COOK, LINDA, Director Business Development Support, Shell E&P

Abstract: Deep Water -- A Global Perspective

The sharp drop in oil prices in 1998 highlighted the challenge facing deepwater oil and gas developments. Reductions in work programs and investment levels had a major impact on rig markets and bidding rounds. The outlook for future oil prices remains uncertain.

The worldwide hydrocarbon potential of deepwater basins is increasingly understood. But can such investments -- in an inherently difficult and unforgiving environment -- remain competitive in this economic climate? The competitiveness of the deep water depends on the industry's ability to reduce costs, manage risks and meet societal challenges, such as avoiding gas flaring. Fiscal regimes appropriate for the economic prospects, and which encourage long-term investments, are also essential.

Effective integration, learning and dissemination are key requirements for realizing deep water potential.

Integrating geological and reservoir modeling is vital for resolving reservoir uncertainty quickly and cost-effectively. Robust development plans depend on properly integrating subsurface, engineering, and commercial understanding. Economic exploitation of deepwater resources -- particularly of gas -- may require an integrated approach to developing fields, infrastructure and markets.Addition of a third train to the Nigerian LNG plant, as part of plans to develop offshore oil and gas fields, is an example.

Learning from experience is essential for reducing costs. The cost per barrel equivalent of capacity of Ursa -- Shell Oil's fourth tension-leg development in the Gulf of Mexico -- was only 40 percent of the cost of its first, Auger.

Extending deepwater success from the few leading areas to realize worldwide opportunities depends on disseminating skills and technology Superficial communication -- without real appreciation of different conditions -- may actually mislead. Effective dissemination requires removing barriers -- within and between organizations -- and establishing the capability and culture for professional exchange. The recent creation of Shell's global deepwater organization reflects the importance given to this thrust.

In the mid-1980s, many thought deepwater development was impossible. Despite much lower prices, the industry has proved them wrong.The high priority Shell companies continue to give to developing their worldwide deepwater portfolio indicates their confidence in its future.

AAPG Search and Discovery Article #90923@1999 International Conference and Exhibition, Birmingham, England