With Few Options Left, Big Oil Pushes Deeper into Gulf of Mexico
Date: 16-Dec-04
Country: USA
Author: Deepa Babington
Anchored to the seabed with mooring lines, ChevronTexaco Corp.'s Genesis oil platform is one of many cropping up in deeper and deeper waters in the Gulf of Mexico.
While the region is the lifeblood of the US oil industry, easy discoveries in the shallow waters have been tapped out.
Indeed, analysts say the future of oil and gas output in this crucial area hinges almost entirely on discoveries in waters that barely 10 years ago would have been too deep to even consider.
In particular, geologists have identified a 350-mile zone off the coasts of Texas and Louisiana notable for its lack of drilling wells and preponderance of potentially oil-rich waters, US Minerals Management Service regional director Chris Oynes said.
"There's still a lot of unexplored territory, and you could be looking at some pretty big discoveries," said Oynes, whose federal agency oversees the nation's offshore oil and gas production in the region. "The Gulf is alive and well."
Of course, searching for oil thousands of feet below sea level is much more expensive and fraught with logistical problems.
On the other hand, operating in US waters -- even very deep ones -- spares oil companies the adventure of, say, wrangling with striking Nigerian oil workers or coping with Kremlin politics in Russia.
"At least here they know what the rules of the game are," Oynes said.
If that, coupled with a dramatic surge in oil prices this year, wasn't enough of an incentive, the US government last month threw in some new royalty relief -- effectively waiving taxes on certain drilling projects in deep waters.
So now energy giants are drilling to depths of as much as 25,000 feet, enough to stack New York's Statue of Liberty 165 times to the top, the Minerals Management Service says.
RAPID-FIRE GROWTH
Although output from recent discoveries at great depths may not come on line for years, deepwater Gulf production has already shot up dramatically in recent years.
The amount of oil plumbed from deep waters -- more than 1,000 feet -- has nearly quadrupled since 1996 and accounts for 62 percent of total production in the Gulf of Mexico, according to the Minerals Management Service.
Over the next decade, the federal agency expects deep water production to double, representing nearly 80 percent of the region's output.
Exploring at ultra-deep water levels -- below 7,500 feet
-- is likely to become the next big frontier, Oynes said.
So far, big companies like ChevronTexaco and Exxon Mobil Corp.-- with the size and scale to foot steep start-up costs -- have led this hunt for oil, but now smaller players have begun moving in, said analyst Brian Ferguson of energy research firm John S. Herold.
Houston-based Anadarko Petroleum Corp., for example, earlier this year decided to sell off its properties in the shallow waters of the Gulf of Mexico and bank on its deepwater fields to hit production targets over the next five years.
"The changing face of the industry is that the dominance of the majors and supermajors is starting to wane, and new companies are moving in, really steering the new direction," Ferguson said.
Not a US phenomenon alone, deepwater exploration is demanding greater attention in many areas of the world, especially as oil prices hover at high levels -- racing up to a record $55 a barrel in October before sliding back.
The run-up has been spurred by unprecedented demand from countries like India and China, coupled with worries about tight supplies and instability in regions like the Middle East and Russia.
PURIFYING SEAWATER
Despite the current enthusiasm, many sobering facts about exploring in uncharted waters remain.
Erecting a comprehensive production platform out in the middle of the ocean can easily cost between $1 billion to $3 billion, compared with $100 million or less along the coast, analysts say.
Add to that higher rates to hire rigs, often runn
