It is said that in the good ol'days, digging an oil well was an easy business. If you were at the right place (like say in Texas), a dedicated knock on the ground would send black-gold gushing forth. In fact, so much of it was freely available that it upset people back then. For instance, a rancher in Texas in 1902, WT Waggoner was irritated when he came across oil while digging for water. An annoyed Waggoner is reported to have wailed: "I wanted water, and they got me oil. I tell you I was mad, mad clean through. We needed water for ourselves and for our cattle to drink."
A century later, things have changed dramatically. From a situation of low demand and oversupply, we are now in an era where crude oil supply is struggling to keep pace with rapidly growing demand.
The trouble is, even as demand for crude oil keeps growing, output from the known oil wells is showing signs of plateauing. According to the Association for the Study of Peak Oil and Gas, many oil-rich countries have already passed their peak rate of oil production; an indication that the world peak of production could now be around the corner.[5] At the same time, there is no let up in demand. This means new wells need to be identified and dug; some of them in places where extracting oil can be a formidable task.
And when 70 percent of the planet is water, drilling for oil in the sea becomes more than just an option.
Prior to 1947, drilling beyond the shore was impossible, and often unnecessary. The first 'true' offshore oil well was drilled off the Louisiana coast in the Gulf of Mexico by Kerr-McGee Oil Industries. Some 17 kms away from the shore, the well was dug at a depth of some 15 feet.[2][3] Today, in the same waters, the deepest and the biggest oil rig named Perdido is operational. Located in the Gulf of Mexico, Perdido draws oil from a depth of about 2450 metres (8000 feet).[1] Thus in a matter of 6 decades and more, we have moved from a depth of 15 feet to 8000 feet.
Going for the dig
Yet, with all the technological advances, drilling in the sea is still fraught with challenges, and a costly proposition. Right from locating a deposit to reaching it and from transporting oil to finally closing the well, there is a long chain of processes
Typically, a deep-sea oil well operates in depths of 1,500 metres plus where one faces the HP-HT (High Pressure and High Temperature) combination. Temperatures dramatically vary when it comes to deep-sea wells. For instance, on the surface of the sea-bed, the temperature can be several notches below freezing point (but the water does not freeze because of salinity and high pressure). However, as you dig deeper under the sea-bed, there is a sharp rise in temperatures. In fact, it can go as high as 230°Celsius.
Another major obstacle is high pressure, which can go up to as much as 35,000 psi. In fact, drilling into rock-layers increases the pressure at every given point. According to estimates, the pressure within the underground reservoir can be extremely high and dangerous, wherein every square centimetre area is subject to pressure equivalent to the weight of a medium-sized car. The challenges of drilling so deep are particularly notable because the fields in question are often so deep that they can’t be visited by humans, even in submersibles.
Hitting bull’s eye
Nonetheless, the biggest challenge for any oil company is to hit the 'sweet spot'. Locating an oil deposit in the sea-bed is feat in its own. Keeping in mind the depth, location of the field and type of sea-bed, the possibility of an oil deposit is much varied. If the hit is not ‘spot on’, huge losses will be incurred. According to an industry rule of thumb, drilling a deepwater "dry-hole" can be set one back by as much as US $100 million. Even so, according to industry experts only 2 out of 10 digs actually yield oil (or gas).
Little wonder, oil exploration companies deploy the latest in technology to minimise, if not altogether avoid, such dry-holes. One such methodology is to dig a reference well, after undertaking extensive geological mapping of the region, including conducting a gravity-magnetic map to ensure the oil reservoir.
Other factors like existing infrastructure, depth of the well, weather and currents, seabed conditions, cost of construction and commissioning of permanent structures, time to first production, equipment reliability, well accessibility for future monitoring or intervention; make drilling in the sea a fairly complex and costly proposition. Hence, there are only a few companies in the space, who have the expertise, and the wherewithal to undertake such explorations.
Finding the right partner
But that is as far as machine or technology goes. At the end of the day, one still needs skilled manpower to deploy the technology effectively. Getting the right people for the job is another big challenge. Even after you have identified them, retaining them is equally a challenge, especially given the long lead times before a find is executed. Because of the challenging working conditions and the high level of technical expertise need, there is only a small pool of people who have the right mindset and knowledge fit for deep sea exploration. Same holds true for companies that exploration firms have to partner with. For instance, GE is among the handful of players with a proven track record, having provided systems for subsea exploration for over 40 years, and has over 1,000 systems installed worldwide.
Lessons from Deepwater
In spite of all the safety and safeguards, things can go horribly wrong on an offshore oil rig. The two biggest disasters in exploration history happened at some of the biggest rigs. One was Piper Alpha in North Sea, where an explosion in 1988 destroyed the rig and resulted in the death of 167 workers. The second was in 2010 at Deepwater Horizon in Gulf of Mexico, off the US coast, where an explosion caused by a blowout killed 11 people and caused the largest offshore oil spill in history.
The lesson learnt from such incidents is that there just cannot be any room for complacency. Given the technology deployed and the associated risks, offshore drilling is a fairly costly proposition. Around 30 per cent of global oil production is obtained through offshore drilling, with less than 1 per cent of wells deeper than 1,500 metres. According to International Energy Agency estimates, oil extraction through deep-sea drilling currently costs between US $35-$65 per barrel. With crude prices hovering over US $100 a barrel, there are decent profits to be made from offshore drilling.
Deep sea – The next big thing in India?
Finally, keeping in mind India's peninsular nature and the fact that offshore gas deposits have been found both in the West (Arabian Sea) and East (Bay of Bengal), there is big potential for deep sea drilling. The quality of crude extracted from India’s sedimentary basins is said to be better than that of the crude imported from the Middle East. With much of India’s offshore assets yet to be explored, deep sea could be the next big thing in India's pursuit of energy security.
Source: Moneycontrol
A century later, things have changed dramatically. From a situation of low demand and oversupply, we are now in an era where crude oil supply is struggling to keep pace with rapidly growing demand.
The trouble is, even as demand for crude oil keeps growing, output from the known oil wells is showing signs of plateauing. According to the Association for the Study of Peak Oil and Gas, many oil-rich countries have already passed their peak rate of oil production; an indication that the world peak of production could now be around the corner.[5] At the same time, there is no let up in demand. This means new wells need to be identified and dug; some of them in places where extracting oil can be a formidable task.
And when 70 percent of the planet is water, drilling for oil in the sea becomes more than just an option.
Prior to 1947, drilling beyond the shore was impossible, and often unnecessary. The first 'true' offshore oil well was drilled off the Louisiana coast in the Gulf of Mexico by Kerr-McGee Oil Industries. Some 17 kms away from the shore, the well was dug at a depth of some 15 feet.[2][3] Today, in the same waters, the deepest and the biggest oil rig named Perdido is operational. Located in the Gulf of Mexico, Perdido draws oil from a depth of about 2450 metres (8000 feet).[1] Thus in a matter of 6 decades and more, we have moved from a depth of 15 feet to 8000 feet.
Going for the dig
Yet, with all the technological advances, drilling in the sea is still fraught with challenges, and a costly proposition. Right from locating a deposit to reaching it and from transporting oil to finally closing the well, there is a long chain of processes
Typically, a deep-sea oil well operates in depths of 1,500 metres plus where one faces the HP-HT (High Pressure and High Temperature) combination. Temperatures dramatically vary when it comes to deep-sea wells. For instance, on the surface of the sea-bed, the temperature can be several notches below freezing point (but the water does not freeze because of salinity and high pressure). However, as you dig deeper under the sea-bed, there is a sharp rise in temperatures. In fact, it can go as high as 230°Celsius.
Another major obstacle is high pressure, which can go up to as much as 35,000 psi. In fact, drilling into rock-layers increases the pressure at every given point. According to estimates, the pressure within the underground reservoir can be extremely high and dangerous, wherein every square centimetre area is subject to pressure equivalent to the weight of a medium-sized car. The challenges of drilling so deep are particularly notable because the fields in question are often so deep that they can’t be visited by humans, even in submersibles.
Hitting bull’s eye
Nonetheless, the biggest challenge for any oil company is to hit the 'sweet spot'. Locating an oil deposit in the sea-bed is feat in its own. Keeping in mind the depth, location of the field and type of sea-bed, the possibility of an oil deposit is much varied. If the hit is not ‘spot on’, huge losses will be incurred. According to an industry rule of thumb, drilling a deepwater "dry-hole" can be set one back by as much as US $100 million. Even so, according to industry experts only 2 out of 10 digs actually yield oil (or gas).
Little wonder, oil exploration companies deploy the latest in technology to minimise, if not altogether avoid, such dry-holes. One such methodology is to dig a reference well, after undertaking extensive geological mapping of the region, including conducting a gravity-magnetic map to ensure the oil reservoir.
Other factors like existing infrastructure, depth of the well, weather and currents, seabed conditions, cost of construction and commissioning of permanent structures, time to first production, equipment reliability, well accessibility for future monitoring or intervention; make drilling in the sea a fairly complex and costly proposition. Hence, there are only a few companies in the space, who have the expertise, and the wherewithal to undertake such explorations.
Finding the right partner
But that is as far as machine or technology goes. At the end of the day, one still needs skilled manpower to deploy the technology effectively. Getting the right people for the job is another big challenge. Even after you have identified them, retaining them is equally a challenge, especially given the long lead times before a find is executed. Because of the challenging working conditions and the high level of technical expertise need, there is only a small pool of people who have the right mindset and knowledge fit for deep sea exploration. Same holds true for companies that exploration firms have to partner with. For instance, GE is among the handful of players with a proven track record, having provided systems for subsea exploration for over 40 years, and has over 1,000 systems installed worldwide.
Lessons from Deepwater
In spite of all the safety and safeguards, things can go horribly wrong on an offshore oil rig. The two biggest disasters in exploration history happened at some of the biggest rigs. One was Piper Alpha in North Sea, where an explosion in 1988 destroyed the rig and resulted in the death of 167 workers. The second was in 2010 at Deepwater Horizon in Gulf of Mexico, off the US coast, where an explosion caused by a blowout killed 11 people and caused the largest offshore oil spill in history.
The lesson learnt from such incidents is that there just cannot be any room for complacency. Given the technology deployed and the associated risks, offshore drilling is a fairly costly proposition. Around 30 per cent of global oil production is obtained through offshore drilling, with less than 1 per cent of wells deeper than 1,500 metres. According to International Energy Agency estimates, oil extraction through deep-sea drilling currently costs between US $35-$65 per barrel. With crude prices hovering over US $100 a barrel, there are decent profits to be made from offshore drilling.
Deep sea – The next big thing in India?
Finally, keeping in mind India's peninsular nature and the fact that offshore gas deposits have been found both in the West (Arabian Sea) and East (Bay of Bengal), there is big potential for deep sea drilling. The quality of crude extracted from India’s sedimentary basins is said to be better than that of the crude imported from the Middle East. With much of India’s offshore assets yet to be explored, deep sea could be the next big thing in India's pursuit of energy security.
Source: Moneycontrol
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