Mozambique's Zambezi Delta.Okay, I said it - Boom! Yes, I know everyone's been avoiding using the word for fear of putting the cabash on it, but let's face it, the boom is back - in the North Sea, in the Gulf of Mexico, in West Africa, and in Southeast Asia. OPEC production is streaming along at maximum levels with barely a discernible tick due to Iraq's reentry into the market, and non-OPEC production is bordering on an all-time high across the board.
The biggest and brightest boom is in the North Sea and US Gulf of Mexico, where activities are at their highest levels in years due to frontier, subsalt, and deepwater exploration; renewed shelf developments; and enhanced recovery from existing fields. In the North Sea, both Norwegian and UK production continues to climb, as operators find new ways of wringing out near redundant fields, and discoveries, albeit seemingly small ones, add up to resounding exploration success. To this, add development at apace, with fast-track production seemingly daily, and the boom is obviously here.
In the US Gulf of Mexico, too, both on the shelf and off, exploration is expanding beyond the traditional venues to what was once thought to be peripheral prospects and to deepwater frontiers. Drilling is at such a frenzy that rig utilization is essentially 100%, with demand outstripping availability most of the time. And production is on the rise, as new developments are brought onstream with an ever greater frequency.
But this is, indeed, a boom being heard 'round the world - particularly in West Africa and Southeast Asia. Like the US Gulf, West Africa's dynamic offshore province is riding a wave of enthusiasm, as discovery after discovery prompt further concession licensing and exploration, and fast-track development, particularly with FPSOs, put activity at its highest. Yet, the area is suffering a lack of rigs and is running at virtually 100% capacity, with full rig utilization and a demand for many more than are currently available.
In Southeast Asia, as well, the demand is approximating availability for rigs capable of drilling frontier and deepwater zones and is almost at full utilization for standard jackups and semis. This is particularly true in the Gulf of Thailand, off Borneo, and in the South China Sea and Bohai Bay.
Is this worldwide boom merely an upcycle with an inevitable downcycle out there waiting to wreck the industry's euphoria or is it a sustainable phenomena?
According to the Paris-based International Energy Agency, in its new report, Global Offshore Oil Prospects to 2000, the present 15-month-long offshore surge will not only be sustained, but will accelerate through the year 2000. At the heart of this revolution, says the IEA, has been the opening up of so many new offshore horizons in the North Sea, Gulf of Mexico, West Africa, and East Asia.
Beyond these new horizons, however, there are five key elements that have contributed to this extraordinary growth and development and are certain to sustain it:
- The application of new technology
- Changes in fiscal regimes
- New methods of project management
- Constant growth in world demand
- Strong, market-based and demand-driven oil and gas prices.
Propelling the technology have been 3D and 4D seismic acquisition, processing, and interpretation; horizontal drilling techniques; subsea completions; multiphase pipelines; and the use of FPSOs, while the advent of more favorable fiscal regimes have contributed to expanded exploration, the economic production of fields with smaller reserves, and entry into numerous frontier zones. This, while shared risk/reward partnerships proliferated, reducing costs as reserve recovery is maximized.
With such a foundation, is it any wonder the boom is here to stay - for the foreseeable future, that is.
Mobile drilling unit newbuilds
Just how many new jackups, drillships, and semisubmersibles are on the books, the drawingboards, and under construction around the world is anybody's guess, but the numbers are growing exponentially as demand and dayrates continue to climb.
In the US Gulf, jackup rates are running from US$25,500 to $45,000, in the North Sea, from $48,000 to $110,000, in West Africa, from $45,000 to $65,000, and in Southeast Asia from $49,000 to $65,000.
Semisubmersibles in the US Gulf have dayrates ranging from $85,000 to $150,000, in the North Sea from $105,000 to $150,000, in West Africa from $45,000 to $66,000, and in Southeast Asia from $56,000 to $81,000. Dynamically positioned drillships are running about $182,000 and others are ranging between $55,000 and $74,000.
As a consequence, drilling and production platforms are being pushed to the limit via extended reach, sidetracks, and horizontal drilling, and a tremendous number of conversions are taking place across the globe, with every possible kind of vessel being transformed into a mobile drilling unit. In addition, a number of hybrids are taking shape.
All this effort to meet the ever growing demand for drillers, particularly deepwater and harsh environment units, is leading up to one inescapable conclusion: new-builds are on the horizon. A few have been announced, but quite a number of other units are quietly taking shape on paper and in the shipyards of Europe, Asia, and the USA.
- Le Tourneau yards are building the biggest jackup ever for Rowan Companies, and has an order for two additional jackups geared to a harsh-environment, priced at about $160 million each.
- Far East Livingston is building a Galaxy II jackup for Santa Fe, due for delivery in August 1998, and Aker has a jackup under construction for the North Sea Vaarg Field and a semi being designed for the Visund Field.
- Astilleros y Talleres del Noroeste shipyards in Spain are building the $75 million Discoverer Enterprise 1, a semi, for Transocean Offshore.
- China's Dalian Shipyard has signed a contract with Norwegian Bjarne Skeie to begin construction of a deepwater semisubmersible priced at about $36 million, with an option for a second.
- Korea's Samsung Heavy Industries is building a 721-ft dynamically positioned, doubled hulled drillship capable of working at water depths up to 10,000 ft for the Conoco-Reading & Bates joint venture.
- Shell Offshore has contracted with J. Ray McDermott and Aker Marine to design a spar-type drilling unit that will also be able to work at that depth, and depending on completion of the design work, as many as three of the spar drillers may go into construction early this year for delivery in 1999.
And, a whole rash of other new-builds are believed to be just around the corner, with announcement in six months to a year.
Briefs. . .
Europe. . .
A second well is being drilled on the Russian Pechora Sea Varandey More Field, southwest of Novaya Zemlya, where Gazprom found oil with its first well, last year. Further drilling will be in collaboration with Statoil and determine commerciality of the usually ice-bound field.
Mideast. . .
Azerbaijan's Socar state oil company has signed an E&P PSC with Elf for the Lenkoran-Talysh Deniz permit. Elf is operator, with 65%, with Socar holding 25% and Total 10%. The 420 sq km permit area lies 300 km south of Baku in waters 20-100 meters deep. 3D seismic and two wells must be carried out within the next three years.
Mobil's interest in Egypt's West Mediterranean Block 1 concession has been assumed by Apache Corporation. The block lies off the Western Desert in the highly prospective Mediterranean coastal sector.
Asia. . .
China National Offshore Oil Corp. has announced that for the first time China's offshore oil production has exceeded 14 million tons a year. This is a 66 percent increase over China's 1995 production of 8.41 million tons. In addition, the country had a seven-fold increase in its annual gas production, now at 3 billion cubic meters.
China and Japan have agreed to joint exploration and development of the disputed island group in the East China Sea known as Senkakus to the Japanese and Diaoyus to the Chinese. It is believed the islands' waters hold considerable oil and gas reserves. Exploration is set to begin this year.
Indonesia's Pertamina has awarded Santa Fe Energy Resources rights to explore the Pagatan Block off southern Kalimantan, a 2.1 million-acre track. Santa Fe is required to drill at least one well, planned for this year, if a rig is available. The agreement provides for a ten year exploration period.
The Gulf of Thailand Block B12/32 has given Texaco a discovery at its Bussabong Field. The Bussabong 2X well went to a vertical depth of 8,570 ft and tested 21 million cf/d gas and 115 b/d condensate. Tests are under evaluation for further work.
Brunei's Maharaja Lela gas and condensate field is to be developed by the New Zealand oil and gas company Fletcher Challenge Energy and partners. The $230 million project begins this year, with first production expected in 1999. Brunei LNG will be the primary market for the gas.
Once again India's government plans to reform its oil industry through restructuring and a move toward market-based pricing. The restructuring has been announced before, with little to actually show for all the hoopla that preceded it. This time it's the Union Ministry of Petroleum that drew up the plan, now before the Cabinet. All is intended to attract international investors. So far, however, the words haven't been replaced by any real action.
Africa. . .
UMC's Tsavorita-1 in Equatorial Guinea was hit by a dry gas kick at 3,605 ft. Neither the personnel nor the rig were injured, and no pollutants were released. The crew was evacuated until they could safely return. The hole was plugged and the rig will be moved for redrilling.
Nigeria's OML110, with its Obe oil field, is to be drilled this year in a production sharing agreement between the Nigerian Ministry of Petroleum, Allied Energy, and the Irish company Tuskar Resources.
Tunisia's Gulf of Gabes Ulysse Permit, a three-block concession totaling 1,912 sq km, has been awarded to British Gas, making the UK company the largest foreign acreage holder in the country, with 6,528 sq km.
South Africa's state gas producer, Mossgas, is set to boost output from its FA and EM Fields in Mossel Bay's Bredasdorp Basin, using the Ocean Liberator. Development drilling is to begin this month. State oil company Soeker is concurrently to trying to revive the EBT Field 100 km southwest of the FA Field.
Mozambique's Zambezi Delta is the focus of an exploration agreement between the Ministry of Mineral Resources & Energy, Empresa Nacional de Hidrocarbonetos (ENH), and BP. The 40,000 sq km Indian Ocean track is part of an 80,000 sq km aquatory believed to hold hydrocarbons. Seismic will be done this year to determine future activity.
Americas. . .
Trinidad & Tobago's Atlantic LNG project, priced at $1 billion and beginning with a single train, had its ground-breaking in October but is expected to be shipping LNG to the Northeastern USA and Spain by mid-1999. Amoco, British Gas, Repsol, Cabot, and the National Gas Co. of Trinidad are partners in the project, while Bechtel is the prime contractor.
Belize is currently the site of an exploratory drilling program on the Gladden Prospect by independent Dover Technology. The Sonat semi DF-97 is drilling 25 miles off Belize's southern coast.
Colombia's only offshore field, Chuchupa, located off the northeast coast in the Caribbean, has a second production platform now onstream. The gasfield is now producing 140 million cf/d gas from two wells. A third well is currently being drilled.
The field is operated by Texaco in a 50/50 contract with state oil company Ecopetrol.
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