Monthly Archives: March 2008

Offshore drilling

I’ve been writing a little bit about Exxon and Schlumberger lately.  I got interested in these companies and the petroleum industry in general because it they are such a gigantic part of the economy (a huge chunk of the top 10 most profitable companies are in the industry).
Most of my blogging so far has been to explore the financial statements from Exxon and Schlumberger.  I like knowing the numbers, but I also wanted to have some sense of what’s really going on at the ground level.  There was a great article called Dispatch from the Oil Frontier in Popular Mechanics.  The article focused on off shore drilling, which I saw quite a bit of from a distance on my cruise in the Carribean.  Not surprisingly, much of the oil on solid ground has been excavated and companies like Shell have moved underwater.  The author estimates there might be as much as 56 billion barrels of oil.  For comparison, Exxon last year produced about 4 billion barrels of oil in 2007.  So there’s a lot to be had, but by no means an unlimited supply.
Some quotes and impressions from the article…

There have already been successes.  In 2004 Shell broke the record for the deepest producing field–the Coulomb, at 7570 ft.–when it tapped a formation 144 miles southeast of New Orleans.  Tow years later, in 7,000 ft. of water 270 miles southwest of the city, Chevron successfully tested its Jack No. 2 well in a field that may hold 15 billion barrels.

That’s a staggering depth when you think about getting the equipment to dig and pump when you’re hundreds of miles out in the ocean on a relatively tiny oil rig. 
I was curious how you get down that deep when you’re in the middle of no where, and the article helped me start piecing it together.

At this point the Boudreaux has already installed a 90-ft-long steel casing into the seabed and capped it with a wellhead and a 48-ft-high tower of controls and hydraulic valves known as the blowout preventer.  Then, nearly 8,000 ft. of aluminum-alloy pipe in 75-ft. sections, known as the riser, was connected to the seafloor assembly.

I also figured you can’t really have humans down there at that depth, given the pressure.  Indeed this is the case:

This automation is in sharp contrast to the technology of earlier rigs, which required roughnecks on the drill floor and in the derrick to disconnect and connect sections of drill pipe by hand, a laborious, dirty and dangerous process.  Ten years ago it would have taken 75 days to drill a well 18,000 ft. deep; the Boudreaux’s crew can do it in two weeks.
In deep water a rig can’t stand on the bottom, which means it either has to be anchored with dozens of miles of chain and cable, or float freely, held in place by GPS-guided thrusters.
And then there’s the ocean itself.  At a depth of 8,000 ft. the pressures are enormous–3,500 psi.  no human hands can operate equipment on the seabed.  That means remotely operated vehicles (ROVs) have to be able to work in those pressures, day in and day out.  And the range of temperatures plays havoc with drilling mud.  “it’s 44 degrees at the seabed and 275 at the drill bit,” says Ricketson, keeping an eye on the turning drill, “So that mud has to function at extremely high and low temperatures–only new synthetic mud can do that.”

I had already seen a little bit on TV about life on these rigs, and it was interesting to read more about it.

There’s a gym onboard and a flat-screen TV in every room, but the crew members mostly do just one thing, and that’s work.
Day or night seems the same; you lose track of time–at 3pm or 3am there’s always someone pumping iron in the gym, a few guys sipping coffee in the mess hall.  You forget where you are, until you step out onto the smoking deck–a flat, steel pace witha  few aluminum benches–remove your hard hat and safety glasses and realize you’re standing on a huge spigot in the middle of nowhere.

I can picture some guy on the smoking deck looking back at the cruise ships, each lit up like a Christmas tree against the dark horizon, going through the shipping lane in the Gulf of Mexico.
Financially, it would be no surprise if the price of oil was going up, because this stuff is expensive.  That made it easier to understand why you’d want the Schlumberger approach of low capital investment and high human investment.

All this tech doesn’t come cheap.  A typical offshore development in 100 ft. of water costs $100 million; just the test well for Chevron’s Jack No. 2 cost $100 million, and the U.S. Minerals Management Service estiamtes the cost of developing a deepwater field can exceed $1 billion.  Shell won’t say what the Perdido regional development will cost, but Noble is charging Shell hundreds of thousands of dollars a day for its rig.  Shell has already spent $554 million on leases in the gulf–that’s just for the right to drill.