Super basins around the world offer plentiful opportunities for exploration and development, even with the temporarily reduced financial outlook of the oil industry. Ask explorationists to pick a favorite in today’s environment and the popular choice is almost a cheat.
The Gulf of Mexico isn’t just a super basin.
It’s a huge expanse of prospects and possibilities, of proven resources and potential reserves. An onshore, near-shore, offshore and deepwater exploration province that is really a vast collection of basins and geological features. A grouping of multiple petroleum systems whose peak generation window continues today.
What Makes the GoM a Successful Super Basin?
The U.S. Bureau of Ocean Energy Management has estimated that undiscovered, technical recoverable resources for its offshore Gulf of Mexico region range from about 40 billion to more than 58 billion barrels of oil, and from 124 trillion to almost 160 trillion cubic feet of natural gas.
To use a phrase from an earlier period: the Gulf of Mexico might be the mother of all super basins.
The geology of the Gulf of Mexico has been well described yet is still under study. The structures and systems of the Gulf of Mexico have been drilled frequently, yet are still being explored, sometimes as frontier prospects.
Discoveries in the Gulf of Mexico are reported annually, successful wells sometimes monthly. The opening of the Mexican side of the offshore basin has brought new intrigue to the area.
Think about what makes a super basin attractive for exploration now, and you have to add together several factors, said Chandler Wilhelm a Houston-based consulting geologist and former Shell exploration leader.
Attractive basins “have very material remaining resource potential combined with significant infrastructure already in place to reduce development costs, enable rapid monetization of discovered volumes, and increase the economic resilience” to low oil and gas prices, Wilhelm noted.
“At least for the near- and mid-term, large IOCs (international oil companies) still require significant oil and gas reserves to fund their cash flows for shareholders, despite their movements into renewables and some recent dividend cuts,” he said.
Large oil companies “must operate at scale in basins that can deliver material cash flows for many years,” Wilhelm observed. That has directed their attention to basins like the Permian in the United States and deepwater basins offshore Brazil.
“For smaller and mid-sized companies, again the answer depends on the business model of each company, particularly how they are financed, the strength of their balance sheet and their timeline to pay back investors,” he said.
“But again, a model of infrastructure-led exploration in basins with significant remaining potential often makes the most sense even for smaller companies. For example, there have been some recent new entrants into the Gulf of Mexico that utilize this model,” he added.
The business driver is cash flow, not just volumes, he said. In the Gulf, in today’s environment even those smaller companies “can acquire leases at low cost without competition, mature a drill site inventory utilizing available state-of-the-art, multiclient 3-D seismic, and tie discoveries back to any of the hundreds of active platforms that have spare capacity,” Wilhelm noted.
“Even small discoveries can be quickly converted into cash flow, sometimes in less than a year,” he said.
The Mother of All Super Basins
Charles Sternbach, president of Star Creek Energy in Houston and chair of AAPG’s Super Basins Committee, considers the Gulf of Mexico a favorite.
“Living for 38 years in the Gulf of Mexico super basin, I must say that I hold this prototype super basin in the highest regard for future potential. And here is why: the GoM super basin is really a mega super basin containing component super basins in the U.S. onshore, offshore, and Mexico Basins,” he said.
Sternbach said the Gulf’s series of passive-margin super basins “has it all” – infrastructure, corporate know-how, service company support, research at pioneering universities and a fundamental geological architecture of multiple source rocks, multiple and thick reservoir packages, and abundant reservoirs with regional salt seals that also create trapping structures.
The Gulf of Mexico has been revitalized with unconventional resources and deepwater conventional reservoirs, Sternbach noted. It’s one of several offshore areas that have dominated the industry’s exploration focus in recent years.
But don’t be surprised if the tide soon starts to shift back toward onshore super basins, he said.
“While these plays have attracted vast exploration capital, other onshore conventional giant field prospects have been starved of capital. I think this onshore inventory of conventional prospects will soon produce another wave of giant discoveries,” he predicted
“I say this not as a macroeconomic view but because I know of specific onshore portfolios of conventional giants waiting for their turn as drilling targets,” he said.
For Sternbach, the prototype onshore super basin is still the U.S. Permian basin in West Texas and New Mexico for unconventional resources.
“In addition to the Permian Age Wolfcamp, there are deeper petroleum systems like the Mississippian Barnett Shale, the Devonian Woodford, the Ordovician Simpson – so much more to develop from multiple source rock horizons contained in a welcoming infrastructure that favors experimentation with new technology and innovation,” he said.
When considering the big picture for future global exploration, however, don’t discount the mother of all super basins.
“Continual revitalization is at the core of the history of the Gulf of Mexico super basins, and I wouldn’t bet against history,” Sternbach said.
The Power of Super Basins
Valuable and actionable lessons can be derived from the study of the world’s many different, unique super basins, and that “is the power of super basins and why we study them all,” Sternbach observed.
“When I was an undergraduate geology major at Columbia University, there was a saying in the department that I hold dear today as I did then: ‘The geologist who has seen the most geology is the best geologist,’” he said.
In a rock-bottom sense, geology makes super basins what they are. It’s a combination of geology, economics and favorable industry factors that bring areas like the Gulf of Mexico to the top of the exploration list today.
“An infrastructure- or market-led exploration strategy still requires good geology and the ability to identify material remaining resources, in a business setting where acreage can be accessed at reasonable cost and the fiscal terms allow investors to realize a profit commensurate with the risks being taken,” Wilhelm noted.
“As AAPG legend Marlan Downey said, ‘Geology is a science, but exploration is a business.’”