Deepwater exploration is grabbing all
the headlines around the world as international companies plumb
the depths of the oceans, but what really happens after the big
announcements of huge discoveries?
Indeed, successful exploration is just one piece
of the puzzle that must be solved before reserves from deepwater
fields can be added to the world markets.
AAPG will be addressing the challenges facing deepwater
operations all around the globe at its annual meeting this month
in Houston. An executive session titled "Business Challenges Facing
Deepwater Development," scheduled for Monday, March 11, will look
at the risks, rewards and obstacles involved — from a variety of
perspectives — in bringing deepwater finds on line.
"If you look at what's happening worldwide in terms
of exploration, you see that the industry in the last 10 years has
committed to deepwater plays," said Carlos A. Dengo, area manager
for the United States and Mexico for ExxonMobil Exploration in Houston.
"So, there's a number of very large projects worldwide
that are in the initial phases of development and these projects
present major challenges to the industry," he continued. "Many are
in water depths that are pushing the limits of technology."
These emerging development programs are a big reason
why the Houston 2002 technical program committee decided to bring
together some of the key players in deepwater development to discuss
the challenges they are facing as the industry embarks on a period
of significant investment in deepwater projects.
Finding the Experts
Dengo, along with Erik Mason, area manager of western
Gulf of Mexico exploration for Shell Offshore, will co-chair this
The vision for the session, according to Mason, is
to look at how different companies in different regions around the
world are proceeding on major deepwater developments.
"We wanted to include all the important deepwater
provinces around the world — the Gulf of Mexico, Brazil, offshore
West Africa — as well as emerging deepwater plays like the Caspian
Sea off Azerbaijan," he said. "We have asked company officials to
discuss the stumbling blocks they are encountering in these large
developments, and how they are overcoming those problems."
In addition to covering the major deepwater provinces,
Dengo and Mason have assembled a list of speakers that combines
private industry as well as state oil companies.
"It's important to remember that state oil companies
are playing a significant role in deepwater exploration and development,"
Dengo said, "and we wanted to hear about the challenges from their
The experts who will be speaking in the session include:
Dave Blackwood, vice president of deepwater development
with BP, will discuss "Crazy Horse Field Development, U.S. Gulf
"Crazy Horse is perhaps the most significant discovery
ever in the deepwater Gulf of Mexico," Dengo said. "It opened up
a new frontier for the industry in the Gulf and showed us all that
you can still find important resources in a basin that conventional
wisdom held was mature.
"The Crazy Horse development presents some technical
challenges, not the least of which is water depth considerations,
and Dave Blackwood will address those challenges."
Johnny Hall, vice president of ExxonMobil Development, will
present a paper on "Angola Block 15 Development."
Block 15 will account for one of the first major
deepwater developments to come on production offshore Angola, and
ExxonMobil faced technological as well as other challenges in its
efforts to bring these reserves to the global market.
Rich Sears, vice president of evaluation and development
planning for Shell International Exploration and Production, will
discuss "Deepwater Nigeria — Big Discoveries, Big Challenges."
Shell has been a dominant player offshore Nigeria
for years and has overcome tremendous obstacles to prove up the
massive potential of the deepwater Niger Delta — and then get that
production on line.
Jose Coutinho Barbosa, director of exploration for Petrobras,
the Brazilian state oil company, will present a paper titled "Deepwater
Development Challenges in Brazil."
Mason said it was critical to include Petrobras in
the session, because the firm has been a pioneer in deepwater development
technology for years. Petrobras has received numerous OTC awards
for deepwater technological advancements and is continuing to push
the water depth barrier.
Plus, he added, there is a great deal of interest
in opportunities in Brazil since the country was opened to outside
Hoshbaht Yusufzade, vice president of state oil company SOCAR
in Azerbaijan, will discuss "Deepwater Development Challenges, Caspian
The Caspian is generating a great deal of attention
from state and private companies. This region has some unique development
challenges due to its geographic position and what it will take
to get production out to world markets.
Ian Ashcroft, head of North America Energy for Wood-Mackenzie,
a London-based consulting firm, will end the session by discussing
"Worldwide Business Challenges Facing Deepwater Development Projects."
"We felt it was important to get a global perspective
from a consultant who is outside the day-to-day operations of the
industry and more of an impartial source, Mason said.
"Wood-Mackenzie has been following deepwater developments
for several years," he added, "benchmarking how companies are performing
and what kinds of practices are working or not working from a technological,
fiscal and political point of view."
Challenges to Success
While each company faces its own unique set
of issues in deepwater development, Dengo and Mason identified some
of the most critical elements in today's world.
Certainly, the most important challenge for deepwater
operators is technology aimed at cost effectively producing fields
in extreme water depths.
"I see two or three major technological challenges
for the industry," Dengo said:
The ability to drill cost effectively.
"In all of these deepwater environments the cost of drilling
continues to be very high, and we need to lower those costs,"
"There is a huge emphasis on cost reduction in the drilling
process today," he said. "When you look at a deepwater development
that requires 30 to 40 wells, and those wells run $20 to $30
million each, it's easy to see why technology that can reduce
that cost is so important."
Deeper reservoirs with higher pressure and higher temperatures.
"These environments, where oil is reservoired in rocks that
are very high pressure and high temperature, bring with them
a series of challenges relative to systems capable of handling
the pressures and metallurgy capable of withstanding extreme
temperatures," Dengo said.
An added consideration in these deeper reservoirs with higher
pressures and temperatures is degradation of the rock properties,
according to Mason. Technologies will have to be developed to
increase production rates and ultimate recoveries from degraded
The need to better understand how reservoirs perform in these
extreme water depths and subsea depths and under the pressure-temperature
"We have a long learning curve ahead of us with regard to
how these reservoirs will produce over time," Dengo said. "That's
just a function of time and experience, but certainly it's something
the industry is working hard to overcome."
In addition to technical issues, the petroleum
industry faces geotechnical challenges in the deepwater — companies
must combine their knowledge with technology to conduct very large,
regional evaluations to determine if a basin is potentially productive.
"Then we can begin focusing on more detailed areas
with all the tools at our disposal," Dengo said.
"Deepwater exploration is no different than anywhere
else — we have to do fundamentaly sound science because much of
our success depends on that solid foundation. From that scientific
knowledge we must determine if field size is sufficient and the
hydrocarbon system robust enough to justify the enormous investments
required in the deepwater."
"The basics are fundamental," he said. "We must have
a geologic understanding of the subsurface from seafloor all the
way to the objective. This understanding can help the development
process from best drilling practices all the way through to production.
"There's a lot of research on new drill bits, mud
types and drilling fluids, for example, but without a basic knowledge
of the whole section those new technologies won't perform at their
The third important arena facing the petroleum industry
operating in deepwater provinces is the fiscal and political regimes
of host countries.
Of course, this varies around the world.
"For example, the fiscal regime we operate under
in the Gulf of Mexico is very different than other parts of the
world," Dengo said, "and these issues present challenges to project
economics depending on the tax structure, royalty structure and
"One barrel of oil is going to be worth a lot more
in the Gulf of Mexico than in Angola simply because of the fiscal
The final, but by no means less important, challenge
for deepwater developments is the proximity to infrastructure and
"In the deepwater Gulf of Mexico this is less of
an issue," Dengo said. "We have a great deal of infrastructure in
place and we are next door to one of the world's largest markets.
But if you explore in the Caspian Sea, for example, this is a huge
issue. No matter how big the discovery, you have to be able to get
it to market economically."