Today, deepwater reserves are a key part of the world’s oil and natural gas needs, accounting for roughly 11% of global production. Over the past five years, two-thirds of discoveries occurred in deepwater, and Brazil has been the preeminent site of this trend. The country’s pre-salt finds alone account for about 38% of the total. Looking ahead, IHS projects that by 2020 deepwater could account for approximately 20% of new source production. For both national and international oil companies, deepwater will figure prominently in their future portfolios.
Awara. Image from Halliburton.
So, why has deepwater exploration been decreasing lately in Brazil and around the world? Even before the current market conditions arose, investment in deepwater exploration was challenged by high costs and fewer than expected successes. Now, with the decline in the price of oil, the challenge is even greater.
As one might expect in the current market, many companies elected to drill development wells in proven areas to ensure productive returns. Brazil is no exception to this strategy. Even with the recent reduction in exploration and production costs, to break even, many projects in Brazil would still need the oil price to be well above where it sits today. In the abundant Santos Basin, for example, average water depth is about 2100m (7000ft) and average reservoir depth is 5800m (19,000ft), conditions that drive up the cost of exploration and development (IHS 2015).
Given these circumstances, why then are future projections still pointing to significant deepwater production contribution over the next five years? In my view, there are two answers. The first is because a high percentage of the discovered, but undeveloped reserves, are in deepwater, 61% of oil and 53% of gas (IHS 2015). As operators ramp up development on proven reserves, these sources will start significantly contributing to overall global production. The second is because exploration activity, though scaled back to accommodate today’s market, will soon recover. Exploration drilling is the machine that fuels new oil reserves. Slow it down and, eventually, new reserves discovery slows. Since deepwater will remain a main source for new reserves, the return to exploration is inevitable.
Clearly, the biggest challenge is the high cost of exploration and development in deepwater. Certain pricing concessions can help generate work, particularly on high-cost items like rigs and subsea equipment. But more substantial, deepwater long-term gains will come through operators internal cost optimization and industry efficiencies driven by technological innovation. Consider two pioneering Halliburton technologies that can help increase reliability and reduce uncertainty to ultimately contribute to the improvement of well economics.
The Halliburton RezConnect well testing system is the industry’s first fully acoustic-activated drill stem test (DST) system. It provides comprehensive acoustic control of DST tools, with measurement and analysis of test data in real-time, allowing operators to have a dialogue with their reservoirs to make informed decisions faster and thereby reduce costly rig time. In Brazil, the RezConnect system recently saved an operator five days of rig time.
Another innovative technology is the Halliburton ESTMZ enhanced single-trip multi-zone completion system. Designed specifically for deepwater and ultra-deepwater completions, it enables isolation and treatment of several well intervals using a high-rate frac pack in a single trip of the work string. In a lower tertiary, five-zone, 1400ft production interval, for example, the ESTMZ system could reduce rig time by as much as 42 days, and a US$1 million spread would see a savings of up to $42 million.
Innovations like these are central to maintain the competitive edge in deepwater markets and restoring exploration activities. Although the market in Brazil and around the world has shifted to development for the near-term, exploration will continue to play a pivotal role if we continue to bring savings through our innovation — and Brazil will remain the major source of deepwater activity in the coming decade.
Abdalla Awara is Vice President of the Testing and Subsea product service line at Halliburton. Previously, he led the strategic marketing team within the Drilling and Evaluation division. Awara began his career as a well testing field engineer at Halliburton in 1987.
Two years later he moved to Geoservices International and progressed through a series of roles, including overall responsibility in Nigeria, Libya, Canada, Asia Pacific, CIS and West Africa. In 2004, he joined Power Well Services (now Expro) through an acquisition to become the Europe and West Africa Regional Vice President, and was named Regional Vice President of Europe and CIS, based in Aberdeen, in 2008.