Meanwhile, deepwater world forges ahead

Tragedy Still Ripples in GOM

Brazil – 2007 to 2010 comparison of offshore post salt to pre-salt.
Brazil – 2007 to 2010 comparison of offshore post salt to pre-salt.

The disastrous deepwater tragedy in the Gulf of Mexico in April 2010 was akin to a shot heard round the world for the oil and gas industry.

However, deepwater drilling continues globally-albeit with an increased focus on safety considerations.

Offshore Brazil continues to grab most of the media’s spotlight on activity – and successes – but offshore activity also is brisk in West Africa , Australia, Gulf of Guinea and the Mediterranean Sea, to name a few.

The glaring exception is the GOM, where the spill triggered not only a moratorium on new deepwater drilling but also toughened the regulations to acquire shallow water permits. This has caused a significant slowdown in the permitting process there.

Last year’s deepwater moratorium was lifted in October, but industry leaders have noted that the government has not yet approved drilling of any new wells that would have been blocked by the ban.

Confusion and uncertainty abound to this day. For instance, it’s become the norm for permitting requests for deepwater wells to remain on hold while the operators assemble and present additional information demanded by the Bureau of Ocean Energy Management, Regulation and Enforcement.

A number of industry experts reportedly predict that a rebound to the GOM activity levels of 2009 won’t occur until possibly 2013 – if ever. Adding insult to injury, the Atlantic seaboard and extreme eastern Gulf near Florida will remain off limits to drilling, despite the decision announced immediately prior to the Big Spill to allow exploration there.

Even the longtime annual crowd-drawing Central Gulf lease sale in March has been postponed, along with the Western Gulf sale in August.

Brazil’s Treasures

The frustration and economic impact given all the uncertainty generated by the still-evolving new U.S. rules and regulatory requirements has some industry watchers speculating that the drillers appear to be on the cusp of at least a partial exodus from the GOM, which has been expected since the moratorium began.

The entire saga is now being dubbed in some industry quarters a “permatorium.”

It’s not that other countries are ignoring the implications of a large deep offshore spill. Some have tightened up requirements relative to safety, but the overall theme essentially is, “let’s learn from it and move on.”

Chief executive Jose Sergio Gabrielli at state-run Petroleo Brasileiro SA (Petrobras) in Brazil reportedly said it’s too soon to draw conclusions from the Gulf spill, so it’s too early to say they’re going to make any changes.

The fact that offshore drilling in other parts of the world is not just moving ahead but reportedly thriving bodes well for energy supplies.

IHS CERA has said that deepwater oil production has about doubled over the past five years and now tallies about five million barrels a day, or about 6 percent of the total crude output worldwide. It’s expected to double again by 2020.

The global deepwater drilling scene includes numerous regions, with the most frenetic activity in Brazil, which some folks refer to as the next Saudi Arabia.

The excitement here began in 2007 when Petrobras and partners BG Group and Portugal’s Galp Energy announced results for the second pre-salt deepwater well at the Tupi field beneath 7,000 feet of water in the Santos Basin offshore southeastern Brazil. Test results indicated estimated reserves as much as eight Bboe for the field, making it the largest find worldwide since the 13 billion barrel Kashagan field in 2000 in Kazakhstan.

Tupi was followed by finds in various areas, including the nearby Campos and Espirito Santo basins.

In 2009, Brazil was producing 2.5 million barrels a day of crude oil, which was sufficient to meet its needs. This is a kind of milestone, considering that the large country once relied on sizeable crude oil imports to accommodate its significant energy appetite.

Going Deeper

The search for additional oil finds shows no letup, and money appears to be plentiful.

“Petrobras had a share sale about a month ago and raised 67 billion dollars,” said Tom Liskey, regional manager for Latin America at IHS. “A lot of that money will go to Brazilian offshore and deepwater sectors; this is just an indication of what the potential is.

“Petrobras is actively looking for rigs, and a lot will have deep sea capability,” Liskey said. “They’ve made clear in no uncertain terms they’re going to move through with deepwater development.”

Liskey said that Brazilian oil agency ANP has become more vigilant following the GOM spill and emphasized that Petrobras is very proactive. As an example, he mentioned they had an issue with a blowout preventer (BOP) while drilling in the Campos Basin using Sevan Marine’s new hi-tech Sevan Driller rig, so the decision was made to halt operations and pull the BOP to review it before proceeding further.

“It’s a dynamic play unfolding in Brazil, because Petrobras is also reaching out to industry and not shutting the door,” Liskey noted. “They want to work actively along with the industry looking for solutions for the pre-salt.”

The mix of players includes private companies, such as OGX. Liskey said the company has focused principally on the post-salt in the Santos Basin for the most part, where they struck a lot of evidence of oil with their wells.

“With no ANP round this year, you have companies that are either farming out or being bought out, and that brings new players in,” Liskey said. “Brazil is luring people, and they’re coming in.

Devon Energy, however, chose to exit the region in its relatively new strategy to focus on U.S. onshore. This was good news for BP, which is acquiring Devon’s assets there.

“A company like BP sees Brazil as a key part of the future in its deepwater portfolio globally,” Liskey noted.

“There’s some interesting farmouts going on, and some of these farmouts have pre-salt potential,” he said. “The post-salt is dynamic too, even in some of the deeper waters.”

Far away in Australia, resources minister Martin Ferguson reportedly declared the government’s intention to continue forging ahead developing oil and gas there. He emphasized the importance of doing so relative to energy security, jobs and the Australian economy.

When queried about all of the bustling activity in so many parts of the world versus the troubling scenario in the Gulf of Mexico, Liskey commented, “The simple fact is, the U.S. is still the biggest economy – and it still runs off oil and gas.”

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Emphasis: World Development