Without doubt 2011 has been a busy year for the oil and gas industry, with global E&P spending an all time high of U.S. $544 billion, according to at least one group of industry analysts.
Great success was achieved with the drillbit, with unconventionals again attracting mega deals – although the “shale gale” has generated a divided audience.
All of this seems against the odds when weighed against the huge economic problems of the Eurozone and widespread unrest for which most of the year will be remembered.
Described as a revolutionary spark of civil uprisings that stretched from western Africa to Iraq, the “Arab Spring” was fed by the use of social media networks – and this revolution is not yet over. The uprising threatened oil supplies, created spikes in the oil price and brought changes in government by replacing dictators with democracy – or at least setting that goal in motion.
While established plays offshore Brazil and the mature area of the North Sea surprised with spectacular billion barrel finds (but the pace in Brazil’s pre-salt has slowed down considerably as the country shifts toward appraisal and development), 2011 may be seen as a year when frontier acreage, if not stealing the limelight, certainly earned the right to share center stage.
Greenland ultimately failed to produce a commercial find for Cairn, but the company claimed two deepwater gas finds off Sri Lanka at its first attempt. This marked the first wells drilled in the country for 30 years and the first to discover hydrocarbons.
Tullow scored with its first well off French Guyana and with pay established in two turbidite fans – a find that has huge implications for the area, as it is believed to mirror the Jubilee play off West Africa.
However, it is East Africa that outshone all, with Anadarko and Eni claiming gas discoveries in two large blocks where only a handful of wells have been drilled. The companies report a recoverable gas resource of at least 52 Tcf, with plenty of upside (see related story, page 10).
Brazil’s Big Year
Since the announced discovery of the giant Lula Field (initially dubbed Tupi) in 2007 in the deepwater subsalt environs offshore Brazil, this entire region has become increasingly alluring to the oil companies.
Drilled to a depth of 17,000 feet beneath 7,000 feet of water in the Santos Basin, Lula was estimated from the get-go to hold eight million barrels of recoverable reserves in the high pressured, high temperature environment beneath a massive salt sheet.
Other major discoveries followed, and billions of barrels have been estimated to await the drill bit in this subsalt region, positioning Brazil to become one of the world’s top energy producers.
The populace in general has been supportive of the oil and gas industry, recognizing the economic benefits provided by oil and gas revenue.
Yet risk is indigenous to this type drilling – and even the best-laid plans can go awry.
In November, a well being drilled by Chevron Corp. at the Frade Field off the coast of Rio de Janeiro began leaking oil into the Atlantic Ocean. All told, about 3,000 barrels max leaked into the ocean water prior to containment.
Surging well pressure reportedly triggered the short-lived problem, and the oil released originated from production shallower than the subsalt.
Compared to the almost five-million barrel spill attributed to the infamous Macondo well debacle in the Gulf of Mexico, the Frade leak might be referred to by some as a drop.
But to many others, it was a drop too many.
Brazil’s regulatory powers-that-be came down hard and swift, halting Chevron from drilling in Brazil – at least for now.
At press time, it was announced that the Brazilian authorities are suing Chevron and rig-owner Transocean for $11 billion and requesting that both companies suspend activities in the country.
Perhaps cooler heads will soon prevail, and the rush-to-judgment will prove to be ill conceived.
Brazil is eager to have its deepwater subsalt hydrocarbon accumulations developed, and the risks and costs to do so are far too great for state-owned Petrobras to go it alone. The resources and expertise of international oil companies are essential.
Developments of Note
Other events of note that help provide perspective of the industry’s fortunes in 2011 include:
- Unconventionals endured a mixed year – particularly in Europe, where France ordered that all permits granted for shale gas exploration be cancelled.
- In the United Kingdom, Cuadrilla Resources suspended hydraulic fracturing operations at its Preese Hall 1 well after it reportedly coincided with a seismic event.
- For shale gas, the driving force in Europe remains Poland and countries to the east, like Ukraine and Austria.
- In Latin America, YPF stunned the industry by claiming to have established the existence of 927 MMb of unconventional oil in the Vaca Muerta formation in Argentina’s Loma La Lata Norte area.
- Shale plays in the United States continue to attract entrants, and one of the biggest deals saw BHP Billiton acquire Petrohawk Energy for U.S. $15.1 billion.
- In China, both shale and CBM continue to climb as pilots are converted to development stage. Still the big question is will “green policy” kill off the pace of development.