Deep oil

Addictions are difficult to kick. This is especially true when they make rich and powerful people richer and more powerful. Those benefiting financially from the addiction will go to great lengths (or, in some cases, great depths) to perpetuate the dependency. Whether oil supplies have peaked or not, Nature’s tolerance for burning it to satisfy society's energy needs has. By now, the reality of climate change should make it clear that peak oil is a meaningless concept, for even if plentiful new and accessible sources of the "Black Gold" were discovered, we should cease drilling for it immediately and redirect our resources towards the development of alternative energy sources. The recently released Stern Report on the economics of climate change confirms what environmentalists have been saying for some time; that in addition to being harmful to the environment, the continued extraction and burning of fossil fuels makes no economic sense whatsoever.

Future historians (assuming civilization survives this madness) will undoubtedly look back at this pivotal juncture and ask why, in light of all we know, we continued to focus on drilling for oil deep into the Gulf of Mexico seabed and the Alaskan wilderness while making it increasingly difficult to site wind farms. (GW)

Drilling Deep in the Gulf of Mexico

New York Times
November 8, 2006
By Jad Mouawad

ABOARD THE WESTERN NEPTUNE, Gulf of Mexico — Every 17 seconds, a small armada of ships trawling 130 miles from the Louisiana coast fire powerful air guns toward the bottom of the sea in a hunt for the next big oil discovery.

The Neptune and three other ships are on a three-month mission to map one of the most remote regions of the United States. The data they collect from the vibrations set off by the guns in the gulf’s deepest waters will help engineers form a picture of some of the world’s newest petroleum prospects.

As oil consumption grows and access to most oil-rich regions becomes increasingly restricted, companies are venturing farther out to sea, drilling deeper than ever in their quest for energy. The next oil frontier — and the next great challenge for oil explorers — lies below 10,000 feet of water, through five miles of hard rock, thick salt and tightly packed sands.

“It’s not a place for the timid,” said Paul K. Siegele, the vice president for deepwater exploration at Chevron, which commissioned a survey by the Neptune. “It’s a place where a lot of people have lost their shirts.”

To picture the challenge, imagine flying above New York City at 30,000 feet and aiming a drill tip the size of a coffee can at the pitcher’s mound in Yankee Stadium. Then imagine doing it in the dark, at $100 million a go.

Even after hitting pay dirt, it will take another decade and billions of dollars to transform oil from these ultra-deep reserves into gasoline. Some of the technology to pump the sludge from these depths, at these pressures and temperatures, has not yet been developed; only about a dozen ships can drill wells that deep, and no one knows for sure how much oil is down there.

While most people regard affordable and abundant supplies as an essential element of the nation’s prosperity, few realize how complex and costly the quest has become, even in the nation’s own backyard. At the same time, some experts argue that the industry is nearing the limits of what it can do to maintain a growing supply of fossil fuels.

But for the geologists, scientists and explorers who work here in the Gulf of Mexico, the history of the deep water holds another lesson: technological breakthroughs have always breathed new life into the energy industry.

“This is as close as we get to the space age on earth,” said Kenny Lang, BP’s vice president for gulf production.

Thanks to advances in offshore technology, and tremendous leaps in supercomputers and three-dimensional imaging, this region’s deepest waters have become the hottest exploration prospects in the nation.

Barely more than a decade ago, the area was called the Dead Sea and was nearly abandoned as the major energy companies left for better prospects in Russia and the Caspian Sea basin.

In fact, the region’s output would have peaked and started slipping long ago without the leaps that have driven the search for offshore oil and natural gas. While production from the Gulf’s shallow waters is declining, deepwater production is on an upswing. Altogether, the Gulf of Mexico accounts for more than 25 percent of the nation’s oil production and 20 percent of its natural gas output.

According to the most optimistic estimates, there could be 40 billion barrels of undiscovered reserves in the deep water, which starts at about 1,500 feet, enough to satisfy American consumption for more than five years.

These reserves might lift the offshore output to 2.2 million barrels a day by 2012, up from 1.5 million barrels today.

Still, that’s a drop in the bucket. Even as the deepwater resources are developed, the nation is expected to continue to import more than two-thirds of the 20 million barrels of oil it consumes each day.

Since 2001, there have been 12 discoveries in waters 5,000 feet deep, drilling into older rock formations known as the Lower Tertiary. Those point to the presence of a region that might hold as much as 15 billion barrels of reserves.

The latest and largest find in the Lower Tertiary, about 250 miles south of New Orleans, was announced in August by BP. The find is a layer of 800 feet of oil-bearing sands, more than five miles under the ocean floor.

“The deep water in the Gulf of Mexico is a textbook application of where technology drove opportunity,” said Barney Issen, a geologist with Chevron. “It’s been known for quite some time that there were huge resources out there but we didn’t have the seismic data to have the nerve to drill. And even if we did, we didn’t have the drilling tools until recently.”

Last month, Royal Dutch Shell announced that it would develop three ultradeep discoveries 200 miles south of the Texas coastline. The project, called Perdido, will tie together fields called Great White, Tobago and Silvertip, and is projected to have a daily capacity of the equivalent of 130,000 barrels of oil by the turn of the decade.

Some of the earlier doubts about production in the Lower Tertiary were recently lifted when Chevron successfully tested its Jack field. The test proved that oil could flow in commercial quantities from sediments deposited as long as 65 million years ago.

“The geology has been proven, the oil is present,” said Renato Bertani, the chief executive of the American unit of Petrobras, Brazil’s national oil company. His company plans to produce from Lower Tertiary discoveries in 2009.

“The result really encouraged us tremendously,” he said. “There is nevertheless some level of uncertainty.”

Part of the problem for deep exploration in the Gulf of Mexico is a thick layer of salt — 15,000 feet deep in some places — that extends unevenly under the Gulf’s waters. The salt acts like frosted glass when geologists try to see through it, blurring their view of untapped oil reserves thought to lie below.

A clear image of the subsea salt can make the difference between a successful discovery and a dry well.

“This is an industry that has to manage risk,” said Rocco Detomo Jr., a senior geophysicist at Shell. “And it’s much too risky and too expensive to look for oil the old-fashioned way.”

At BP’s sprawling campus in a Houston suburb, geologists take many years looking for oil before drilling a single well. They are counting on huge leaps in processing power from computer networks that allow scientists to make sense of the complex seismic data acquired by ships like the Neptune.

The more sophisticated data is necessary because drilling costs have soared in recent years and can now reach as much as $800,000 a day, or up to $100 million for a single well. Those costs raise the risks when, on average, only one in every three to five wells turns up oil.

Chevron, for example, expects to spend $3.5 billion on its Tahiti project, which should start production in 2008. BP invests more than $2 billion a year in the Gulf and devotes 40 percent of its global exploration budget here.

“When you’re living in that place where you’re constantly on the edge, occasionally you’re going to stub your toe,” Mr. Lang of BP said.

That recently happened at BP’s Thunder Horse, the world’s largest offshore platform, with a planned oil capacity of 250,000 barrels a day. The platform, dwarfing anything else in the Gulf, was supposed to start production last year, but ran into problems, including being left listing after Hurricane Dennis passed in 2005. The latest mishap involves replacing critical pieces of equipment at the bottom of the ocean, a lengthy process that will delay production until 2008.

Thunder Horse has been more than a decade in the making, according to Cindy A. Yeilding, the company’s chief geologist in Houston. Back in the early 1990s, Ms. Yeilding and other BP scientists used better technology, including the new three-dimensional seismic mapping, and more powerful computers to focus on big fields, which are referred to as “elephants” in the industry.

“We went on an elephant hunt,” she said. “To test a new play, we needed to find a huge accumulation of hydrocarbons and we needed a rig that could drill in 5,000 or 6,000 feet of water. It was a combination of geology and technology.”

From 1992 to 1997, the company acquired dozens of new leases from the government, spurred by a new royalty relief program that provided extra incentives to encourage deepwater exploration.

On the first day of 1999, the company finally began drilling a well in the Mississippi Canyon’s Block 778, a lease in the northeast region of the Gulf, about 125 miles from New Orleans. The drilling team, led by Ms. Yeilding, was confident it had found the giant field it was looking for but was nervous at the prospect of drilling through salt in deep waters.

“We were petrified,” Ms. Yeilding recalled. “We were so afraid of salt, we wanted to go around it.”

But the efforts paid off. On July 4 that year, the BP well reached its final depth of 29,000 feet, after having gone through 6,000 feet of water and 2,500 feet of salt. There, BP made the biggest discovery in the Gulf of Mexico. The field, holding one billion barrels of reserves, became known as Thunder Horse.

The wider hunt has been on ever since. On the Neptune’s deck, the repetitive beat of the air guns can barely be heard. But below the sea, the vibrations travel deep inside the earth’s crust. Then they bounce back and are picked up by streamers of densely packed electronic sensors, stretching four miles behind the ship.

Inside, working in cool temperature-controlled rooms, dozens of engineers control the ship’s position, collect the seismic data and begin forming a picture of the earth’s geological layers.

“The easy oil is running out because it has already been found,” said Ezio Plenizio, an Italian geophysicist aboard the Neptune, which belongs to the oil services company Schlumberger. “But 20 years ago, when I started in the business, people were already saying that oil is going to run out soon.”