Current Trends in Deepwater Exploration and Production
The first discovery of deepwater oil reserves (more than 1,000 feet deep) was made by Shell in 1975, and some of the first deepwater platforms were implemented in the ’80s. Since then, engineering and seismology technologies have improved greatly, propelling deepwater exploration and production at increasing rates. But to what degree?
National Geographic reported earlier this year that in the Gulf of Mexico region 63 of 83 working rigs in 2014 operated in deep water, as opposed to 14 five years before. The institution also reported that those deepwater wells are producing more oil, accounting for as much as an estimated 16 percent of U.S. oil production by the end of the year. Finally, they note that while the downturn in oil prices has resulted in cancelled projects and divestments, “federal data” indicate that slowdown is more common in shallow-water projects.
Meanwhile, deepwater drilling permits have been increasingly issued, from 14 in 2010 (likely due to the moratorium on drilling after the Deepwater Horizon accident), 274 in 2011, and 603 in 2014. Additionally, drilling depths are increasing: the average ocean depth of drilled wells increased by 40 percent from 2005 to 2010, and actual well depths are now being explored as deep as 20,000 feet below the ocean floor.
On a global level, deepwater oil sources continue to be vital as well. In September 2010, BP estimated that of the 85 million barrels per day of oil consumed globally, five million were extracted from deepwater sources around the world. In August 2014, Total estimated that that number would rise to nine million barrels per day by 2035.
Of course, there’s the financial side to deepwater exploration and production. Several factors have affected investments in deepwater, from the April 2010 Deepwater Horizon accident to the current downturn in global oil prices. Additional regulations — current and pending — as well as lower oil prices have caused many smaller and less portfolio-diverse companies to back out of early exploration contracts and slim down operations. But as energy consultant Imran Khan told USA Today at the beginning of 2015, deepwater investments are for the long term: “Once you start spending all that money, it’s hard to stop in the middle.”