Strong Gulf deepwater activity predicted

At the opening session of the Society of Petroleum Engineers’ Annual Technical Conference and Exhibition in New Orleans today, panelists spoke bullishly about the future of the deepwater U.S. Gulf of Mexico.

John Howell, Shell’s Upstream America’s executive vice president for deepwater, said that “drilling and operational water depths will continue to increase, accompanied by deeper reservoirs, and higher subsurface temperatures and pressures.” These, he noted, will lead to more complex, and more numerous subsea wells and systems

In terms of activity levels, Lars Herbst, the Gulf of Mexico regional director with the Department of Interior’s Bureau of Safety and Environmental Enforcement, said the BSEE expects 17 deepwater rigs to enter the GOM by 2015. Currently, he noted, 10 deepwater GOM projects are either underway or sanctioned, with another eight discoveries undergoing appraisal.

As if to underscore the importance of deepwater in general, and the deepwater GOM in particular, John Gremp, chairman and CEO of FMC Technologies, confirmed that two-thirds of the Houston company’s $6.2 billion in revenues is derived from subsea equipment.

To a certain extent, this optimism flies in the face of logic. Deepwater developments are extremely expensive and are optimum in scenarios where other sources of oil and gas are dwindling or in short supply. This is not the case in U.S. where shale plays have increased the nation’s supply of domestic oil and gas dramatically. The Bakken and Eagle Ford shale plays alone should add nearly three million barrels a day of oil production to the nation’s supply by 2017.

While refinery bottlenecks and pending fracturing regulations may impact shale development and production, U.S. oil and gas production from shale should remain high for a long time. That being the case, deepwater development economics may make those areas of the GOM much less attractive compared to shale developments.

About the author

Dr. William J. Pike

Dr. William J. Pike has 45 years experience in the upstream oil and gas industry, including more than 20 years in oil and gas drilling and production operations, both onshore and offshore. He has worked in the U.S., Canada, Britain, Europe and Russia as a technical and economic advisor to the energy industries and various governmental agencies. Pike was editor-in-chief and editorial director for Hart Energy Publishing’s E&P magazine and was also the editor of the Journal of Petroleum Technology, the official publication of the Society of Petroleum Engineers. He holds a doctorate in energy economics from the University of Aberdeen in Scotland.

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