"Deep Oil"-Reaching for the Big Reserves
Wednesday, January 31, 2007SUSIE GHARIB: More than two-thirds of the oil produced in the Gulf of Mexico now comes from water deeper than a thousand feet. But demand for crude is prompting oil companies to drill in far deeper depths. As we wrap up our series "Deep Oil," Diane Eastabrook looks at where the largest oil reserves are likely to be and the higher stakes involved in reaching them.
DIANE EASTABROOK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Onboard "Discoverer Deep Seas," workers prepare wells that Chevron thinks could produce up to a half billion barrels of oil starting next year. The Tahiti field, below 4,300 feet of water in the Gulf of Mexico, was a significant discovery for Chevron. But a potentially bigger field called Jack lies farther south, under 7,000 feet of water. Mickey Driver, Chevron's government and public affairs advisor, says Jack lies in a region of ancient rock formations.
MICKEY DRIVER, GOVERNMENT & PUBLIC AFFAIRS ADVISOR, CHEVRON: That is a trend that many people estimate contains between three to 15 billion barrels of oil. That runs for about 200 miles from the central Gulf of Mexico to the western Gulf of Mexico.
EASTABROOK: The U.S. Department of the Interior estimates the Gulf of Mexico's deep water regions could contain nearly 60 billion barrels of crude oil. At current consumption rates, that is enough fuel to meet U.S. oil demand for 7.5 years. But the oil industry faces significant barriers in bringing much of that oil to market. Deep water technology is one barrier. Oil service companies like Baker Hughes have had to strengthen drill bits for working in deep water's more challenging conditions. And Halliburton has added sensors and upgraded the abilities of its drill assemblies. But Tim Probert, Halliburton's senior vice president of drilling, evaluation and digital solutions, says further improvements are necessary for drilling in depths exceeding 7,000 feet.
TIM PROBERT, SENIOR VP HALLIBURTON: Drilling to those kinds of depths requires significant increases in pressure capability for the equipment, up to between 25,000 and 30,000 pounds per square inch. So, we continue to develop the technologies to make drilling in even deeper applications possible.
EASTABROOK: Drill rig shortages are another concern. Offshore drilling contractor Transocean has 30 deep water drill ships in operation and three more under construction, but Transocean CEO Robert Long says those rigs are all spoken for.
ROBERT LONG, CEO, TRANSOCEAN: Right now, we have no availability in 2007 or 2008. In 2009 we have about 20 percent of our capacity available for contract.
EASTABROOK: There is also a shortage of talent. Many workers left the oil industry in the late 1990s when crude prices tanked and exploration slowed. Now, companies like Mustang Engineering, which designs oil platforms, have too much work and not enough people to do it. AJ Cortez, Mustang's vice president of upstream business, says he is searching for a variety of engineers.
A.J. CORTEZ, V.P. UPSTREAM BUSINESS, MUSTANG ENGINEERING: We're looking at other industries as far as bringing in experienced engineers and we're doing a lot of hiring out of colleges, which there hasn't been a lot of that done until the last four or five years.
EASTABROOK: Experts predict oil demand will continue growing for several decades so that will support growth in oil technology, talent and equipment. Industry watchers say even if it isn't feasible to produce oil in deep water fields like Jack today, it probably will be in the future. Diane Eastabrook, NIGHTLY BUSINESS REPORT, in the Gulf of Mexico.
