Texas tea cooling down

When you think of Texas oil fields, you think busy, big and big money. But when you've been pumping oil out of the ground for a 100 years, oil production declines as the oil starts to run out. Then you scramble for the scraps that are left.

The hike in prices over the last ten years from $8 to $80 helps, but even those economics can't overcome the inevitabilities of petrogeology.

This story from the New York Times tells that story:

But for all the new wealth and activity, the best the industry can hope to accomplish is to slow the decline of American oil production. The good times here are not nearly as good as they were in the last big oil boom in the 1970s and 1980s — and nobody expects they will get that way, how ever high prices rise.

A similar pattern is emerging in the North Sea too.

North Sea Oil - Keeping it going

North Sea oil was discovered in the early 1960s with the first well coming on line in 1971. Still, it wasn't until prices went high enough and the technology was sufficiently developed that the fields were intensively exploited.

And now the fields governed by both Great Britain and Norway are falling into decline.

Dr. Roger D. Blanchard of the Department of Chemistry at Northern Kentucky University has recently published a paper showing the path of decline. These charts show the the Norwegian decline (table 1) and the UK decline (table 2).

These are both pretty classic shapes and are really not all that different than the charts showing decline for the NL offshore sector.

The difference between the local sector and the North Sea is that the North Sea is fairly well-exploited and they are heading into a phase of metaphorically scraping the bottom of the barrel. There are no real big fields left in that region and it's already been very well explored.

Over here the chart merely shows the fields already developed. In fact, there is much to be explored and developed off our coasts.

Naturally The Economist (one of the finest news analytical magazines in the English language) has a story on how the North Sea is working to maximise it's barrel scraping efficiencies.

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Every last drop
Jul 12th 2007
From The Economist print edition
How to prolong the North Sea's life

THERE is no shortage of oil and gas beneath the North Sea. Total production so far has been around 34 billion barrels, and roughly 20 billion are thought to remain. Indeed, production is forecast to rise slightly this year, to 3.1m barrels a day from 2.9m in 2006, thanks largely to the discovery of the Buzzard field, which came on stream in January.

But big finds are the exception and the rise in output will be only a small blip in a downward trend. Buzzard, which contains 500m barrels, was the largest discovery for ten years. Much of the remaining oil and gas in the North Sea is stored in small or geologically tricky deposits that are expensive and difficult to develop profitably.

Technology is one way to keep the hydrocarbons flowing. BP's Rhum field, for example—with temperatures of 150°C and pressures up to 12,700 pounds per square inch—has been known about for years, but drilling technology has only recently advanced to the point where production is practical. Improved seismic surveys can give a better idea of what is present below the seabed. High-tech imaging persuaded Total, a French firm, to develop the Jura field (another large find of 170m barrels), which is due to start production in 2008.

Another option is to bring in specialist firms. Big oil companies are often uninterested in small fields, preferring to pursue larger and more profitable developments elsewhere. In 2003 the government created new, cheaper licences to try to attract firms that specialise in wringing as much as possible from small or partially depleted fields. Half of the 150 licences granted last year fell into this category.

The industry is also eyeing the few unexplored frontiers in the North Sea. The seas west of the Shetland Islands are thought to hold billions of barrels of hydrocarbons, mostly natural gas. But the lack of infrastructure in such a remote area would make it difficult to bring production to shore. And although oil prices are high, gas prices have slumped following the opening earlier in the year of a big import pipeline from Norway.

Despite these difficulties the government wants Britain still to be pumping 3m barrels of oil and gas a day by 2010. But its actions belie its words. As chancellor of the exchequer, Gordon Brown raised taxes on the industry in recent years. Oil firms now pay a 50% corporation tax on new developments, compared with the 30% rate charged on other companies. The tax squeeze on the North Sea oil industry may end up accelerating its decline.

North Sea oil - Aberdeen looks outward

Here is an interesting piece on the North Sea oil industry from The Economist (one of the finest news analytical magazines in the English language).

It describes how Aberdeen is the center of the offshore sector for the North Sea. Much of the technology developed for the offshore wells in the area, the first serious offshore basin in the world to be developed, was invented and deployed by smaller Scottish companies. Big oil uses these companies as subcontractors.

But with the oil running out, the local support industry is shifting focus to developing techniques in extracting oil from more marginal and difficult reservoirs. And with a quarter of their business exported (to here, among other places) they want and need even more exports to keep their knives sharp.

Enjoy.

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When the wells dry up
Jul 12th 2007 | ABERDEEN From The Economist print edition
Offshore production has spawned a high-tech cluster of British businesses with global ambitions

“EVERYONE else in Britain hangs on what the Bank of England does with interest rates,” says one proud Aberdonian. “Up here, we don't care about that. We're much more interested in what OPEC does to the oil price.” An exaggeration maybe, but Aberdeen is the Houston of an offshore industry that has long made Britain a big oil and gas producer.

The petropounds coursing through the “Granite City” on the north-east coast of Scotland have turned Aberdeen into one of the most prosperous cities in Britain. The typical worker makes £481 ($971) a week, compared with median earnings of £447 across Britain. The city's unemployment rate is well under the national average. The oil industry employs 33,000 people directly in Aberdeen and is estimated to provide work for 400,000 in Britain.

Aberdeen is booming now thanks to high oil prices, but the future looks less rosy. Offshore output peaked eight years ago, when Britain was the world's sixth-biggest producer of oil and gas; by 2006 it had become the 12th-biggest. The International Energy Agency said on July 10th that the drop in production had been steeper than expected. “There'll be nothing here in 15 years' time,” says one former offshore worker. “Oil's been good to me, but I wouldn't want my son going into the business.” The recent decision by Royal Dutch Shell to sell off several of its North Sea fields and to abandon the construction of a £25m headquarters in the city has added to local worries.

Yet even though oil and gas output is declining, the local businesses that have sprung up to support it have bright prospects. The North Sea was one of the earliest offshore oil basins to be developed. Many of the technologies needed to produce oil from underwater wells—especially in the difficult, gale-prone waters off the British coast—were developed in Scotland. Around 90% of oil-industry workers are employed not by the big international companies such as BP or Total that operate the fields but by local businesses.

For example, Wood Group is a big oil-services firm that specialises in, among other things, enhanced-recovery technology and offshore pipelines. Sub-Atlantic is a small outfit that makes remotely operated submarines. Altogether such businesses—covering everything from catering and construction to geology and engineering—have a turnover of around £11.7 billion a year. The hope is that they will be able to sell the expertise they have acquired in the North Sea to an industry searching for oil and seeking to maximise production in ever more testing submarine conditions around the world.

One area of particular British expertise is in subsea technology, a catch-all term for things such as automated wellheads and long pipeline networks on the seabed. These allow oil companies to use cheap ships instead of expensive fixed platforms and enable them to operate several wells from one platform many miles away. Remotely operated vehicles are used to install and maintain equipment where water is too deep for divers.

In 2005 Britain's subsea industry's output was worth around £3.4 billion, half of which was exported, a 20% rise on the year before. There are big opportunities to keep growing fast. British firms account for half of global sales, and the industry is expanding rapidly. The world market for subsea services could be worth $40 billion by 2011, according to Scottish Enterprise, a development agency. David Pridden, the boss of Subsea UK, a trade agency, thinks exports from the British industry could reach $15 billion by 2020.

Local businesses also have experience in squeezing more output out of existing fields, or cheaply developing smaller ones—something that should extend the life of Britain's North Sea industry (see article). As big finds become rarer, producers are focusing on how to extract oil from smaller reservoirs that can be geologically or technically tricky to operate. “As other oilfields around the world begin to mature, there'll be a centre of expertise here that can tell them how to get the most out of their remaining reserves,” says Geoff Runcie, the boss of the Aberdeen and Grampian Chamber of Commerce.

The city's cluster of high-tech businesses may have sprung up to support the North Sea oil industry but there are also opportunities beyond it. Many local firms have branched off into other areas, such as defence. Technologies developed to pull oil and gas from the ocean floor can find other uses, too. When a Russian mini-submarine became caught on the Pacific seabed in 2005, it was cut free by a British remotely operated submarine based on technology developed for the North Sea.

Aberdeen also has ambitions to exploit its oil-support know-how in green energy. The hope is that local businesses with expertise in offshore construction and engineering can provide services to firms building offshore wind turbines or, in future, tidal and wave-powered generators. And even exhausted oil and gas fields may come in handy. One idea is that they can be used to store carbon emissions from fossil-fuel power plants.

The city is not short of ambition, but cooler-headed businessmen point out that it is easier to recognise opportunities than to grasp them. Exports still account for only about a quarter of the oil-support industry's output. Last year they grew by just 2%, compared with 16% in 2005, despite efforts by Scottish Enterprise to encourage firms to expand overseas. Oilmen make similar complaints to their counterparts in the rest of Britain's engineering sector: that the country lacks skilled workers; the standard of technical education is inadequate; and the government is ineffective in tackling these problems.

Yet such complaints have been made ever since the first North Sea well started pumping in 1967. The cluster of businesses in Aberdeen has achieved a critical mass thanks to the North Sea. It now stands a good chance of thriving in more distant offshore markets as the demand for energy continues to boom.