How will offshore weather the oil price storm?

We've seen it many times before. After an unusually long plateau, prices have plunged. People are asking, "Is this a hiccup, or a major decline?"

GhiselinDick Ghiselin • Houston

We've seen it many times before. After an unusually long plateau, prices have plunged. People are asking, "Is this a hiccup, or a major decline?" Particularly in offshore markets where costs to sustain the latest technology, maintain best safety procedures, and deliver the most successful exploration programs have been experiencing steady growth, how will the price slump affect drilling and production?

Like those in all commodity markets, the oil and gas industry does not solely set the price of its products. It can, however, profit by reducing its costs per barrel or cubic foot produced.

Drilling with fewer dollars

As one might expect, technology continues to provide solutions that can greatly reduce operating costs. One that is unique to the offshore arena is dual-gradient drilling. The concept of dual gradient got its first vote from Project DeepStar, an industry consortium dedicated to address common challenges of the offshore environment. In the first half of 2001, the first successful test of the dual-gradient drilling concept was performed by DeepStar using the aptly-namedOcean New Era rig of Diamond Offshore. Called Subsea Mudlift, the basic idea was to lift mud returns from the seabed to the surface using a seabed pumping unit. From a hydrostatic pressure perspective, this amounted to eliminating the effect of several thousand feet of seawater column. "It's the same as siting the rig on the seafloor," exclaimed enthusiasts.

Dual-gradient drilling has many advantages, but some that will be extremely useful in lowering drilling costs include:

  • Eliminating several strings of casing, along with associated costs of setting and cementing them
  • Enabling drillers to reach target depth with fewer strings, which means they can start with smaller diameter pipe while still reaching TD with a properly-sized completion string
  • Reducing the risks associated with narrow drilling margins, defined as the difference between fracture pressure and pore pressure gradients
  • Reducing the number of logging runs with their associated depth charges.

Dual-gradient drilling is being introduced offshore at this time by a couple of operators and a version has been developed by one offshore drilling contractor. The latter features a unique process with two major advantages: no seabed pumping unit is required, and the system will work on any offshore drilling rig without major modifications.

If popularized, dual-gradient drilling will reduce drilling costs and risks, while potentially extending drilling depths and increasing water-depth capabilities.

A trip untaken

Drill bit technology advancements are making significant reductions in offshore drilling costs. New design bits have been introduced that have better performance and longer lifetimes. One innovation is the Onyx 360 bit from Schlumberger's Smith Bits. With the bit's unique rotating cutter arrays, cutter wear is reduced so drillers can drill with a single bit farther and faster than ever before. The biggest beneficiary is the offshore industry where rig costs can turn a bit trip into a million dollar exercise. Even if one bit trip can be eliminated from a drilling program, the operator stands to save considerable money. Only a few rotating cutters deployed strategically in the cutter array can turn a polycrystalline diamond compact bit into a performance and longevity star.

Improving exploration success

Technology has played a major role in improving exploration success worldwide, but especially offshore. Recently, Western-Geco pioneered its "Coil Shooting" technique that uses a combination of steerable seismic streamers and accurate GPS positioning of each air gun and hydrophone to deliver more high-quality 3D data in less time with half as many vessels. The technique involves sailing in overlapping circles while continuously acquiring data. This eliminates the time-consuming line-change technique of the past where the vessel had to execute a long turn requiring many hours with no data being taken before returning to the next seismic line. On-board processing techniques have been improved by several providers to allow near-real-time quality control and delivery of better data to the processing centers.

The number of appraisal wells required has been reduced by the latest technology in logging-while-drilling (LWD) surveys as well as traditional wireline surveys. One of the newest breakthroughs is the GeoSphere LWD system that can image a 100-ft radius around the borehole as it is drilled. The system reduces the number of missed reservoirs and can be used to correct seismic data in the reservoir model.

Formation fluid sampling with downhole real-time fluid analysis can be acquired while drilling, thanks to a system pioneered by Halliburton's Sperry Division, and now offered by a few others. The ability to characterize hydrocarbons in situ and to precisely measure fluid mobility and pressure brings vital data to the economic evaluation of any reservoir. In times of depressed crude oil prices, this information can make the difference between an economic success and a bust.

Completions last longer

Perhaps the most number of improvements have been made in the well-completion arena. Those with the greatest potential to reduce costs fall into the following areas:

  • Sand management solutions that can predict sanding and prevent it rather than mitigating it after it occurs
  • Flow assurance techniques that can reduce or even eliminate waxing, hydrates, asphaltenes, and scale
  • Inflow control devices that prevent screen completions from eroding due to localized high-pressure flow.

Greater understanding

Perhaps the biggest cost drain comes from decisions based on sketchy data or risky assumptions regarding the reservoir fabric and fluids. Service companies are now combining rock and fluid analysis in integrated laboratories equipped with nano-technology imaging systems. By considering the complete reservoir including its fluid component simultaneously, more accurate and reliable decisions can be made. Decision-risk can be greatly reduced along with associated costs.

While hoping the current price decline will be short-lived, it is always a good idea to look into the newest technologies and techniques that can help reduce exploration, drilling and production costs.

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