September 2021

The last barrel

Offshore resurgence underway
Craig Fleming / World Oil

The havoc created by Hurricane Ida, which struck Louisiana on Aug. 26, damaged offshore platforms, pipelines and heli-pads. The destruction was so severe that two out of three barrels of oil normally produced from the U.S. Gulf of Mexico are unavailable. Despite the powerful hit to the offshore industry, companies are gearing up to increase spending in offshore fields. There is an onslaught of good news and positive indicators that suggest offshore operators are poised to resume development in 2021-2022.

Offshore leasing activity. Offshore acreage dominates global licensing rounds that are scheduled to close in the second half of 2021. Over 35% of the acreage available, that is either open or scheduled to close in the second half of 2021, is located in shallow water, while ultra-deep water and deepwater acreage account for 24% and 19%, respectively, according to GlobalData. A company report suggests that during the second half of 2021, 16 licensing rounds that are currently open are expected to close by the end of the year. Asia is hosting the largest number of licensing rounds (6), followed by South America (3). Among the lease sales that are scheduled to close in 2021, Malaysia is offering the largest volume of acreage. The Malaysian sale is followed by the 2021 Offshore Acreage Release Round in Australia and the International Bid Round 2021 in Egypt. Other major players include Brazil, Canada, India and Indonesia.

“Ongoing financial discipline and cuts in the exploration budget by many upstream companies could push exploration activities toward mature basins and areas with existing infrastructure. Companies with high capital availability may be in an advantageous position to participate in licensing rounds and capitalize on reduced service costs and competition,” said industry analyst Nikolas Pachipis.

Vast South American potential. Brazil is expected to contribute 23% or 1.3 MMbopd of global oil and condensate production in 2025 from several planned and announced offshore projects that are expected to start operations between 2021 and 2025. Another industry report reveals that 1.16 MMbopd in Brazil in 2025 are expected from planned projects with identified development plans, while 169,000 bopd are expected from early-stage announced projects that are undergoing conceptual studies and are expected to get approval for development. A total of 29 crude oil projects is expected to start operations in the country during 2021-2025. Of these, Bacalhau, Buzios V and Lula Oeste are the key prospects expected to collectively contribute approximately 44% of the country’s crude and condensate production in 2025.

“While Saudi Arabia dominates liquids production globally, mostly from already producing fields, Brazil leads crude and condensate production from upcoming/new projects. Brazil’s prolific pre-salt layer in the Santos basin has produced a strong portfolio of offshore projects, operated mainly by Petrobras. These projects have shown robust economics, such as development break-even oil prices averaging $40/bbl, and have significantly contributed to South America’s trend of surpassing North America’s offshore production by 2023,” according to senior analyst Effuah Alleyne.

Another XoM victory offshore Guyana. ExxonMobil reported a significant discovery at Whiptail in the Stabroek Block, offshore Guyana. The Whiptail-1 well encountered 246 ft of net pay in a high-quality oil-bearing sandstone. Drilling is also underway at Whiptail-2, which encountered 167 ft of net pay in a similar oil-bearing sandstone. Drilling continues at both wells to test deeper targets, and results will be evaluated for future development. The Whiptail discovery is 4 mi southeast of the Uaru-1 discovery, reported in January 2020, and 3 mi west of Yellowtail field.

“This discovery increases our confidence in the resource size and quality in the southeast area of the Stabroek Block and could form the basis for future development,” said Mike Cousins, ExxonMobil V.P. for Exploration and New Ventures. The company projects that six projects should be online by 2027 and sees potential for up to 10 more projects to fully develop the resource base.

Contract for survey. A contract for geophysical work in the offshore Guyana play has been awarded by Esso Exploration and Production to Oceaneering International, which will provide two surveys, using a towed, autonomous underwater vehicle. The contract also calls for a shallow geotechnical survey. The company will employ the DP-2 Cape Davis, equipped with the 3,000-m-rated OS-VI AUV, towed geophysical sensors, and geotechnical sampling and testing equipment. The surveys were scheduled to begin during third-quarter 2021. In addition to the geophysical and geotechnical survey, Oceaneering also will be working with RPS Group to provide protected species observers and perform an environmental baseline survey of the area.

Norway. In August, Equinor started production from its Troll phase 3 project in the North Sea. The new wells are tied to the Troll A platform and are projected to extend the structure’s life past 2050. The development has a break-even price below $10/bbl and CO2 emissions of less than 0.1 kg/boe. Recoverable volumes from Troll phase 3, which will produce the Troll West gas cap, are estimated at 347 Bcm, which equates to 2.2 Bboe. “Troll phase 3 is one of the most profitable projects in Equinor’s history,” while producing record-low CO2 emissions, noted Arne Sigve Nylund, V.P. Projects, Drilling and Procurement. Troll has generated substantial revenue for 25 years, with Troll phase 3 income estimated at NOK 17 billion (2021).

The last frontier. With the hard push to convert to renewables, oil and gas operators are focusing on the high ROI that offshore prospects offer. And as witnessed by Troll, the controlled and contained environment offers operators a unique opportunity to reap high profits while keeping GHG emissions to a minimum. 

About the Authors
Craig Fleming
World Oil
Craig Fleming
Connect with World Oil
Connect with World Oil, the upstream industry's most trusted source of forecast data, industry trends, and insights into operational and technological advances.