Energy Issues

Toward the end of March, Chevron announced a new find in the Gulf of Mexico, in Walker Ridge Block 98. The Coronado discovery was drilled to 31,866 ft, TVD, in 6,127 ft of water. To put the depth in perspective, 31,866 ft is the altitude at which transcontinental flights operate, or the height of 22 Empire State Buildings, or the length of 106 football fields, or the length of 2,375 compact cars parked end-to-end. By any standard, that’s deep.

The discovery, 190 mi off the coast of Louisiana, in the vicinity of the Jack/St. Malo and Big Foot discoveries, is set to produce next year. According to Gary Luquette, president of Chevron North America Exploration and Production Company, “the Coronado discovery continues our string of exploration successes in the Lower Tertiary, where Chevron is advancing multiple projects.” Chevron has a 40% interest in the field. Partners include ConocoPhillips (35%), a subsidiary of Anadarko (15%) and Venari Offshore LLC (10%).

Not a record-setter. As deep as it is, in terms of water depth and TVD, the Coronado discovery is not setting records. In the Gulf, alone, BP’s Tiber well reached 35,055 ft, TVD, in 2009, making it the deepest well in the sector. BP found oil in multiple Lower Tertiary reservoirs. The well was drilled by the Transocean Deepwater Horizon, just months before the Macondo tragedy. In terms of Gulf water depth records, Shell’s Tobago project was drilled, and produces, in 9,436 ft of water. By any standard, these are great achievements.

Overall records are more impressive. While questioned by some, the trophy for the world’s deepest well appears to reside with Russia’s Kola Superdeep Borehole. One sidetrack of the well reached 40,230 ft in 1989. The record water depth well remains in the planning stages. The Integrated Ocean Drilling Program (IODP) has plans to drill and core a hole 1,640 ft through the Mohorovičić seismic discontinuity, into the upper mantle of the oceanic crust from three candidate locations in the Pacific Ocean (Cocos Plate, Baja California and offshore Hawaii). The TVD of one of the well’s sidetracks is projected to reach 32,805 ft, with the riser situated in a record-setting 13,120 ft of water.

Limiting factors. These major technical achievements beg the question, “how much deeper can we go?” The answer to that question depends on a number of factors. First is the size of the equipment needed to drill to increasing depths in deeper water. Every extra foot of penetration adds to requirements for variable deck load capacity, hookload capacity, pump capacity, bulk and liquid mixing and storage capacity, and on and on. That means larger, more complex, more expensive vessels. That is achievable, but at what cost?

The second limiting factor is water depth and, more specifically, pressure and temperature. At a saltwater pressure gradient of 0.465 lb/ft, an object at 10,000 ft is subjected to 4,650 psi. Seafloor pressure on the IODP project will reach more than 6,100 psi. And, that is high pressure in a foreign, corrosive environment. But we can design for it. The same can be said for subsea temperatures. At current deepwater and ultra-deepwater operating levels, seafloor temperatures hover a few degrees above freezing. That encourages hydrate formation and plugging. But, again, this is something we can, and have, engineered around.

A third limiting factor can be deep reservoir conditions. At greater depths, temperatures can approach 275oF and more, and can go much higher in certain reservoirs. Pressures can reach 20,000 psi-plus. Here, sudden and catastrophic equipment failure can occur. Again, we can successfully engineer around these limiting factors, meaning that moves to deeper wells, in deeper waters, can be made with proper technological design and planning.

A fourth limiting factor is accessibility. At greater depths, intervention becomes much more difficult. Inspection and maintenance become technical challenges. Compounding accessibility and equipment maintenance issues are currents and vortex-induced vibration. And, then, there is limited accessibility to just about everything, when violent weather (hurricanes, for example) comes a visiting. These, save for occasional catastrophic weather, are manageable and not a prohibitive hindrance in moving to ever-deeper waters.

So, operations in 20,000 ft of water, while requiring large leaps in technology, are not out of the question. Surely we can go that deep, and deeper.

Economic limits. But, there is a further limiting factor in moving to ever-deeper water. It’s the dreaded e-word—economics. The deeper we go, the higher the costs and the higher the risks. Certainly, we can engineer around most risks, and some of the cost issues, all things being equal. But, all things are not equal. What will likely limit how deep we can, and will go, both in terms of water depth and TVD, is the current U.S., and pending global, shale boom. To put it succinctly, oil from shale plays is supplementing the U.S. oil supply and, eventually, the world oil supply, at costs significantly less than potential oil produced in deepwater and ultra-deepwater.

The U.S. Department of Energy’s Energy Information Administration (EIA) estimates that, between 2007 and 2009 (the latest data available from EIA), the cost to find and lift a barrel of oil onshore, including shale plays, averaged $31.38. The cost to find and lift a barrel offshore was calculated at $51.60. Add a nominal 25% premium for the same operation in ultra-deepwater, and you have a cost of $64.50/bbl, or double the onshore cost. As additional oil production from shale kicks in, it is hard to envision a vibrant, expanding deepwater E&P sector moving into deeper waters. But, the stakes are high in deep water, and I have been wrong before.