Deep Oil Rush: Future Supplies Only a Question of Economics
By GUY CHAZAN
A consortium led by Anadarko Petroleum Corp. said it had discovered oil off the coast of Sierra Leone, potentially opening up a vast new petroleum province in the deep waters off West Africa.
It is the latest in a string of deep-water finds spurred by advances in drilling technologies and exploration strategies that are changing the face of the oil industry. It comes in the same month BP PLC announced it had made a “giant” new oil discovery below the Gulf of Mexico after drilling what is thought to be the world’s deepest well. That field is estimated to contain three billion barrels of oil, although only a fraction of that may ever be extracted, BP said.
The steep run-up in the price of oil over the past few years has swelled Western oil companies’ exploration budgets and encouraged them to push into high-risk areas once considered too costly to exploit, such as the Arctic, and the ultra-deep waters offshore Brazil.
Twenty-five years ago, oil companies struggled to operate in seas deeper than 600 feet. Now technological innovations mean they can pump crude in waters 6,000 feet deep. Anadarko’s well in Sierra Leone, known as Venus B, was drilled in water more than a mile deep.
Some observers say the string of recent discoveries, especially BP’s, has undermined the theory of “peak oil” — the idea that the world’s oil production is about to peak — since improving technology is constantly opening up new frontiers for Big Oil. BP’s Gulf of Mexico find was “good evidence the concept behind peak oil is flawed,” says Adam Sieminski, chief energy economist at Deutsche Bank.
Though much of the crude stored below ultra deep water is hard to extract, “if demand is there for the product, technology and prices will make it possible to develop that oil,” he said.
The shift to ever remoter areas comes as Western oil companies are increasingly shut out of the world’s richest oil provinces like the Middle East and Russia. But the new oil plays often present challenges that push the majors’ technological abilities to the limit.
Brazil’s subsalt reserves, for example, are the largest discovery in the Western Hemisphere in three decades, but they are buried under a thick layer of salt miles below the ocean floor that shifts under geological pressure, making them extremely expensive to develop.
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