Deep water boom

Dr Michael Smith, Energyfiles CEO, reveals the offshore drilling market will be worth US $80 billion by 2012.

Deep water drilling has grown from less than 50, mostly exploratory wells, drilled each year at the beginning of the 1990s to nearly 600, mostly development wells, being drilled each year today.

And numbers are still rising. Such expanding drilling levels have been responsible for increasing oil and gas production - production that is vitally needed to maintain global supplies.

Offshore drilling represents a substantial part of CAPEX in all operating regions. The latest edition of the ‘World Offshore Drilling Spend Forecast 2008-2012' estimates that drilling now attracts over 50% of offshore capital expenditure and that by 2012 the market will be worth around US $80 billion, having grown from US $34 billion in 2003.

Of course it has been excessive inflation of especially rig prices in the last three years that has been the main driver to growth in expenditure. This allied to expensive deep water drilling that is focusing the R&D efforts of the industry. Along with more complex development wells, deep waters represent the real physical growth area within this part of the service sector.

Evolution of deep water drilling

The first deep water well was drilled in 1966 by Pan American in water depths of 710m off Newfoundland. Two years later Shell drilled a well in 1,610m in the same area. The first discovery (of non-commercial gas) was Esso's well W9-B-1 drilled in the Andaman Sea in 1976 in 802m of water. But it was in Brazil and the Gulf of Mexico where deep water drilling really took off.

Shell drilled its record breaking Coulomb-1 well in the Gulf of Mexico in 1987 at a depth of 2,292m. That record was only broken nine years later, again by Shell, when it drilled Baha-1 in 2,320m followed in 2003 by the deepest well anywhere, drilled by ChevronTexaco in 3,053m of water. Wells off Brazil and Angola are also now regularly drilled above 2,000m.

Back in the 1980s it was not lack of drilling technology that held back drilling in deep waters, or a failure to recognise the hydrocarbon potential of deep water reservoirs. It was production technology that lagged behind and even in technically feasible areas, fields had to be very large to be commercial.

However, now that many of the production challenges have been, at least partly, overcome with newly designed floating production units, deep and ultra deep water drilling is dominating demand levels for both semi-submersibles and drillships, which themselves have seen great improvements in design and capability.

All this drilling has, of course, led to growing output and shows how oil production in particular has expanded since 1990. The figure shows projected growth in oil production to 2015 when deep waters will perhaps be delivering nearly 10 million barrels per day to refineries, representing around 10% of our global output.

Drilling and spending

To realise these new volumes, many deep water wells have been and will be required. It is estimated around 4 500 deep water wells have been drilled globally in the 18 years since 1990, when production first began to rise. It is expected that almost as many will be drilled over the next five years.

The number of deep water exploratory wells is still increasing in most regions where potential exists. However, in most regions numbers are likely to flatten off soon.