With 2011 drawing to a close, it's time for OE to look afresh at the world's emerging hot spots. One of those generating the most interest, if not the most dollars yet, is also the coldest: the Arctic. Jennifer Pallanich asks a cross-section of industry leaders where they see the industry headed in the next few years.
Newfoundland, Nova Scotia, Greenland and elsewhere in the Arctic Circle are catching the interest of oil companies. Drilling off Greenland has offered disappointing results – only shows for one of Cairn's wells this year and a dry hole with the other.
Yet, the reserves are there and elsewhere north of the Arctic Circle, if US Geological Survey estimates are to be believed. The USGS in 2008 said the area north of the Arctic Circle holds 90 billion barrels of undiscovered technically recoverable oil. According to the USGS, the Arctic accounts for about 13% of the world's undiscovered oil. About 84% of the estimated resources are expected to be offshore.
When it comes to gas and NGLs north of the Arctic Circle, the USGS estimates the area holds 1670tcf of technically recoverable natural gas, and 44 billion barrels of technically recoverable NGLs. The USGS pegs that as about 30% of the world's undiscovered natural gas and 20% of the undiscovered NGLs globally.
Oceaneering's Knut Eriksen, SVP for subsea products, believes there is opportunity in the Arctic arena, given the sizable amount of reserves the area is thought to hold. ‘I think we'll see more activity there over the years, but it's going to take time.'
Some of the delay will surround the need to develop regulations for the region. Some of it will come from the very seasonal nature of Arctic drilling. And some of it will come from the need to develop technology and equipment suitable for a harsh environment where ice gouging is a threat for subsea infrastructure while icebergs threaten surface equipment and severe cold can kill personnel.
‘The industry must not underestimate the challenges that need to be overcome,' warns Paul Jukes, MCS Kenny Houston president. ‘We do have to be very, very careful and be sure we have safe and reliable designs for the Arctic.'
MCS Kenny parent Wood Group has sponsored a chair in arctic engineering at Memorial University in St Johns, Newfoundland. Issues particularly relevant in the Arctic include logistics, ice scouring, iceberg management, reliability and integrity in icy conditions, and the need for a closed loop, environmentally.
Drilling contractor Ensco has inked a few deals for exploration in new regions. Ensco investor relations VP Sean O'Neill says possible new frontiers for the industry include French Guiana, where the ENSCO 8503 has drilled a new discovery for Tullow, and Brunei, where the ENSCO 8504 is beginning drilling operations for Total. ‘The latest places we've contracted rigs were probably not on a lot of radar screens,' O'Neill says. ‘There are more discoveries happening in more parts of the world with more customers.'
Eriksen says one can extrapolate from promising hydrocarbons in one region to predict the possibility other places might carry.
‘If you look at the discoveries in Brazil and think of the subsalt there, and probably there is going to be the same thing in West Africa because we know that West Africa and South America at one point in time was a contiguous geologic area. We haven't even gotten to the subsalt in West Africa yet,' he says. ‘I think there is a tremendous opportunity there. First we had the subsalt here [in the Gulf of Mexico], then pre-salt in Brazil; probably the next thing is going to be subsalt in West Africa.'
Even the Gulf of Mexico has its frontiers. In fact, this region seems to have more incarnations than a cat; every time some industry pundit pronounces the birthplace of offshore drilling on the wane, a new find revives it. Most recently, these finds are in two locations: the ultradeepwater Lower Tertiary, or Wilcox Trend, despite the government's moratorium on deepwater drilling in the wake of Macondo and the shallow water ultra-deep reservoirs that operator McMoRan believes are analogous to the Lower Tertiary.
McMoRan has said that data resulting from drilling below the salt on the shelf indicates the presence of geologic formations, including Middle/Lower Miocene, Wilcox, Frio, Tuscaloosa and Cretaceous Carbonate that have been prolific onshore, in the deepwater Gulf and internationally. In the Lower Tertiary, ExxonMobil's recent wildcat in Keathley Canyon block 919 led the supermajor to estimate Keathley Canyon blocks 918, 919, 963 and 964 – location of the Hadrian North and Hadrian South discoveries – contain about 700 million boe of recoverables.
What the Lower Tertiary doesn't have that most of the rest of the Gulf has is massive pipeline infrastructure. While ExxonMobil is planning to produce its Hadrian area finds to Anadarko's operated Lucius development nearby under a unitization agreement, that still leaves a vast swath of the ultra-deepwater Gulf with little in the way of means to send hydrocarbons to shore. This translates into opportunity for the FPSO market.
Petrobras currently has the only FPSO in US Gulf of Mexico waters, but that deepwater project – known as Cascade/Chinook – has been stalled and not yet begun production.
Australia is another region that is not a frontier, but it is or will soon be experiencing certain frontier issues because of a personnel and materials crunch. Australia has been in the news quite a bit because of the number of large gas projects in progress there, notably the Chevron-operated Gorgon and Wheatstone fields, Shell's Prelude FLNG project, Woodside's Browse, Sunrise and Pluto projects plus its North West Shelf redevelopment, and Inpex' Ichthys project.
As Mike Robinson, FMC sales & marketing manager for Australia and New Zealand, puts it: ‘Gas projects are a big deal in Australia. The gas reservoirs here in sunny Australia are huge.'
He says the gas reservoirs have the potential to last ‘a long time' and while they include lengthy development phases, there is still the possibility that lots of gas will be left behind due to low pressures, low flow rates and associated hydrate challenges. OE