Oil companies go deep - East Valley Tribune: Business

Oil companies go deep

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Posted: Monday, June 19, 2006 6:07 am | Updated: 5:09 pm, Fri Oct 7, 2011.

ABOARD THE DISCOVERER DEEP SEAS - Nearly three football fields long, the ship appears to be sitting idle on the turquoise blue waters of the Gulf of Mexico, perhaps even abandoned.

Beneath the deck, there’s no such tranquility. A 200-person crew of geologists, engineers and technicians work around the clock at dimly lit keyboards, controlling every move of an adjoining oil rig as it uses an 16 1 /2-inch pipe to bore through the ocean floor.

The Chevron Corp. crew is developing a deepwater oil field 190 miles off the Louisiana coast projected to produce 100,000 barrels a day by 2008 and 500 million barrels overall. Each well will reach more than 26,000 feet below sea level.

It’s the kind of deepwater discovery once thought to be out of reach, but with improved technology and climbing global oil prices, companies are spending billions developing oil fields the Interior Department says will substantially boost Gulf production.

Deepwater exploration — done in depths of 1,000 feet of water or greater — is also volatile, as companies face increasing development costs, a battle with the federal government over royalty payments and continued rig shortages.

‘‘Deepwater is a hot issue right now because there’s a lot at stake for everyone,’’ said David E. Dismukes, associate director for Louisiana State University’s Center for Energy Studies. ‘‘It is the frontier for domestic oil and gas production right now.’’

When Chevron begins producing oil from this reservoir called Tahiti, it will be among several new major oil and natural gas projects in the Gulf over the next two years.

Within a year, BP PLC expects to have two Gulf projects producing oil designed to collectively generate 450,000 barrels of oil a day. Anadarko Petroleum Corp. will operate Independence Hub, also in the Gulf, slated to produce 1 billion cubic feet of natural gas a day.

Two factors are driving companies such as these to deeper waters: aging fields on shore and in shallow waters are less productive, and federal lawmakers restrict access to other prime fields such as those in Alaska, the western Gulf of Mexico and coastal waters.

Companies are also going global with deepwater production tapping the coastal shores of Nigeria, Angola and Brazil. Deepwater accounts for about 3.7 million barrels a day — or slightly less than 5 percent — of global production, according to estimates by energy consultant Wood Mackenzie.

‘‘There are huge decisions ahead of us,’’ said Paul Siegele, Chevron’s vice president of deepwater production. ‘‘It’s the challenge of exploring around the world as well as places like the Arctic and the middle of nowhere.’’

Deepwater drilling in the Gulf dates to 1979 when Shell Oil Co. began production, but development really didn’t take off until the 1990s as technological advancements made it more feasible, according to the Interior Department’s Minerals Management Service.

By 2004, deepwater production accounted for 66.4 percent of Gulf production, a 10-year, 40-percentage point boost, according to the Energy Information Administration. A 2004 Minerals Management forecast put Gulf production rising 36 percent through 2013, even as older wells dry up, largely thanks to deepwater pursuits.

Deepwater exploration, or wells drilled in unproven areas, fell 35 percent last year from 2004, a 10-year-low, largely because of hurricanes.

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