Turbulent times ahead for US Gulf's next wave
  from: Offshore Engineer
  Thursday, May 08, 2008

Delays and skyrocketing costs in several ultradeepwater Gulf of Mexico projects have been offset to a degree by healthy prices for crude oil, a panel of industry leaders said at OTC yesterday.

In a forum examining the challenges facing E&P companies working in the Gulf ’s deepwater frontiers, officials said recent oil prices – even if they do not remain at current record levels – have helped keep exploration viable.

‘We do need a fairly robust oil price to make [deepwater exploration] attractive,’ said Brian Smith, general manager of major capital projects at Chevron.

While Smith and his fellow panelists – Russell Ford, Shell’s technical vice president, Americas, Darrell Hollek, Anadarko’s VP Gulf of Mexico operations, and Neil Shaw, BP’s senior VP, E&P, who were joined by US Minerals Management Service associate director Chris Oynes – would not reveal specific costing structures their respective companies used when planning the viability of deepwater fields, they did agree that some softening in prices would likely not derail any current or proposed projects.

‘You can survive in a $50 to $80 [per barrel] world,’ said Ford, provided prices for other commodities associated with exploration, such as steel, move in tandem.

In a wide-ranging discussion, officials said a handful of well-publicized delays in large US Gulf projects – and the current halt of natural gas production at Enterprise Product Partners’ Independence Hub platform due to a gas leak – should not raise questions about the companies’ ability to perform well as operations move into ever-deeper waters.

‘It is very difficult to predict the exact month that you’re going to bring a project online,’ Smith said. ‘You tend to not plan for something going badly wrong.’

The scheduled mid-2008 launch of Chevron’s $3.5 billion Tahiti project in the Gulf was pushed to 2009 because of the discovery last year of metallurgical problems with the facility’s mooring shackles.

Other setbacks on several current deepwater projects can also be chalked up to pressures created by overdemand on the global fleet of heavy lift vessels and deepwater drilling units as well as for specialist contractors services.

The panel session, on the theme of ‘New Waves in the Gulf of Mexico,’ cited escalating costs, a tight labor market and increasing technology and seismic demands as the major challenges associated with deepwater exploration, and said dealing with such complications would be even more critical as the industry moves into the region’s highlyprospective Lower Tertiary trend.

‘The conditions in the places where we find our new, major sources of hydrocarbons and supplies are becoming more difficult,’ Ford said. ‘It’s going to take more investment and it’s going to take more ingenuity to get this out of the ground and get those supplies to market.’

The MMS’ Oynes said that despite delays and other challenges that have cropped up in deepwater exploration, the agency remains confident that the Gulf ’s offshore oil frontiers eventually will produce yields in keeping with MMS projections issued in 2007.

‘I think the point is not to stick with the finite numbers but rather the broad trend,’ he said. ‘I think we’re very comfortable with the 2.1 to 2.2 million barrels of oil production is certainly doable in the relatively near future.’

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