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Deep sea oil business is booming

Wednesday, August 15 07:56:09

Booming like never before, the offshore oil and gas industry is exploring ever deeper into the ocean and drilling further under the sea bed, bringing strikes like one this week off Brazil that may be one of the biggest yet in the region. "Ultra-deep" wells, drilled in water at least 1.5 km (4,500 feet) deep into several more kilometres of rock to the reservoir below, have reached a landmark in 2012 to date, accounting for more than half of all the world's new discoveries so far this year, data from IHS Offshore Rig Consulting shows.

And from a global fleet of over 1,200 rigs and drilling vessels tracked by rigzone.com, more than 80 rigs on contract now have the ability to work in ocean depths of more than 7,500 feet. That compares to fewer than 10 at the turn of the century and double the number at work just two years ago, IHS says. It is not hard to see where the funds are coming from: the world's biggest offshore oil players, from the likes of BP , Royal Dutch/Shell and Chevron to national oil companies with promising offshore waters such as Petrobras in Brazil, India's ONGC and Mexico's Pemex - are using the proceeds of high oil prices to spend at a pace. Petrobras's new Carcara strike was 2 km below the surface of the Atlantic in an area causing much excitement.

Data from analysts at Wood Mackenzie puts total exploration spending among the Western oil majors alone at over $80 billion this year, more than four times the level in 2002 - and up 25 percent compared to 2010. Much of that is going offshore, and the results are coming thicker and faster than many expected. As well as the news from Brazil, this week also saw unexpectedly strong results announced by Norwegian oil services company Aker Solutions, an offshore specialist. "The market seems better than anyone had hoped," said Christian Frederik Lunde, an analyst at brokerage Carnegie.

The factors driving private oil and gas companies into the ocean have been around for decades; resource nationalism denies them access to three quarters of the world's known reserves, the economics and politics of offshore development are simpler than on land, and the finds are big and economically viable. A sustained period of high oil prices have pushed this latest boom, but technological breakthroughs have accelerated it, too. This week's Brazilian breakthrough is an example. Drilled in 2,027 metres of water to a depth of 6,213 metres, the Carcara well is in a so-called subsalt field, underneath salt layers that once hid the hydrocarbon deposits from seismologists.

It was all so different 30 years ago, when the North Sea between Britain and Norway was still new exploration territory. Engineers wondered then how they would ever drill from a sea bed deeper than a man could dive, and into reservoir pressures that would be higher than that diver's oxygen tank. "We thought we were pretty amazing when we did it," recalls Eamonn O'Connell, a veteran of the pioneering era and now BP's director for well interventions and integrity.

Today, those achievements in 140 metres or 400-plus feet of water look like child's play beside wells in the deep oceans. The world's deepest offshore production well, operated by Shell from the Perdido platform in the U.S. Gulf, is 9,356 feet - almost three km - below the waves. The water pressure alone at that depth is 4,500 pounds per square inch (psi), or 310 bar - similar to that inside those North Sea wells of the 1980s. The reservoirs themselves in the U.S. Gulf, off West Africa, Brazil and elsewhere, are several kilometres deeper again below the seabed, testing engineering ingenuity at pressures up to 18,000 psi -- more than three times what the North Sea geologists had to worry about. ( C) Reuters