By Judy Maksoud
Gulf of Mexico looks to gas for a rebound
The optimism that marked the beginning of 2001 has run up against the unpleasant reality of economic recession in the US following Sept. 11. This downturn dealt the oil and gas industry a hard blow that was felt first and most lastingly in the Gulf of Mexico. While international E&P activities were briefly bumped off track, the GoM took a hit from which it is still trying to recover.
Transocean Richardson in the Gulf of Mexico.
Jackup utilization in the GoM fell off dramatically, then dayrates plummeted, followed by an exodus of rigs. From September 2001 to February 2002, the GoM rig count dropped by 33, according to numbers published by Rigzone.
Although the GoM is still feeling the repercussions of this downturn, things could pick up by 4Q 2002. Beginning in late March, when the rate of slide seemed to be slowing, GoM exploration drilling appeared to be leveling off. There was some indication that the market could be moving out of the doldrums. Analysts agree the real transition to economic growth in the US will take place after 2Q 2002, which could bring increased activity to the Gulf late in the year.
High-density 3D and 4D seismic surveys have identified deep gas plays on the shallow shelf that look promising. And royalty relief for deep gas drilling will offer incentives that will make exploration drilling attractive. The GoM lease sale in March saw elevated interest in the shallow water blocks where gas drilling is likely to take place. Gas prices, which had dipped below $2, jumped above $3 in March for the first time in months. Incentives coupled with continued solid gas prices could help bring rigs back to the shallow waters of the Gulf.
While the GoM market has been soft, other areas of the world have not suffered dramatic setbacks. According to Baker Hughes, the number of rigs operating offshore Africa by February 2002 was slightly above September's count. There were also more rigs in the Middle East and Far East, and the Canadian rig count jumped up during the period.
All the world's a stage
Capital will continue to go to regions where the investment climate is welcoming and returns on investment are secure. One of the regions that continues to see an influx of investment is Southeast Asia, where gas exploration is on the rise, and foreign investment is increasing. International cooperation is growing among Asia/Pacific nations that are finding it easier to work together to exploit their resources. Countries like Indonesia and China are actively seeking foreign partners to pursue E&P objectives.
Exploration and production activity offshore Africa continues to be exceptional. And ambitious drilling programs will bring more fields into production in the coming months, particularly offshore Angola and Nigeria, where tremendous reserves will be tied-in to existing production units. These two countries will attract three-quarters of the region's oil company dollars over the next five years. Angola, sub-Saharan Africa's second largest oil producer, is still one of the most promising deepwater exploration plays in the world.
Equatorial Guinea is heating up as an oil province, and more exploration drilling is on the books for Côte d'Ivoire.
For years, some have been tolling the death knell for the North Sea, but the area is not the moribund region it has been made out to be. The North Sea continues to hold its own and, in fact, has held some surprises. One example is PanCanadian's Buzzard discovery, with estimated recoverable reserves in excess of 400 MMbbl. This figure discounts reserves yet to be identified with a sizable portion of the field not yet evaluated. It is unlikely that the region holds many more such fields, but opportunities for development are many. The majority of developments in the immediate future will use the existing infrastructure to economically extend the life of mature operations.
Deepwater on Canada's eastern coast will be one of the places to keep an eye on this year. The first wells will be drilled this summer offshore Nova Scotia and Newfoundland, where contractors are optimistic that at least one well will find sizable reserves.
Diamond Offshore's jackup Ocean Sovereign drilling offshore Indonesia.
South America's Trinidad and Tobago has recently drawn a lot of interest as well, with a number of players exploring for oil and gas, both of which could be plentiful.
Exploration and production have been heavy offshore Brazil in the last few years and will continue in the same vein into 2002. There are still many unexplored areas, and upcoming lease sales are generating international interest. Brazil's Agência Nacional do Petróleo (ANP) is financing geological research this year, allocating $430 million in the 2002 budget for gathering geological data and seismic processing, a function normally carried out by Petrobras. ANP is working to open up new prospects and frontiers in its rich offshore by providing new geological information. The enormous area offshore Brazil contains many regions for which no data exists.
Vast areas in West Africa's deepwater also remain unexplored. With drilling requirements on a number of deepwater blocks, exploration drilling will test previously untouched areas in the coming two years. Huge amounts of seismic data collected over the past two years have made operators optimistic about the extent of reserves. South Africa has seen a number of initiatives, and seismic surveys off Africa's east coast will soon indicate if exploration will move around the Cape of Good Hope and on up the eastern seaboard.