Deepwater oil fields are a final frontier; see video
By David J. Lynch, USA TODAY
ABOARD THE CAJUN EXPRESS, Gulf of Mexico
Five miles straight down, past the prowling barracuda and tuna, lies a massive sandstone formation marbled with oil. Extricating the inky fluid, which has lain undisturbed for millions of years, and shipping it 150 miles to land won't be easy.
But with rising global demand pushing the price of a barrel of oil near $140, securing new oil supplies from deep, distant spots such as the field code-named Tahiti is critical. That's why Chevron has leased this mobile drilling rig, which displaces more water than one of the Navy's Nimitz-class carriers, to ready for production half a dozen wells scattered across the ocean floor. The vessel's on-board thrusters hold it almost perfectly still, directly above its target, submerged in 4,000 feet of water.
"The deep water has been, and really truly is, potentially the next wave of hydrocarbons into the global energy market. It's hugely important," says Stephen Thurston, Chevron's vice president of deepwater exploration and projects.
Deepwater oil fields, those below more than 1,000 feet of water, represent one of the final frontiers of oil prospecting. The good news is that there's plenty of oil in such deposits, especially here in the Gulf of Mexico and off the coasts of Brazil and West Africa. The bad news is that much of that valuable crude lies in complex geologic formations, hidden beneath a mile or more of troublesome salt layers — meaning these new reservoirs will be costly to develop and thus will do little to eliminate $4-a-gallon gasoline.
By next year when Tahiti begins sending oil to anxious consumers ashore, Chevron expects to have invested $4.7 billion in this project. That outsized sum reflects a surge in oil field costs for raw materials, fuel and specialized gear, which have more than doubled since 2000, according to the Cambridge Energy Research Associates. The daily lease for the Cajun Express alone costs $463,000.
"The level of cost will keep (gas) prices up. It's not like we'll find something easy to produce and all of a sudden the price of gas will go back to $3," says Gary Taylor of industry publication Platts Oilgram News.
The western Gulf of Mexico represents the only United States waters where oil companies are allowed to drill. Persistently high oil prices have shaken, but not ended, the 1981 federal ban on drilling off the U.S. east and west coasts and in the eastern Gulf. President Bush on Wednesday joined likely Republican presidential nominee Sen. John McCain in reversing his support for the prohibition. Democrats remain opposed to expanded coastal drilling, saying it would threaten the environment and do little to curb high gas prices for years.
The increasing prominence of deepwater discoveries such as Tahiti illustrates a core truth behind the steadily rising cost of fuel: All of the easy oil has been found or used. Now, drillers must navigate 4,000 feet of water and an additional 20,000 feet of sand, rock and salt to find what the Earth has left.
"People back home don't think about that, but that's 5 miles! Back when I started in this business, if you went 2 miles, that was a great thing. You got your name on a plaque," says Buddy Horton, a safety consultant at DC International of Lafayette, La., and a 32-year industry veteran.
Last month, Chevron, the second-largest U.S. oil company, reported first-quarter earnings of $5.2 billion, up almost 10% compared with the same period in 2007. The company expects to spend $2 billion this year searching the globe for new oil, with deepwater prospecting claiming the largest single share. Chevron plans this year to begin producing oil from another deepwater field in the Gulf called Blind Faith as well as the Agbami project off the coast of Nigeria.
Into deeper water
The industry's first offshore well was drilled in 1947 within sight of the Louisiana coast in water not much deeper than a municipal swimming pool. From those modest beginnings, the industry has marched steadily into more challenging depths. Last year, 130 deepwater projects produced oil, up from 17 a decade earlier, according to Minerals Management Service, the Interior Department agency that leases offshore parcels.
By 2015, Chevron expects deepwater wells to account for one-quarter of offshore oil production vs. 9% today.
Much of the action now is in so-called ultra-deepwater fields beyond 5,000-foot depths. In 2003, Chevron drilled a record-setting well in 10,011 feet of water, and the San Ramon, Calif., oil giant has plans to go even deeper. It's leased two new drill ships from drilling contractor Transocean capable of reaching total well depths of 40,000 feet, including 12,000 feet of water. The first delivery is scheduled next year.
As companies rush to develop new deepwater fields, they are encountering roadblocks. The most critical: a global shortage of drilling rigs, the legacy of investment-chilling low oil prices a decade ago, when crude dipped below $12 a barrel. The scarcity of rigs is so serious that some promising fields are going unexplored, according to Interior's MMS. Customers trying to lease a rig from Cajun Express owner Transocean must wait two years, says Steven Newman, the company's president. The drilling contractor's order backlog now exceeds $30 billion compared with less than $1 billion four years ago. "I've been in this business for 15 years, and these are the best times I've ever seen. My boss, our CEO, has been in this business for 30 years, and these are the best times he's ever seen," Newman says.
Almost one-third of the world's deepwater rigs are active in the Gulf. Many are prowling an ancient formation called the Lower Tertiary, which sprawls from Texas and Louisiana far offshore and could hold up to 2.8 billion barrels of hydrocarbons.
Chevron's Tahiti field, which the company announced as a major find in 2002, looks like one of the biggest discoveries in the region, potentially containing 400 million to 500 million barrels of oil. It is scheduled to begin producing 125,000 barrels a day next year.
But in this demanding environment, stumbles are not unknown, even over prosaic components such as the heavy shackles designed to secure Chevron's production platform — a floating 60-story structure taking shape nearby — to the ocean floor. In 2007, Chevron delayed the Tahiti program after encountering what it described as "metallurgical problems" with the roughly 1-ton industrial bracelets.
Likewise, last year, Chevron was forced to temporarily abandon one of the six wells in the project's initial phase after an attempt to complete it failed. Now, the more than 140 oil workers from Chevron and several support companies housed on the Cajun Express are proceeding with a second try. The work should be finished in early July.
Griping about Big Oil
Just to get this far in Chevron's multiyear project has been an undertaking. The workers aboard the drilling rig brave hurricanes and toxic fluids while battling tricky currents that tug at the drill pipe as it reaches toward the ocean floor. Below the sea bottom, unpredictable layers of sediments — like a wedding cake with a mind of its own — threaten unanticipated problems with each additional foot of depth. Low-pressure areas known as "thief zones" can baffle drillers by robbing the fluids needed to lubricate the advancing drill bit.
"It takes a lot to drill these wells nowadays. It's not as easy as it used to be. … The equipment needs to be more robust, bigger, heavier-duty," says Marty Hebert, 52, offshore manager for Transocean.
One reason is the extreme conditions associated with operating in very deep fields. The oil trapped below the ocean floor is under pressures that reach 20,000 pounds per square inch — perhaps twice the force of a shallower well — as well as temperatures approaching 400 degrees Fahrenheit. Releasing the oil safely is akin to handling a giant ketchup bottle full of sluggish fluid but ultimately prone to an explosive release.
To complete the Tahiti wells, Chevron had to design new variants of standard drilling tools using exotic alloys such as corrosion-resistant inconel, says Clay Jostes, 29, a field drilling engineer. That's another reason costs are so high.
Prospecting for oil conjures up images of well-muscled men toting heavy pipes and swinging oversized tools. And there's some of that here. At one end of the Cajun Express, a vertical array of various drill pipes resembles an enormous industrial pipe organ.
But today's oil industry owes as much to Silicon Valley as it does to sheer brawn. Specialized three-dimensional software allows industry geologists to "see" beneath the ocean floor and the thick subsurface salt canopy that hides the oil. On the bridge, workers track sea currents and weather on 10 flat-screen monitors, while in the well control center, a driller seated in a cushioned captain's chair watches fluid pressure in the well far below. Robotic minisubs carry out near-daily inspections of the drill pipe.
"A lot of the stuff we do rivals the space program. … It's cutting-edge technology," says Jostes.
But when the young engineer finishes his two-week shift here on the oil field frontier and returns to his New Braunfels, Texas, home, he knows he'll be greeted with grumbling, not applause. "It's frustrating for me to hear my friends. They gripe about the price of a gallon of gas," he says. "They just want to blame Big Oil. But we're not pillaging the American people, and we shouldn't apologize for the profits we're making."
There's still plenty to do before Tahiti sends its first barrel of oil creeping through a pipeline to shore. All six wells on the sea floor will be connected to a subsea manifold, the midway stop on the way to the production platform overhead. By then, Jostes will have moved on to another site.
"As far as oil being a limited resource, will I ever see the end of it? Or will my grandkids see the end of it?" asks Jostes. "I don't think so. I don't think there is a limit."