COMMENT

Leonard Le Blanc

Deepwater forum

Several members of the international deepwater drilling and development fraternity are calling for the formation of a global "Deepwater Forum." The purpose of such a group of operators would be to focus, guide, and help fund deepwater research programs, as well as lowering the technology and entry costs for all operators.

One situation alone - deepwater well control - exemplifies the urgent need for greater sharing of knowledge. One drilling incident in deepwater, resulting in environmental damage, could force suspension of deepwater operations by regulatory authorities, regardless of demonstrated technical expertise and experience. Such a halt is almost guaranteed in US and European deepwater operations, but there would be repercussions elsewhere.

A pooling of deepwater experience and joint industry project efforts would alleviate duplicative research efforts and focus funding on the remaining knowledge and equipment gaps. Yes, there are competitive concerns and problems with sharing proprietary information, but there is too much at stake for all deepwater operators. On this issue, regulators are in clear agreement with industry.

Search for identity

Oil and gas producers are searching for a new business identity, pushed on one side by the growing global environmental movement, and on the other by technological changes taking place within the industry and society.

For years now, many companies have referred to themselves as energy companies, rather than simply oil and gas companies. The change was driven more by new marketing efforts than a significant change in business. However, a number of major producers now are examining what will constitute "energy" in the next century, but more to the point, who should provide it and at what cost and impact.

Is this shift simply strategic positioning or a growing acceptance of reality? Does it matter?

It's not that oil and gas exploitation will be less important in the future. Petroleum will play a dominant role in energy consumption for at least 50-70 more years. Equally predictable, however, is that technology will not remain static, and more benign uses and impacts for petroleum products will evolve in the future.

For producers, ignoring alternative energy forms or renewables will not make them go away. Without giving up position on oil and gas use, energy companies are examining other options, renewable and otherwise. Some have quietly created business units to begin framing the wider definition of "energy." The development of independent natural gas units was the first step in this re-definition.

Today's energy producers must position themselves to be energy providers far into the next century, and providing it in the form consumers want.

Time and technology

Mature area exploration seems to be a contradiction in terms, but there is no other description for what is taking place in the shallow water Gulf of Mexico and just beginning in the North Sea.

Efforts to drill behind-the-pipe reserves and secondary targets near producing wells have just about run their course, and producers are reaching further out. This small quiet revolution, especially in water depths under 200 ft, is being driven by the availability of pipeline and platform infrastructure, the dwindling cost of 3D seismic, and the availability of logs from lots of wells with which to tie in seismic.

This is not a big production play, nor is the cash flow huge, but it isn't a high-cost play either, and the margins make it very attractive. Shallow water construction, installation, and workover costs have remained relatively constrained, in contrast to costs in deeper water. Exploration drilling in shallow water makes few demands on jackup capability, so costs are relatively constrained here too.

The wide use of extended reach, multi-lateral, and horizontal drilling technologies make this play even more attractive. Extended reach drilling, by itself, provides a low-cost search tool for adjoining leaseholders. When positioning at the junction of four 3-mile sq leases in the US Gulf, a drilling unit can probe nearly 50% of the total area in the four blocks without changing locations.

If this new exploration play continues for any length of time or uncovers sizeable new reserve additions, we can truly say there is no such thing as production maturity. Productivity is a matter of time and technology. Besides, there is more than a little suspicion that reservoir recharge is altering the time-honored fundamentals of reserve estimation.