Vision and Reality - Realizing the Commercial Prospects for Deepwater Production – part two

Published November 9th, 2000 - 02:00 GMT

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.  

 

Shortening the time frame:  

One of the most important achievements of Shell deepwater engineers has been to reduce the time taken to design, construct and commission facilities. Ram-Powell - in deeper water than Auger and with greater capacity - took 18 months and $100 million less. This was achieved by effective learning, simplification and doing things in parallel rather than sequentially.  

 

There are particular challenges in deep water. One is shallow-water flow in over pressured sands - a phenomenon that can damage or even destroy wells.  

 

Shell researchers have developed techniques for predicting, managing and remediating this problem. But it still forced a change to the Ursa location.  

 

That's where experience counts - to be able to reorganize such a huge project so that mating of topsides and hull is done in the southern Caribbean while new wells are predrilled - all without delaying the project.  

 

That was essential, because delay destroys deepwater economics - particularly at low oil prices. The Ursa facilities cost some $3.60 per barrel equivalent.  

 

Explorers must play their part by cutting exploration and appraisal times. We are learning to detect and characterize reservoirs - and forecast their performance - more quickly, and to communicate the results to colleagues of other disciplines in ways they can use.  

 

Making the most of what's available:  

It may be heresy here, but our real assets are not the reserves but the pipelines and productions systems we invest in to develop them.  

 

We must use these as effectively as possible - as hubs through which smaller and deeper fields can be developed.  

 

This year, for example, Shell Oil announced the development of Macaroni as a satellite of Auger, and Europe as a satellite of Mars. We believe that the infrastructure which Shell Oil is developing in the Gulf of Mexico will be increasingly valuable.  

 

Profitability depends not just on the cost of finding and developing reserves but on total lifecycle costs. This brings me to the fourth imperative for deepwater profitability: reliability, reliability and reliability.  

 

It takes special wells to deliver 10,000 barrels a day - and to keep on doing so. Think of the erosive force of sand. Think of the cost of intervention. And think of the impact on production if one of so few wells is shut in. Mars is producing over 120,000 barrels of oil and 120 million cubic feet of gas a day from just 13 wells.  

 

Shell companies have invested heavily to understand metocean conditions and their impact on deepwater structures. Shell Oil spent $8 million installing a network of environmental, motion and force sensors on the Auger TLP to produce a continuing flow of data that will guide future design.  

 

Of course, reliability is more than just a short-term economic requirement. It is a responsibility - to meet the safety and environmental standards to which we are committed.  

 

This is particularly true when we are pushing forward technological limits - and where intervention is more difficult. We must ensure that we know what we are doing, have the skills and systems to do it properly, and have the plans to cope with any emergencies.  

 

Driving forces:  

Let me widen my perspective to suggest three forces which drive this industry's progress:  

» our capacity to learn;  

» the commercial dynamic; and  

» our relationship with society.  

 

I have stressed the extent to which deepwater advances are the product of long-term technological evolution. Floating production systems have been developed over two decades. The necessary reliability for deepwater subsea systems was learned in shallower waters. But there's more to it than that.  

 

Technological advances and learning don't just happen by accident. It requires continued investment in research and development. Above all, it requires continued investment in people, who carry the experience and drive forward the progress.  

 

Over the past 20 years Shell companies have invested over $500 million in deepwater research - experimenting, for instance, with platform, pipeline and riser designs in our own test tanks. We remain committed to such long-term investment - even in tough times. This industry's commercial dynamic drives the relentless pursuit of innovation and improvement. 

 

I was involved in discovering the Troll field in Norway in 1979. We knew that, if we found oil, we could develop it. But, as I pointed out at the time, if it was gas 'we had bought a ticket to the moon' - and would need to extend our capabilities to find a way of using it. We did, of course, and Troll came on stream in 1996.  

 

Similarly, when Shell Oil took all those leases in the Gulf of Mexico they didn't have the capability to develop fields in such depths. But they had confidence in their ability to learn - and the courage to try.  

 

This industry faces many new opportunities around the world. In part this is a consequence of political change - of political and economic liberalization. But it also reflects a recognition of our ability to work in fruitful partnership with host countries. We understand much better the need to ensure that what we do meets the needs of all those who have a stake in it.  

 

What lies ahead?  

As I said at the beginning, we have a compelling vision of deepwater possibilities. We see a new world-class province being opened up off West Africa - particularly with the major discoveries in Angola. Shell companies are very active in that area. Plans to develop the Bonga field in 1,000 meters of water off Nigeria - using an FPSO - are close to fruition. 

 

We can all have confidence in this industry's ability to extend further into deep water using a range of development systems. But we should never diminish the challenges.  

 

Drilling in deeper water could be constrained by limitations in riser technology, by the hydrostatic weight of the mud column acting on unstable formations, and by the sheer cost of rigs capable of handling such weight.  

 

One possible solution would be to have the drilling rig on the seabed. It sounds like science fiction. So did production a mile down - the depth of Mensa.  

 

A joint Shell/Saipem project is considering such possibilities.  

There are still major challenges in drilling and completing high-productivity wells. Flow assurance techniques are essential for deeper, colder and longer pipelines. Effective and economic means of remote intervention are vital.  

 

Gas is both an opportunity and a challenge - dealing with associated gas in remote locations without flaring. One possibility is to have floating liquefaction or gas-to-liquid conversion.  

 

Several companies are considering such possibilities. It would be surprising if this didn't include Shell companies - with their particular experience of LNG and also gas conversion.  

 

Problems include the obvious ones of scaling and fitting the technology for marine use. Paradoxically, there are challenges in developing floating plant that is both large enough to support gas production as well as small enough to deal with associated gas. Above all, there is the absolute requirement of commerciality; gas marketing is a difficult game.  

 

The ultimate challenge for deep water is, of course, the economic challenge I mentioned at the beginning.  

 

Many of us have lived with the expectation of rising oil prices. On the contrary, low oil prices may persist for some time. All the technical possibilities that we rightly take such pride in will be as nothing if production from deep water is uncompetitive.  

 

Down-to-earth Star Trek:  

Does that mean that, in Shell, our vision of deep water is now curtailed? The best answer I can give is to demonstrate our continued commitment. We have an unrivalled world-wide deepwater position - exploration, development and production. We are working very hard to extend that position and to realize its potential.  

 

Analogues from world-wide turbidity exploration enhance our geological understanding; though we are careful not to be confined by them. We have the experience of continuing achievement. And Shell International Deepwater Services ensures that experience gained in one place is directly available everywhere.  

 

As I said, we remain committed to pushing forward our technological capabilities, solving problems that we know need solving.  

 

Lastly, but most important, we have an international community of more than 2,000 people working on deep water. And this is a true knowledge community, sharing experience and developing common understanding. 

 

Despite the current challenges our deepwater vision is not diminished. We are still driven by a vision of great potential and new possibilities. We have pursued it for more than 30 years and will continue doing so. Our vision is partly that of the explorer, 'to boldly go…'.  

 

But, as business people, our true fulfillment is to deliver the energy people need safely, cleanly and profitably. That is a challenge worthy of comparison with space exploration.  

 

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 . 

 

 

© 2000 Mena Report (www.menareport.com)

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