Due to the continues squeeze of the land oil fields companies are turning more and more to the deep water search / find / produce arena. Although this is a two years speech we do think that it is more then relevant these days.
Major discoveries in a range of geological settings confirm the vision of widespread deepwater oil and gas resources. The industry's ability to explore and develop in deep water has advanced rapidly. Shell has been pursuing deepwater opportunities since the 1960s.
In the Gulf of Mexico it has led the industry, bringing a series of fields into production in up to 1,700 meters of water. These achievements have depended on finding highly productive wells, cutting exploration and construction time, harnessing infrastructure and emphasizing reliability.
Progress depends on a capacity to learn, the commercial dynamic and responding to societal needs. The challenge is to ensure deepwater production remains competitive at low oil prices. Shell has unrivalled world-wide deepwater interests and is committed to realizing their potential.
Some striking Shell publicity posters in the 1970s likened North Sea development to space exploration. The comparison was apt - the scale of the endeavor, the technical challenge, the excitement of a new frontier. It is even more apt today as we develop fields in more than a kilometer of water and probe much greater depths.
Like space explorers, we are driven by a vision of expanding possibilities. Yet there's a huge difference. We're not publicly funded seekers of knowledge. We're business people with the responsibility for delivering the energy the world needs.
That energy has to be economic - as well as extracted safely and cleanly - and we have to be profitable. We need vision. But we must root that vision in sober technical and economic realities; oil prices a third lower this year than last are a sobering reality.
As explorers we are rightly excited by major discoveries which confirm our vision of widespread deepwater promise. We know how our industry's technical capabilities have advanced.
In 30 years we have gone from drilling in a few hundred meters of water to nearly three thousand - with the capacity to develop fields following not far behind.
But we shouldn't kid ourselves that we have yet done much to realize that promise. The amount of oil and gas flowing from fields in more than 500 meters of water is still small - and confined to a handful of companies. Development in those water depths - let alone the sort of depths we aspire to - is far from a mature technology.
It's still a steep learning curve - in a hostile environment that is physically, technically and economically unforgiving.
A long time coming:
And we should not imagine that the skills and tools that allow us to operate at such depths just emerged in the 1990s. They have been developed over half a century since Kerr-McGee installed the first offshore platform in the Gulf of Mexico in 1947.
When I joined Shell International in 1969 deepwater possibilities were already being pursued. One of the jobs for a geophysicist as I finished training was on the Lady Glorita, the seismic vessel for the Shell deepwater exploration campaign.
I get very seasick. So I was relieved to be sent to Indonesia instead. I was there when the Sedco 445 arrived in 1972 to drill in 350 meters of water. We learned much from that campaign - even if we didn't add to our reserves.
A valuable lesson had been learned even earlier, when Shell Oil sent the Eureka in 1963 to core deepwater turbidities in the Gulf of Mexico.
When those cores were extracted the decks were 'sloppy with oil'. They were rushed ashore and locked deep in the corporate archives - a bit like the ark at the end of the Indiana Jones film.
Nor were those turbidity plays, which now generate so much excitement, new to geologists. Production from turbidities began in California last century. But it was in the North Sea in the 1970s that the industry really began to focus on the deepwater possibilities of turbidities. Since then, success has been found in three geological settings:
» unconfined, basinal turbidity fan systems in the North Sea as well as the Campos Basin;
» salt mini-basins with confined turbidity fans in the Gulf of Mexico; and
» thick channel levee systems off West Africa.
Petrobras has mastered the first of these settings in the Campos Basin, finding and developing a succession of deepwater fields in record depths. It has demonstrated remarkable vision, skill and courage.
Shell companies are proud to have pooled their deepwater expertise with that of Petrobras in exploration ventures elsewhere, and look forward to the possibility of working with Petrobras here in Brazil.
Gulf of Mexico:
Let me focus on the deepwater Gulf of Mexico, where Shell Oil has led the way. Its geologists began considering deepwater turbidite possibilities off the Gulf of Mexico shelf in the 1960s, leading to the first leases and exploration wells in the 1970s.
Attention focused on 'potholes' where basins fall into thick, massive salt. Could sands carried from the shelf have been caught in these potholes? Were they deposited in productive reservoirs? How to identify them?
The term 'productive' has, of course, a special meaning in deep water.
Economic development requires wells capable of producing over 20 million barrels at rates above 10,000 barrels a day. Such 'high ultimate-high rate' wells are the first imperative for deepwater profitability.
Shell explorers learned how the most productive sheet sands were deposited on the flanks of the lower slopes of those potholes. They learned how to use seismic 'bright spots' to identify hydrocarbons, and 3D data to reveal reservoir architecture and properties. The effort paid off in a continuing succession of discoveries, starting with Tahoe in 1984.
Their success rate has been very high - far above the industry average. Nearly half of Shell Oil's exploration wells found significant hydrocarbons, while a third made commercial discoveries.
And these discoveries have remarkable well rates. One of the Ram-Powell wells has produced more than 40,000 barrels of oil and gas a day. The Ursa wells are expected to produce more than 20,000 barrels a day.
Even with such wells, development in deep water is not a picnic. Shell Oil had installed the Bullwinkle platform in a record 400 meters of water in 1988. But the engineering and economic limits of such fixed structures were being reached. Alternatives were needed.
This wasn't new. Shell Oil installed the first subsea well in 1960. The industry has been pursuing a range of alternative floating systems - tension-leg platforms (TLP), spars, compliant towers, floating production, storage and offloading facilities (FPSOs) - since the 1970s.
Development of Auger began in 1989 using a TLP in nearly 900 meters of water. The field was brought on stream five years later, at a cost of $1.1 billion. Its facilities have been expanded twice since then, and it is now producing over 100,000 barrels of oil and 300 million cubic feet of gas a day.
Mars, with more than twice the reserves, was brought into production in 1996 using a similar system - as was Ram-Powell in 1997. Ursa - in 1,200 meters of water and with three times Auger's original capacity - will be brought into production next year.
Meanwhile Tahoe, Popeye and Mensa have been developed as subsea satellites - Mensa in 1,600 meters of water with a 100 kilometer tie-back to the host platform. Shell Oil has a strong portfolio of other deepwater projects - and an aggressive appraisal and exploration effort.
The lessons of these developments provide two other imperatives for deepwater profitability: reducing the time from exploration to revenues and working the infrastructure.
Source:Shell. Originally was published on 09-11-1998.
Phil Watts, Managing Director of The Shell Petroleum Company (The "Shell" Transport and Trading Company, plc) and Group Managing Director of the Royal Dutch/Shell Group of Companies at the American Association of Petroleum Geologists International Conference, Rio de Janeiro, Brazil .
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