gulf's oil production in 2002. In the last three years, there have been 11 industry-announced discoveries in water depths greater than 7,000 ft, which have the promise of opening up entirely new geologic frontiers.”

“Production from spars is one of the newest trends,” noted Burton, “eight of which were on production at the end of 2003, and three more are scheduled to begin production in 2004.” Subsea production has expanded from a water depth of 1,462 ft in 1988, to 7,216 ft in 2002, and to Shell/BP's Coulomb/Na Kika project, scheduled this year, which will establish subsea production in 7,570 ft of water.

The report concludes by looking toward the future – the expected continuing increases in production; anticipated new field developments based on recent discoveries; predictions of future deepwater discoveries; the decrease in time between leasing and production; and the difficulties of evaluating thousands of deepwater leases before their terms expire, given the limited number of offshore deepwater rigs.

Copies of the new report can be obtained from MMS, Gulf of Mexico OCS Region, free of charge, either in paper copies or disc, by visiting the Regional headquarters, 1201 Elmwood Park Blvd., New Orleans, Louisiana 70123, or by telephoning 1-800-200 GULF. Ask for OCS Report MMS 2004-021, “Deepwater Gulf of Mexico 2004: America's expanding frontier.” The entire report can also be found on the MMS website: www.gomr.mms.gov/homepg/whatsnew/techann/2004-021.pdf.