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BERGMAN, GARY J. and WILLIAM R. LANDRUM*, Conoco, Inc.

Abstract: Deepwater Hydrocarbon Development in the New Millennium

Hydrocarbon resources have been identified in sediments beneath the world's oceans to significant water depths.There is considerable potential. However, only when there is the right mix of favorable reservoir performance, commercial terms, regulations and technologies will development of this higher cost and more technically challenging energy option occur.

Development of deepwater resources hinges on a number of different drivers, each of which is critical to success.These drivers include: geology and reservoir performance of the targeted field; commercial terms; new technologies; the natural gas infrastructure; the price of crude oil; supply and demand factors; and political and regulatory considerations.

Geology & Reservoir Performance

The essential requirement for successful deepwater development is the existence of commercial quantities of hydrocarbons that can be produced at very high flow rates. High flow rates are required to increase early cash flow and reduce the number of wells, and hence development costs.Today the energy industry is moving rapidly into ever-deeper water because recent experience has proved that highly productive and commercially attractive reservoirs are there to be discovered.

The existence of high performance reservoirs in a particular basin is far from assured. It requires a number of geologic factors that cannot be controlled, only predicted, and thus it is subject to significant risk. Full characterization of each reservoir can be made only after its discovery. Many deepwater areas will be found to contain no commercial hydrocarbons at all; many will take hundreds of millions of dollars and many dry holes until the first discovery. For example, over 50 wells were drilled before the first discovery was made in the now-prolific North Sea.The first deepwater discovery in West Africa came more than 15 years and billions of dollars after the initial exploratory well.

Commercial Terms

In the new millennium, commercial terms will be either barriers or stimuli to investment. Once granted the rights to explore for and develop deepwater natural resources, energy companies are often viewed by the host government as rich sources of jobs and, even more important, national income.This is often reflected in high income tax rates and high government takes. Measured use of these income generating methods is required to prevent them from becoming economic disincentives.

New Technologies

New technologies can help drive down the cost to find, produce and transport a barrel of oil. A list of these emerging technologies would include:

Advanced interpretation techniques and work stations
3-D dynamic visualization for exploration and development
4-D (time lapse) and 5-D (plus offset attributes) seismic data
Neural networks, fuzzy logic and inference engines
Real time geologic and seismic information while drilling
Marine riserless drilling
Coil tubing drilling
Subsea production systems including multi-phase pumping and metering
Gas conversion and liquefaction
Multilateral drilling and well completions
Automation and intelligent wells
Advanced composite materials
Natural Gas Infrastructure

The maturity of the natural gas infrastructure is another major driver affecting deepwater development. Deepwater resources are often located far from gas infrastructure. Oil can be produced and delivered to market via alternative modes of transportation, but gas is another matter.

The natural gas associated with oil production must be used and transported in a way which conforms with local regulations, conserves the resource, and meets the environmental expectations of society.The gas issue often becomes the number one obstacle to oil development in deep water.

Crude Oil Price

Three important price risks surround crude oil prices in the new millennium.

1) Continued price volatility into the long-term future
2) Gradual price decline paralleling technology-based cost improvements
3) Very low prices due to world events or the impact of a breakthrough in technology

Historical analysis of prices going back many years shows a pattern of volatile price swings superimposed on a relatively flat inflation-adjusted price [Figure 1].

The world's proven oil reserve volumes have increased by a factor of 9 since 1950, growing from about 32 x10 9 cubic meters (200 billion barrels) to 280 x10 9 cubic meters (1.76 trillion barrels) by 1995.This was despite cumulative oil production of 118 x10 9 cubic meters (740 billion barrels) during this same period [Figure 2]. Petroleum reserves should not be viewed as a fixed resource but rather as a commodity which grows, thanks to new technologies that improve recovery of petroleum or reduce the cost to find, produce, process and transport it.

Conclusion

Every factor -- geologic and reservoir, commercial and economic, political and regulatory, infrastructure maturity, and new technologies -- plays a role in driving viable and sustainable deepwater hydrocarbon development in the new millennium.

Figure 1.

Figure 2.

*Denotes speaker other than senior author.

AAPG Search and Discovery Article #[email protected] International Conference and Exhibition, Birmingham, England