Posted on 09/05/2006 10:03:24 PM PDT by demlosers
The elephants aren't extinct yet.
Chevron Corp. and its partners say they have tapped into an area that may contain as much as 15 billion barrels of oil in the ultradeep waters of the Gulf of Mexico — the kind of massive reservoir of crude that the industry dubs an elephant discovery.
The days of such discoveries were supposedly gone, with oil supplies peaking as the world simply ran out of big oil-producing fields, according to pessimistic forecasters. Instead, high technology and sky-high oil prices have combined to transform dud prospects into billions of barrels of crude.
“The industry is still very capable of coming up with new ways of producing oil,” says Michael Lynch, a prominent opponent of the notion of peak oil — that global supplies of crude are set for a marked decline.
The exact size of the reserves at the Chevron well, called Jack, aren't yet known. But the company said the wider area, known as the Lower Tertiary, could contain between three billion and 15 billion barrels of recoverable oil. At the upper end of the range, that would rival the Prudhoe Bay deposits in Alaska.
And it could increase U.S. domestic reserves by 50 per cent. Only part of that overall total, however, could be attributed to the Jack prospect, which some analysts said Tuesday is likely to amount to 500 million barrels.
Whatever the ultimate size of Jack, its true importance lies in when it was discovered — earlier this decade, rather than in the 1960s or 1970s, said Mr. Lynch, president of Strategic Energy and Economic Research Inc. It is proof positive that higher commodity prices and improvements in exploration technology can result in major new discoveries, he said.
That is the case at Chevron's Jack well in the Gulf of Mexico, nearly 300 kilometres from the U.S. coast. Massive caps and peaks of prehistoric salt had defeated earlier exploration efforts, chewing up the sound waves that the industry uses to create seismic pictures of reservoirs.
“It soaks it up, distorts it,” said Stephen Hadden, senior vice-president of exploration and production at Devon Energy Corp., which has a 25-per-cent stake in Jack and other prospects in the Lower Tertiary region.
Devon, with proved reserves of 2.1 billion barrels of oil and gas, said it could more than double its reserves from its holdings in the area. Devon said its Lower Tertiary prospects could contain the equivalent of six billion barrels of oil, using the expansive measure of unrisked resource potential. Despite the caveat, Devon shares jumped 12 per cent, with analysts saying the firm is an alluring takeover target.
“The larger companies are running out of room to grow and the deepwater Gulf of Mexico is right down their alley,” said Oppenheimer & Co. analyst Fadel Gheit. “They really have no options left — Russia is for all practical purposes closing its doors, the Middle East is radioactive, Venezuela is kicking us out, and the Canadian oil sands, I think, are played out.”
Devon's Mr. Hadden said several new technologies and techniques were brought to bear on Jack, combining to allow the partners to fashion a picture of the reservoirs underneath the previously impenetrable salt caps. More powerful computers and refined algorithms were part of that success. “It's a technology that's really evolved over the last six or seven years,” he said.
Such technology reduces the risk of ultradeep exploration in the gulf, where future wells are likely to cost up to $120-million (U.S.), Mr. Hadden said, declining to say how much Jack cost.
Jim Lovasz, senior engineering analyst at Ross Smith Energy Group Ltd. in Calgary, said new simulation technology is also playing a part in opening up new frontiers to oil exploration.
New frontiers such as the Lower Tertiary will keep the global supply of oil growing, Mr. Lynch said — although it's not likely to silence the advocates of peak oil.
“This won't convince the bulk of them. For the rest of us, it does serve as a reminder that there are still a lot of things that can still be done.”
I gather it's an technical/infrastructure problem. Ethanol can not be sent via pipeline like refined oil products and ethanol has to be mixed at the local tank farm, not at the refinery. There is little ethanol being made on the East Coast since corn is not an especially abundant crop there as in the Midwest. To get ethanol to the East Coast requires shipping by train or truck which adds lots to the cost.
That's Petrobras? I think maybe they have the world's deepest offshore well right now, but I haven't double-checked that. I did read a little about your project - very exciting.
If that was the time period I was thinking of, there was the small matter of natural gas going from $7/MCF to something like $.50/MCF. Makes a huge difference. That's what happened with the Tuscaloosa Trend, too - 1986 happened.
Whew...that would be too late -- Iran would have plenty nukes by then. Let's do it in reverse, a-la-Ronald Reagan.
Subsalt imaging has been a project with the theoretical and processing geophysicists for 20, maybe 30 years now. Imaging correctly the steep bedding dips near salt has also been a problem going back at least that long, or longer. The answers are still elusive.
I've been following your project as well- I work for an independant that owns several medium sized product tankers in the Jones Act trade. Are you using open- or -closed loop for your heat exchangers when regasification is going on? I've been hearing that the new project in LA is causing a ruckus because of the environmental impact of the ice-cold water coming out of the plant.
BTB, if one of your FPSO's has to git because of a hurricane or equivalent strong weather, how long does it take to get underway, and can the vessel 1) move at pre-conversion speed, and 2) handle rough weather with the new stability profile?
Thanks for your post, btb, and good luck-
The acreage "Jack" was found under, was probably leased using prospect economics featuring a $20 price deck.
If it's as big as Chevron thinks, then the prospect could have gone forward with $30 oil, or $50 oil. If prices for any reason had gone below $20, they'd have walked away from it and just let the acreage revert to the government -- at least, before they got their first straw in it and could count the pay.
And thus, it is not motivated by $75 spot oil prices.
Bitumen. Separates out into bitumen (the equivalent of the refiner's "resid" => tar, goo) and short-chain hydrocarbons (methane, ethane). Mudloggers usually see this in a show as C1 through a trace of C3 on the chromatograph in the mud returns while drilling through it. That's an indication of fractionated gas with traces of light liquid hydrocarbons ("condensate" in industry parlance -- accent on the first syllable). The condensate can sometimes be as light as gasoline, and used to be called that -- "casinghead gasoline" in old "oilman talk". Clear, light, aromatic, it'll actually run in your car's engine, only don't do it, because it also contains vanadium and other elements that need to be refined out (vanadium hardens steel and will cause your rings to start cracking and scuffing).
The largest oil reserves in the world.....
No. The first well was drilled a couple of years ago. Mind you, they probably waited until the price deck justified the project anew, before they drilled that well.
Prospect economics is very much a game of "Mother, may I?" with people who are ruled by the gods of money in New York making all the decisions. People who know more, waiting on the nod from people who know less and have a completely different agenda.
When oil prices ran up from the abysmal retest of the 80's lows in 1991 (I once saw a CEO so put-out he could have kicked the cat, back in 1991: here he was drilling $10 million dollar wells up in Wyoming, and the market was telling him he could have 90 cents per MCF of gas -- fortunately, he persevered with the project) and began to look like the "bust" was over, in 1996, companies committed a lot more money to exploration, bumping their exploration budgets 10-20% over prior year's expenditures and taking on staff to handle the workload.
Then the bottom suddenly fell out because the Southeast Asian real-estate bubble that was fueling demand suddenly burst, and millions of Asian motorbikes got parked for a while. Oil prices retreated to $12/bbl or so, and the New York financial guys were practically screaming at the energy executives. The effect was to impose "capital discipline" on the energy companies, which amounted to pledges never, ever to hire anyone ever again, and never, ever to let their price deck get above some ridiculously low number -- i.e., no more surprises, no matter what. So they've been painfully cautious about edging up the "price deck" they use in prospect economics. As recently as two or three years ago, industry observers and participants quoted in the industry press were still anticipating headcount reductions in the industry amounting to 20% over the next five years. No, really.
Prices for oil were around $30, but disbelief was rampant (good sign of a market bottom), and people were saying that the prices wouldn't hold up, and we'd be back to $20 before you know it.
New York extracted from the industry (with senior management jobs stapled to them) promises of tighter risk management, higher returns to shareholders from operations, faster growth ("get big or get out"), and continued organizational retrenchment after the Asian bust, at precisely the time, given deepwater-offshore project lead times, when they should have been expanding their exploration efforts, in order to anticipate and meet rising demand from Asia.
And that's the real story behind $70 oil.
Exxon just drilled a collossally deep well-- a record -- in the shallow shelf of the Gulf of Mexico a few weeks ago -- economic failure, no telling what they actually found. I'd have to see the completion ticket (P&A versus T/A or suspended).
I think we use closed loop on the heat exchangers.
Re: having to git due to weather: It won't. Once in situ, the engines will be mothballed. The anchors and risers would take weeks, if not months, to disconnect. However, the weather in the area is fairly tame. The vessel is designed to stay in place for at least 10 years; there is a provision to dry dock it at that time, but it will not be able to travel under it's own power.
The vessel is designed to "weathervane" or pivot at the bow. This allows it to automatically face into the current.
But nobody is building LNG capable harbors - and nobody wants them! (they can go boom!)
Peak oil is about demand increases outrunning production increases - and the consequent steep real price increase brought about by this event. Peak oil is the top of the bell curve, and is predicted by the statistics of fewer and fewer significant finds over the years (real facts), and ever increasing demand. It is not a bunch of loonies expressing their vacuous opinions.
In the 1920s they thought they were running out of oil and then Dad Joiner found the East Texas field, where the geologists had delared no oil can be found. Tha field alone produced enough oil to support the US military during WWII, while the German military machine was starving because of the lack of it. If Hitler had given Rommel enough troops to break through into the Middle East, the war would have taken a different turn.
In the end, the only way to find oil is actually to dig wells. After lots of dry holes, comes a gusher!
Socialists governments base their power to ration the delivery of goods to the select few. Some capitalists use government to undercut the competition, but capitalism invariably under cuts THEM!
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.