Three potent forces are buffeting the offshore energy industry in 2024.
Thanks to technology, it’s meeting those challenges head on.
Offshore operators today face significant demands to reduce or at least contain higher costs and increase efficiency, especially in production operations. At the same time, the industry’s need to build up long-term reserves has pushed offshore exploration toward more remote, frontier prospects.
In sports terms, offshore exploration and production companies are like teams struggling with spending caps while also trying to boost their scoring ability.
The technical program of the upcoming Offshore Technology Conference in Houston May 6-9 reflects a third challenge: how to address decarbonization and the energy transition.
This year, OTC will feature multiple sessions on carbon capture and storage, offshore wind, green hydrogen and other topics related to low-carbon energy.
Getting Creative
Continual improvement has helped the industry contain costs and create efficiency, said Sandeep Khurana, head adviser and managing senior vice president for Ryder Scott Co., and a member of the 2024 OTC board of directors.
“In terms of controlling costs and introducing efficiencies, I think the industry has done a good job. It’s just a necessary thing. It’s not like it was before, a step change,” he said.
Over the years, the offshore industry has become “more creative and more innovative. In the toolkit, there’s lots of experience and technology,” Khurana noted.
“We need what we need. How do we get smart about it? Technology is there – robotics, how do we use more of it? How do we use the technology we have?” he said.
At OTC, a current example of the industry’s creativity will be presented in the May 8 morning session “Mega Project – Whale: Deepwater Host Replication.” Representatives from Shell will discuss the Gulf of Mexico-Alaminos Canyon Whale field project, owned by Shell and Chevron.
In designing its Whale semi-submersible production host, Shell Offshore took the innovative step of closely replicating its earlier Vito platform. The design included a 99-percent replication of the Vito hull and 80 percent of Vito’s topsides, according to Shell.
The company leveraged the engineering, construction and supply chain of its earlier effort by using that approach. Whale is expected to go online in late 2024 and reach peak production of about 100,000 barrels of oil equivalent per day.
Khurana said offshore operators also can create efficiencies now by applying a full range of Big Data, data analysis and AI tools. Technological, engineering and computing advances have all helped the industry overcome previous obstacles.
“At one point we were constrained by technology. There are very few things that constrain us now, in that sense,” he observed.
A recent analysis of worldwide offshore drilling by energy data and analytics company Rystad Energy projected about 50 more deepwater and ultra-deepwater wells this year than in 2023. It estimated that deep exploratory drilling will account for roughly 35 percent of offshore activity.
“Despite tightened budgets, frontier drilling is fueling optimism for a productive year, particularly deepwater projects in the Atlantic Margin, Eastern Mediterranean and Asia,” it noted.
Acreage awarded to majors last year totaled 112,000 square kilometers, a 20 percent increase from the previous year, according to the company. Awarded offshore blocks were 39 percent in the shelf segment, 28 percent deepwater and 33 percent ultra-deepwater.
“As majors tighten their financial belts, they’re cautiously venturing into deeper waters and re-evaluating their approaches for frontier exploration,” said Santosh Kumar Budankayala, Rystad Energy senior analyst.
For today’s offshore operators, Khurana said, “the deeper water is not an issue. It’s not a big issue – it’s established now.”
Current challenges have more to do with production capability and finding markets for offshore natural gas, he observed. With floating production storage and offloading facilities – FPSOs – “there’s a floating market, in a sense. You can send the oil anywhere.
“The big problem you face when you get into gas in these deepwater areas is, ‘Is there a market nearby?’” he said.
Many large offshore gas finds have been distant from population centers. Monetizing offshore gas by identifying and reaching high-demand markets has become an important consideration for the industry, Khurana noted.
“Wherever you find gas in the frontier, unfortunately there’s not a big market. That’s become a driver,” he said.
Green Themes
OTC opens the morning of May 6 with a trio of keynote sessions on green themes, including “Environmental Footprints and Economic Impacts of Energy.” Speakers for that session include Scott Tinker, director of the Bureau of Economic Geology at the University of Texas-Austin, and James Bennett, retired renewable energy senior adviser for the U.S. Bureau of Ocean Energy Management.
Khurana said safety and the environment have long been key concerns for offshore operators, an area that later expanded to become known as Health, Safety and Environment. Human well-being continues as a core concept for the industry, he noted.
“It has always been part of the portfolio. Lately, of course, that has changed to (focus on) carbon emissions,” Khurana said.
Major oil companies, national oil companies and large independents dominate offshore energy operations. The industry’s biggest players possess the financial ability to devote resources to promoting safety and environmental protection, and have a history of doing so.
Khurana said to his mind, the offshore industry has been “by all measures, a very successful industry and very environmentally responsible.”
The OTC website lists an offshore wind thread that details wind-energy-related sessions at the meeting. They include a May 7 fireside chat on “The Future of Offshore Wind: Opportunities and Challenges,” and a May 8 keynote on first steps in the offshore wind industry, focusing on the experiences of TotalEnergies.
OTC board members “discuss sometimes what OTC should stand for. We came down to our mission statement,” Khurana said.
“In general, it’s considering offshore as a resource,” he explained.
In that light, the addition of wind energy to the offshore energy repertoire seemed like a natural extension. Offshore installation technology for wind is “analogous to what the industry has always used. The expertise exists,” Khurana noted.
Increased costs, higher interest rates and logistical challenges slowed offshore wind development last year. About 12,000 megawatts of proposed offshore wind farm projects ended up being delayed or cancelled.
“The cost of developing wind farms has gone higher, so that has put a bit of a damper on the wind development now,” but “offshore is a good place to have wind energy, away from people. There’s a lot of real estate there,” Khurana said.
In wind installations, carbon capture and other energy-transition areas, offshore operators continue to develop new technology for the world’s evolving energy demands.
“This industry was built to evolve,” Khurana said. “The offshore industry, in my mind, is very blessed.”