Unconventionals and Deepwater Can Co-Exist

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Unconventional resources’ rapid growth in North America has grabbed the attention of exploration and production companies both stateside and globally, with many diversifying their portfolio between conventional exploration programs and unconventional resource projects. However, as the enthusiasm for onshore shale play increases, the debate of how the industry should best allocate their capital seems to be the reigning topic.

The United States is now the number one unconventional oil and gas producer in the world, and together with Canada, accounts for more than 25 percent of global natural gas production, a panelist at the 2014 Offshore Technology Conference discussed in “How will Unconventional Play Revolution Impact Offshore Deepwater Industry?”

Productivity of oil and natural gas wells is steadily increasing in many basins across the United States because of the increasing precision and efficiency of horizontal drilling and hydraulic fracturing in oil and natural gas extraction, the U.S. Energy Information Administration (EIA) noted. Many resource-producing basins are experiencing a yield over time in either oil (Bakken, Eagle Ford and Niobrara) or natural gas (Marcellus and Haynesville) formations.

“There is a need to adapt to a changing context,” stated Torstein Hole, senior vice president of Development and Production at Statoil North America.

Deepwater oil and gas developments have been impacted by:

  • The financial crisis (2008-2009) and the Deepwater Horizon incident (2010)
  • Lower natural gas prices relative to crude oil
  • Cost inflation and higher perceived risks

Meanwhile, unconventional resource development has accelerated because of:

  • Technology and efficiency advances
  • Higher oil prices and lower perceived risks

However, many panelists stated that unconventionals and deepwater are complementary with their approach and focus on safety and sustainability issues being key and the need for portfolio diversity with varying risks.

 

“The deepwater basin just keeps on giving,” said Greg Guidry, executive vice president of Shell’s Upstream Americas, Unconventional. “Every time we are ready to write it off, something big happens and it renews itself.”

This mindset is why deepwater development will coexist during the shale phenomenon, Guidry said.

“Deepwater drilling is at a high level of utilization, and the number of new deepwater projects coming into the planning stage is set to accelerate over the next few years, as around 90 new drillships/semisubs are delivered,” Jim McCaul, president of International Maritime Associates, Inc., explained to Rigzone recently. “So I wouldn’t count this sector of the industry out; it just seems as if operators are wanting a financial return that can be obtained from each project, and in turn are cutting costs.”

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