At the beginning of a new century, almost all the prospective, and even a lot of unprospective deepwater acreage up to 5,000 ft water depth, is already under lease. We need to push ever farther out, and deeper. Fortunately, this need is being satisfied by more ultra-deepwater and ultra-ultra-deepwater bid rounds.
I am excited by this, since it heralds more big discoveries and reserves. But I have to ask whether we are ready to tackle developments in 10,000 ft water depths. Sometimes, we underestimate the challenge of deepwater, forgetting that the industry is anything but mature.
The fiscal and economic conditions have to be right before the industry will go after these potential hydrocarbon reserves. But this is only the tip of the iceberg. Customers won't pay more for oil and gas from deepwater than they now pay.
Technology will play a big role in bridging the current price gap. If we're going to conquer the ultra-deep, we need technology advances to get out there and to drive the costs down as well. It's clear that technology advances have been responsible for huge exploration and development cost reductions over the past 20 years.
Companies who were content to be "fast followers" - buying technologies off the shelf - will have to re-think. Ultra-deep license terms will not allow tardiness, and if a technology has not yet been developed, it can't be bought. In Shell we use a phrase, "The Difference is Technology." And so we continue to invest significant amounts of money in research and development.
Technology imperatives
When we went into deepwater a few years ago, we simply thought bigger - bigger rigs, floating systems, everything. Now, we need to find newer and smarter solutions. It will be the most creative innovators who differentiate themselves from the competition.
A whole range of technologies will be needed for our coming foray into water depths of 10,000 feet and more. Some of them have already left the drawing board and will become a reality soon. Others are still a gleam in the eyes of the inventors.
Drilling costs make up about a third of a typical deepwater development project. Lighter materials used in new riser designs will be very important in ultra-deepwater. We will push the depth envelope further using dual-gradient drilling and making use of subsea mud pumps. Three industry projects are developing these systems and the first implementation will be soon. We recently completed a multiple solid expandable tubular successfully on one of our critical Gulf of Mexico deepwater wells, and that shows us that the mono-diameter well is no longer a dream. It could be reality before the end of this decade. These wells will help us unlock reservoirs that currently are beyond our reach.
With ultra-deepwater developments, we will have to deliver on promises made on well performance and field productivity. Smart well technologies offer exciting new ways to keep these promises. Combined with time-lapse reservoir imaging using 4D seismic and other data, we will manage reservoir performance in real time and maximize recoveries. With better reservoir modeling, we will further reduce uncertainties and reach optimum performance.
The reliability of production systems is critical. Deepwater does not allow the luxury of quick and easy intervention. Our subsea facilities will need high uptimes and require the minimum of intervention to ensure they at least match the reliability of dry tree systems. I expect we will use autonomous underwater vehicles to monitor operations and environmental performance continuously. Subsea production systems, that now have fluids flowing over relatively short distances to floating processing facilities, will be extended by deploying and using subsea processing safely. This will involve major technology breakthroughs and paradigm shifts.
Smart wells are a key technology, but there is a host of others, such as subsea separation, multiphase subsea boosting and gas compression, cold wellstream transportation, fiber-optic control systems, and a wide range of supporting technologies that will be needed to let us achieve this ambitious dream.
I predict that long tieback distances for both oil and gas wells will become the norm, and realizing the vision of the offshore field being developed directly to land, without massive surface processing and pumping stations, may not be too far off.
When we can operate facilities remotely and use robots, our operations will become inherently safer. We must have fail-safe systems so we can perform to the highest environmental standards, and when our industry has zero-impact facilities, we will be a leader in environ-mental performance. There are those who say automating facilities offshore will reduce employment, but I foresee a shift from on-site to land-based operations. Employees will leverage best practices of remote operations on complex offshore installations and improve on them using communications advances to do the job from onshore.
Winning in deepwater
The industry needs to start developing and implementing technology for ultra-deepwater now. If we apply new technologies in our current projects we can test them now and take out the risks. The winners in this game will be the organizations who can spiral up the learning curve fastest. Inter-disciplinary teams working on several projects simultaneously are more likely to find innovative solutions and will apply best practices, not just to a single project, but reduce the risks for all at the same time.
Our experience in Shell with the tension leg platform (TLP) and subsea projects in the Gulf of Mexico shows that this approach brings constant organizational learning, too, which also lowers costs. We reduced unit development costs by over 60% since the first TLP some 10 years ago, and project schedules have been shortened by over 50%. We have much better economic performance and we've lowered the commercial threshold at which deepwater projects become viable.
We've come a long way in deepwater. But, it's clear the E&P industry needs new technology to conquer ultra-deepwater. It needs the organizational capability to deploy the technology. Above all, it needs the people who can make it all happen.
Matthais Bichsel
Director
Shell Deepwater Services
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