Oil Industry Reviving Quest for Deepwater Reserves

Oil Industry Reviving Quest for Deepwater ReservesOil Industry Reviving Quest for Deepwater Reserves

Deepwater oil drilling can be expensive, time-consuming and a hard sell to investors. But the world's top energy firms are restarting their search for giant oilfields under the ocean after a two-year lull.

A recovery in oil prices to about $50 a barrel from a 12-year low in 2016 is reviving oil majors' appetite for risk. Reductions in offshore production costs mean that some projects may be able to compete with North American shale fields, executives said at an energy conference in Houston this week, Reuters reported.

The recovery in the industry has so far been focused on onshore shale output from the largest US oilfield, the Permian Basin.

"Our competition over the past years has evolved from 'we want to be the best in deepwater' to 'we want to compete with shale' to 'we want to beat the Permian'," Wael Sawan, Royal Dutch Shell's executive vice president for deepwater, said in an interview.

Shell is the largest deepwater producer among the world's top publicly traded oil companies and is set to pump 900,000 barrels per day from such projects by the end of the decade.

It has cut well costs by at least 50%, reduced logistics cost by three quarters and cut staff by nearly a third to make developments in areas such as the Gulf of Mexico and Nigeria profitable at oil prices below $40 a barrel, on par with the most profitable shale wells, Sawan said. Other companies such as France's Total have seen similar cost cuts.

After cutting the cost of deepwater development, companies are also reviving the search for new resources.

They are focusing exploration efforts on areas close to existing fields to maximize the chances of discovery and minimize costs. Many such areas are in Brazil, the Gulf of Mexico and Southeast Asia.

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