Thursday, September 3, 2009

Ladies and Gentlemen, Start your Tankers! Part 2

Part 1.

I spent a little while reading through reports about BP's Tiber strike and I found one little nugget that caught my attention: US Yearly Production Increases for the first time since 1991. 150 Years Ago, Col. Drake drilled a hole in the ground. For a long time after that, The US was the 'Saudi Arabia' of world oil production. US production underpinned the Allied War machine in WWII, but shortly thereafter, we started to import oil. The US was still mostly independent, but in 1970, US oil production peaked at 12.5 Million Barrels/Day and began to slowly decline. In the early 90's, we started importing more oil than we produced. Even with the giant fields of Prudhoe Bay and the Gulf of Mexico, US production continued to fall because of depleting older oil fields, like Texas, Pennsylvania, and California. Reversing that trend, even if it will only be in the short term, would have dividends for US energy security. Maybe we will be more reluctant to send so many young men and women to die in a hot desert on the other side of the globe for black goopy stuff (not to mention the incredible financial cost).

20 years ago, consensus amongst geologists was that the Gulf of Mexico was a "Dead Sea" when it came to any future oil production. A lot of oil production happened up until the continental shelf and a few deepwater fields were built, most notably Shell Cognac and then there was a long lull. After Cognac, almost nothing new was built in the Gulf until the early/mid-90's. From the late 70's/early 80's all the way through the early/mid 90's, Gulf exploration and production floundered. Scores of local service companies went under. But, for now at least, it looks like the good times are back.

I noticed one other thing about the Times-Pic article was almost all of their quotes came from Service Companies. Almost everything that's done in the oil industry is actually done by service companies. Once the geologists find the oil and the platform is built (by a third party shipyard with subcontracting engineers, like yours truly helping out on the design work), only about 10-20% of the personnel offshore are for the actual oil company. 40-50% of the crew is for the drilling company. Another 10% are for catering. The rest is split between a multitude of specialties, from chemical vendors to construction workers, etc. For every person employed with the major oil companies, there's at least 10 people involved in the service companies.

Tiber, and all the other Lower Tertiary Trend Fields (I'll get to that in a sec) will be supported out of Port Fourchon. Even if the majors move their main offices to Houston or the Northshore, that means tons of jobs for South Louisiana.

The Lower Tertiary Trend is a large area that is believe to hold the key to the future of oil production in the Gulf of Mexico. Jack, St. Malo, Kaskida, Cascade, Chinook, and Tiber are all a part of this area. Out of all those prospects, discovered over the past decade, only three are close to producting. Many companies are sitting on their hands either because of technical reasons or economic reasons. It could be quite a while before we see even a single barrel of oil flow out of Tiber. The Oil Drum has a fantastic wrap-up written after the Jack #2 strike years ago.

Chinook and Cascade will produce 80,000 barrels/day out of the first Floating Production, Storage and Offloading vessel (FPSO) in the Gulf of Mexico. First oil is slated for sometime early next year.

The other field is Perdido, slated to come on line any day now at 130,000 barrels/day. Perdido is a "spar"-type platform.

Here's a nice video that shows you what a spar looks like:

What the video doesn't really convey is the SCALE! If you put the base of that spar on Poydras street, the bottom of the topsides (living quarters/production equipment/etc.) would be a little shorter than One Shell Square (50+ stories). With the topsides and drilling module (about the size of a 10-story building), the Perdido Spar would dwarf every single building on the skyline.

Here are some incredible photos of the Perdido topsides being lifted into place. Look at the size of some of the oil workers in scale with the enormous hooks and cranes and equipment.

One of the big battle to be waged in the Lower Tertiary Trend is FPSO vs. Spar. The Coast Guard has, for various reasons, frowned on FPSO's in the Gulf. They've allowed Cascade/Chinook as a test. Spars are a more proven, very reliable design that depends on the sheer bulk of the platform to absorb the weather. FPSO's are much more delicate, but the oil companies like them because they're cheaper to produce and man. Part of Petrobras' pitch with their FPSO was they'd drop their umbilicals and risers and run for the hills when a hurricane approaches. We'll see how that works out. Also, FPSO's don't have pipelines leading to shore. They store about 1 million barrels of oil, roughly the size of a supertanker, in their hull. Shuttle tankers tie up alongside the FPSO and offload crude to run to shore. Those shuttle tankers go back and forth with all the crude that is produced in lieu of a pipeline. Will the Coast Guard allow a dozen or more FPSO's, with all of their associated shuttle tankers, to operate in a very crowded Gulf of Mexico with two of the largest ports in the world (New Orleans and Houston) also in close proximity? Will that be the only economical way to develop the oil?


Krishna Kumar said...

very good post!

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