BP's Dudley speaks about energy's future

even if there is a slowdown in wage hikes doesn’t mean the future in the offshore isn’t gleaming

[B]Production at a Price[/B]

Capital investment in offshore oil and gas is growing, unleashing new technologies for ultra-deep, subsea and Arctic production. It’s an expensive undertaking.

By Wendy Laursen
June 03, 2014

They say that “peak oil” has passed. They say there’s no more “easy oil.” It’s all in a day’s work for the world’s offshore oil and gas companies because nobody really envisages renewables being able to meet global energy demand anytime soon.

Bob Dudley, Group Chief Executive of BP, sees energy demand rising 40 percent by 2035 with most of the growth coming from emerging economies. “We expect fossil fuels to remain dominant,” he explains. “Indeed, even in the most dramatic projections of governments acting to cut carbon emissions, fossil fuels remain dominant at least for the next few decades.”

Until recently, a regular topic of debate has been whether or not there would be enough resources to meet demand. “That debate, I think, is over,” says Dudley. “We have seen abundant resources opening up all around the world – notably shale, tight gas and oil – in the U.S., Asia, Russia and other regions. Deepwater discoveries continue to be made. The heavy oil of Canada is being developed quite rapidly now, and we know the Arctic also has massive potential energy resources.”

The industry is finding new opportunities and becoming more cash-generative. “In exploration, we have doubled our spend, reloaded our prospect inventory and started to see some real success with seven potentially commercial discoveries in 2013,” adds Dudley. BP’s upstream operations are focused on four key regions: Angola, Azerbaijan, the Gulf of Mexico and the North Sea.

Although still rationalizing its resources after the 2010 Macondo incident, BP has leading deepwater acreage in the Gulf of Mexico, Uruguay, Libya, Egypt and India. The company is the second largest offshore acreage holder in Australia’s Ceduna Basin and the third largest in Angola. It also has a presence in Nova Scotia, Brazil, Morocco, the South China Sea and, as a result of its recent buy into Rosneft, the Arctic.

Big money is being spent across the industry. Douglas-Westwood estimates that the upstream spend of publically listed international oil majors totalled $270 billion in 2013, and Deloitte recently reported that the number of global oil and gas companies with capital budgets exceeding $1 billion more than tripled to 132 in 2012 from just 40 in 2000.

Offshore Hotspots

“The global hunger for energy, combined with the development of technologies for surveying and extracting resources, has made Africa a real hotspot in exploration,” says Gerrit Laubscher, GAC Group’s Business Development Manager for Oil & Gas, Sub-Sahara Africa. “All the coastal countries of Sub-Saharan Africa are today involved in some level of exploration, which has led to several recent discoveries. The gas finds in Mozambique and Tanzania, new deepwater discoveries in Angola and the Congo, and further exploration in Ghana are only a few of the recent significant developments in offshore energy across Africa.”

In Sub-Saharan Africa, Dubai-based GAC provides a range of shipping, logistics, marine and related services to the offshore industry via a network of offices in Ghana, Nigeria, Congo, Angola and South Africa and through carefully selected strategic partners elsewhere. New field developments in Congo, Angola, Mozambique and Tanzania have led to a substantial increase in the number of inquiries from offshore service companies for shipping and logistics services.

But there are challenges that are having a significant impact on project costs, says Laubscher: “The lack of infrastructure, combined with the slow response from local governments to invest or allow private enterprise to do so across Africa, forces customers to look for other alternatives at huge additional cost.”

One of the biggest challenges is the unpredictability of costs due to sudden changes in legislation. “Long, drawn-out bureaucratic processes for the sake of industry reform, for example in Nigeria, and the threat of sea crimes in East Africa and the Gulf of Guinea are some of the macro stumbling blocks preventing the region from benefitting from the interest in its energy resources,” adds Laubscher.

The lack of easy oil means companies like BP are putting a lot of money into overcoming technical challenges associated with frontier fields. BP announced the launch of Project 20K™ in February 2012, stating its intention to develop technologies over the next decade in four key areas: well design and completions; drilling rigs, riser and blowout prevention equipment; subsea production systems, and well intervention and containment.

In the U.S. Gulf of Mexico, BP expects Project 20K technology to play a key role in developing major deepwater discoveries like Kaskida and Tiber. It estimates the application of 20K technology across its own global portfolio could potentially unlock an additional 10-20 billion barrels of resources inaccessible with current drilling equipment, which has a technical limit of 15,000 pounds per square inch of pressure and temperatures of 250°F. BP has teamed with Maersk Drilling to develop conceptual engineering designs for a new breed of drilling rig that can operate in high-pressure and high-temperature reservoirs of up to 20,000 psi and 350°F.

Sudheer Chand, Director of Corporate Offshore Technology at ABS, sees another drilling technology, dual gradient and managed pressure drilling, as having already been pivotal in ultra-deep operations. These techniques control pressure gradients to reduce fracturing and other potential challenges to drilling efficiency. The required technology is gaining popularity as the quest for ultra-deep production grows.

Subsea Production

Hand in hand with this move to ultra-deep water is the desire for subsea production. Already there are more than 20 production fields around the world that process fluids on the seafloor. This is more efficient than bringing oil and gas to the surface to process – only to return it to subsea pipelines for transport.

Subsea structures have the advantage of being relatively immune from storms and surface collisions, but limitations with subsea power reliability have hampered development. When a significant boost to fluid pressure or temperature is required to maintain flow, there is a need for pumps and compressors that require large amounts of power. As yet, a reliable subsea equivalent of topside power technology is still under development, and ABS is involved in a number of joint industry projects aimed at achieving this.

From a subsea construction and maintenance perspective, ABS’s Chand sees big changes in dynamic positioning technology to support subsea installation: “We’ve had DP ships around for quite a while, but in the past the vessels were solitary in the sense that one DP vessel would supply a rig or FPSO. Now we have a whole fleet of these vessels working in close proximity. It’s like formation flying instead of a solitary pilot flying a plane.” This demands new standards in precision and reliability, a topic on which ABS offers comprehensive advice.

Astro Technology’s President, David Brower, a former rocket scientist, is bringing space-age technology to the maintenance of subsea oil and gas fields. Through the Clear Gulf JIP, which brings together experts from the oil and gas industry and the NASA Johnson Space Center in Houston, Astro Technology is leading the development of enhanced subsea system-monitoring technology, which is expected to significantly reduce the risk of spills in deepwater operations.

The project started in 2010 and has already had a major impact on flow assurance and the monitoring of subsea risers and flowlines. The company has developed techniques for fitting fiber-optic sensors to existing subsea and deepwater equipment even when the surfaces involved are muddy or encrusted, using a combination of underwater adhesives and friction clamps.

“This has opened up a whole new world of possibilities,” says Brower. “My vision for 10 years down the road is to have the entire monitoring system of subsea equipment automated so that it acts like the nervous system in the human body. Your senses are providing all the input to a central processing area that monitors the health and activity of the system. If anything goes wrong, you have a suite of miniature robots resident down there that can move transducers around to monitor hardware and flow and ultimately take remedial action. The whole system would be auto-adaptive with the aim of taking care of problems before they occur.”

It’s a concept that draws heavily on Brower’s space expertise, and he is systematically putting all the pieces together to make it a reality for the oil and gas industry.

In West Africa, Astro Technology’s sensors and sensor retrofit technologies are already being used to monitor the tendons on tension-leg platforms that otherwise would not be able to successfully drill in deep water there. Astro Technology’s subsea sensors also have implications for the wider industry including the opportunity to replace heavy, cumbersome load cells with lighter, more cost-effective monitoring systems for offshore drilling platforms.

Innovative Power Systems

Electronic Power Design (EPD) has a patent pending on another concept that is aimed at reducing construction time and costs for drilling platforms. The company specializes in electrical power systems for drilling rigs, production platforms, and offshore support vessels and routinely upgrades the world’s older rigs with the latest technologies. Market forces keep these older rigs in operation as newbuild construction is a long and complicated process.

But EPD is also active in technology development for newbuilds. The company has developed a three-piece modular plug-and-play system that covers the entire power needs of jack-up rigs. The modules are all pre-commissioned to reduce shipyard effort and improve quality control.

John Norwood, Senior Vice President for Business Development, sees this technology and the increasing use of batteries as the future, since both will reduce costs for drilling operators. The company’s EPD ECO™ line of drives and power products are increasingly being deployed with battery systems that reduce power generation, and therefore the environmental footprint, of drilling platforms and drillships.

“When rigs have a blackout, they need to recover very quickly,” Norwood explains. “Battery power can be used to limit the risk of power outage while the rig’s power system recovers. Additionally, battery systems can reduce the power generation requirements of equipment that has short duty cycles. For example, the draw-works system that is used to hoist the drill string may be rated at 4,000 horsepower but may only run on an average of 2,000 horsepower with peaks every few seconds. Rather than having to keep generator sets online, batteries can be used to supply power during the peaks.”

Battery technology has been developing rapidly, increasing in reliability and decreasing in size, and Norwood sees this as a major cost-reducing technology for operators in the future.

Final Frontier

All the new technologies could potentially converge in the Arctic, which according to environmental group Greenpeace presents an almost perfect storm of risks. The Arctic combines daunting challenges such as the need for long-term capital investment with an uncertain return, a remote and uniquely challenging operating environment, ongoing court challenges, a lack of extraction and spill-response infrastructure, and the spotlight of the world’s environmental organizations.

Yet progress is already being made. Gazprom extracted first gas from the Kirinskoye Field (Sakhalin III) in October 2013, Russia’s first subsea production facility. Two months later the company pioneered the development of the Russian Arctic Shelf with the first oil recovered from the shallow Prirazlomnoye Field. The offshore, ice-resistant stationary production platform at Prirazlomnoye – named Prirazlomnaya – is designed to operate under extreme environmental and climatic conditions and to exclude the possibility of oil spills – at least according to Gazprom. The company delayed the project until it determined that it met international standards, but it was still the subject of a high-profile Greenpeace protest.

So just as “peak oil” has passed, so too is the industry working hard to ensure that “peak oil spill” has also passed, despite the costs, the challenges of frontier political systems, the harsh, remote environments and the skepticism of environmental groups.

the question is as much as the big players like BP are prepared to spend untold amounts of money finding and producing energy, are they going to continue to support pumping money into people as well

perhaps they have no choice?

They got no choice unless the board is willing to crew a rig or a boat themselves…