New acreage and data evaluation strong;
vessels, equipment remain in short supply
Equipment and crews remain busy around the globe. The service sector is responding by expanding, building new equipment, but with minimal speculation. Utilization of marine seismic vessels and drilling rigs remains above 90%.
The pace of exploration will continue strong in the new year as companies evaluate existing acreage and preview data sets in new regions. This indicates that next year the industry will continue in an equipment constrained mode. High use of the available equipment and crews assures a strong support industry which is critical for the implementation of exploration and development programs.
An interesting extension of older exploration practices is coming into its own as a result of enhanced seismic and drilling technologies. Re-exploration of older fields, satellite exploration away from established fields, and wildcatting in undeveloped regions will be practiced with renewed fervor. Exploration is expanding in all dimensions: new frontiers, recently opened theaters and mature regions. Below are the areas to watch for 1998.
Gulf of MexicoMuch has been said about the resurrection of the Gulf of Mexico. The Gulf has come back with renewed strength, begun first by the subsalt play two years ago. Emphasis shifted in 1997 from the difficult and expensive subsalt plays to deepwater exploration. Successful programs by Shell and others are paving the way by extending current drilling practices to hunt "elephants" in the virgin deep of the Gulf.
Subsalt continues as an active frontier but it is a long term play with more technology development required before routine drilling is possible. Lease sales in deepwater have dramatically shifted the inventory so that more than half of the leases lie in water depths of 1,500 ft or deeper.
Field re-exploration is an expanding frontier that will be actively exploited by smaller oil companies in 1998. Application of high resolution 3D seismic and steerable high angle drilling will extend the active life of many fields. Little did the majors realize that selling older fields would be such loss of cash flow due to undeveloped or bypassed reserves. Smaller oil companies are now reaping the rewards of their investment.
South AmericaPetrobras will continue the relentless drive into deepwater. Massive development commitments will limit the exploration component, but expect new field announcements along the way. The decision to open most of the offshore to joint venture operations should bring new players and money to the region increasing the number of new fields discovered in 1998.
Early in 1998, a new frontier - the Falkland Shelf - will open in the South Atlantic. Is this a new North Sea? Time and drilling will tell the tale. Look for a few dry holes but some interesting geology and reservoir studies as well from this region. Opening of this theater could also spur development of the Argentine Shelf which has received little attention. Since YPF was privatized major interest shifted to onshore development. That should change this year as the shelf is tested.
North Atlantic/North SeaDrilling rigs and drilling technology have pushed the current envelope out from the shelf to water depths of 7,500 ft or more. Licenses let in recent Porcupine Trough and Rockall Trough sales will be tested this year. The Shetland Islands to Faroe Islands continues to attract interest with seismic and drilling scheduled for the coming year. A major drilling challenge will be to control the drilling riser in swift deep water currents.
The North Sea will see strong satellite field exploration and development. New smaller fields are now developed using subsea and tie-back technologies.
The Arctic Ocean perimeter seas are the next frontier. Norway and Russia will lead the way as they test new operating practices for ice conditions. New exploration commitments will test the Norwegian Sea and Barents Sea. In a related theater Greenland's Fylla Project could open a new frontier in the western Atlantic. Ice in all its destructive power is the major limitation. This again is a long term play necessary for new oil supplies of the next century.
West AfricaDeepwater again is the key driver for new West Africa exploration activity. Sales of deep water acreage were strong in the last two years and new discoveries demonstrated the viability of deep water plays. This trend will continue in the new year. A sleeper in all of West African activity is the subsalt. Western Africa has active subsalt exploration just as does the US Gulf of Mexico. The two areas are proving grounds for seismic and drilling activity chasing this potential.
Caspian SeaActivity will be strong in the Caspian Sea this year. Western Geophysical completed its major seismic study of the northern Caspian. Results of that work should lead to exploration drilling by Chevron and others.
The south Caspian activity will be dominated by Azerbaijan. Socar joint ventures covering older fields and untested structures will lead to new discoveries in this mature producing region. Seismic programs in the southern Caspian are underway.
Asia-PacificIndia has great potential but continues to act in a self-defeating fashion in its licensing and joint venture activities. The deepwater delta fans of the Indus and Ganges should hold significant reserves but will not be tested this coming year.
Australia continues its steady exploration of the western shelf. Testing of recent deep water leases will continue in 1998 but areas east of the Zone of Cooperation hold much undeveloped potential. Northern Territory and Queensland hold vast tracts of unlicensed acreage in the Arafura Sea. These will see little action this new year but could spring to life if a good discovery occurs in the Northern Territory.
China had success this year in the leases around Hainan Island in the South China Sea. Look for that activity to expand and new developments to begin. Complex geology and tensions with Taiwan continue to limit activity in the East China Sea.
Russia's Sakhalin Island development has begun. Expect new field discoveries as well as development drilling in 1998. Russia is again promoting the northern Sea of Okhotsk with new geologic interpretations. These are areas of future potential that are waiting on firm work experience at Sakhalin Island and on developing political relationships.
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