March 2014

Offshore in depth

Offshore’s role in the new energy paradigm
Eldon Ball / Contributing Editor

As the U.S. moves nearer each year to becoming a net exporter of oil and gas, it’s reasonable to raise the question, “What effect will that have on offshore exploration and production, both in the U.S. and internationally?”


To answer that question, we examine some of the conclusions that BP reached in recent analyses. First, there’s BP’s annual forecast of future oil and gas supply and demand, entitled BP Energy Outlook 2035.

BP projects that by 2035, the U.S. will not only be energy self-sufficient but will also maintain a position as the world’s top producer of liquids and natural gas. Here are some of their reasons for that conclusion:

  • U.S. energy production will rise 24% while consumption expands just 3%.
  • U.S. energy production, as a share of consumption, will rise from 84% in 2012 to 101% in 2035.
  • With large increases in oil and natural gas output, U.S. oil imports will drop nearly 75%, and the country will become a net gas exporter by 2017.
  • The U.S. will remain the world’s largest gas producer, accounting for nearly 20% of global supply in 2035 and becoming a net exporter by 2020. The U.S. will also be the world’s largest liquids producer, starting in 2013.
  • Natural gas will replace oil as the leading fuel in U.S. energy consumption around 2027—rising from 30% today to 35% in 2035. Oil’s share will fall from 36% to 29%.
  • Rising U.S. oil production (+37%) and natural gas output (+45%) will outpace declines in coal (-20%). Oil output will surpass its previous peak ( in 1970), while natural gas will continue to rise from today’s record levels.
  • Fossil fuels will account for 80% of U.S. energy demand in 2035, down from today’s 85%, driven by the increase in renewables for power generation, from 2% to 8%.
  • Energy consumed in transportation will fall 18%. Oil will remain the dominant fuel source, but its share will fall from 95% to 83%, as both biofuels and natural gas capture an 8% share by 2035.
  • U.S. tight oil output will triple to 4.5 MMbpd in 2035. Shale gas production should more than double to 65 Bcfd.
  • U.S. share of global demand will fall from 18% to 13% in 2035, as China rises from 22% to 27%, having passed the U.S. in 2010 as the largest consumer.

But what does this all mean for the offshore sector?

It means that offshore—particularly deep water — will continue to be a key part of the global oil and gas supply picture going forward, even as import and export patterns change, as BP’s Dr. Michael C. Daly explained in a recent presentation at Imperial College. And, not surprisingly, he notes that technology will play a major role.

“Today, we are some 40 years into the deepwater era,” he said. “And although we are, perhaps, half-way through it in finding terms, deepwater exploration is a trend that will be with us for some time yet.”

Deep water, Dr. Daly says, will likely be followed by two very different trends, both of which are beginning to emerge. Dr. Daly forecasts, “Firstly, a move to the unexplored Arctic frontier of ice-bound continental shelves; and secondly to a re-exploration of the onshore and shallow waters of the world with new images, new technology and, occasionally, new ideas.”

The exploration themes underlying these new plays, he says, give us a clear indication of where deepwater exploration is headed:

  • The largest, Brazil’s pre-salt play and the Paleogene play of the Gulf of Mexico, were both a result of going deeper in established basins, below salt, toward the lowest known source rock. Industry is now taking this thesis to explore the Angolan conjugate margin of Brazil and seeing early success.
  • The Rovuma delta gas discoveries of East Africa; the Krishna Godavari gas of East India; the Congo fan oil discoveries of West Africa; and the greater Nile fan gas discoveries all result from exploring the medial and distal parts of large, young delta systems. This is where traditional source rocks remain uncertain, and where biogenic processes have resulted in large gas finds in at least two of these areas: Israel and India.

Dr. Daly says that this tells us two things about future exploration trends: 1) go deeper, exploring down to the source rock; and 2) deltas are still delivering surprises. “In conclusion,” he says, “deepwater exploration has legs yet. Underpinning it will be ever-improved and cheaper seismic data: seeing beneath shallow gas, salt and basalt, and allowing the mapping and de-risking through porosity and fluid indicators. However, with the elevated activity levels of the past few years, a decline in success rates is inevitable, and the discovery of new plays ever more difficult.”

For the future of the U.S. oil and gas industry, the Chinese proverb, “May you live in interesting times,” seems to fit very well. wo-box_blue.gif 

About the Authors
Eldon Ball
Contributing Editor
Eldon Ball has more than 35 years of experience in business-to-business writing and editing, technical and economics communications, media relations, marketing, and events management, specializing in oil and gas and high-tech businesses.
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