We didn’t run out of oil…
It just got really expensive.
Many people wonder why the price of oil is over $105 a barrel for WTI when the United States in awash in the stuff.
One reason is that the cost of new oil production is reported to be between $72 and $90 a barrel.
As old shallow fields run dry, new methods of expanding production and getting oil and gas, such as fracking and deepwater drilling, are filling the gaps.
These new oilfields require a host of new systems and production techniques.
Here are the new trends in oilfield production…
The Next Wave in Oil Technology
First up is deepwater.
Deepwater wells used to be those that were more than 500 feet deep. By this definition, there are over 600 deepwater wells in the Gulf of Mexico.
But that’s old-school punk pocket change.
For 2012, 49% of new offshore discoveries were in ultra-deepwater (28% were in deep water). New rigs are now being developed with semi-submersibles that can drill to 5,000 feet or deeper. And the most modern drillships can push to depths of 12,000 feet.
There are currently 120 ultra-deepwater drillships in existence, and demand is strong.
Transocean says that its deepwater rigs are close to 100% utilized. And they aren’t alone…
According to Offshore-mag.com, Seadrill has noticed a surge in ultra-deepwater rig demand in West Africa, Southeast Asia, and Brazil. As a result, available rig capacity has diminished rapidly.
Furthermore, Rowan (NYSE: RDC) has recently contracted with Hyundai Heavy Industries to build two 12,000-foot drillships at a cost of $605 million apiece. But it’s worth it…
Rowan Companies reported earnings two days ago: “For the three months ended June 30, 2013, it generated net income from continuing operations of $82.8 million, or $0.67 per share, compared to $50.8 million, or $0.41 per share, in the second quarter of 2012.”
CEO Matt Ralls went on to say, “In addition to our strong second quarter operating results, we are very pleased to have recently received contracts for our second and third ultra-deepwater newbuild drillships at attractive rates. Our backlog is at an all-time high, and we are optimistic that we will have our fourth newbuild drillship contracted in the coming months.”
The time is right for those that own ultra-deepwater rigs.
Pacific Drilling (NYSE: PACD) has reported that its total operating expenses are $180,000 per day. Meanwhile, it rents out its drillships for more than $600,000 a day.
Bottom-feeder
Another advancement in oil production is subsea processing. This is where production systems rest on the bottom, rather than on the surface.
These systems don’t drill; they just pump and transport. The benefit here is that you can use one centrally-placed platform with pipes running out to multiple wellheads.
Subsea systems are expected to expand from $27 billion in 2011 to $130 billion in 2020.
Supercomputers and 4D Seismic
Rigzone.com reports Big Oil runs only second to the Department of Defense in its use of supercomputers.
Where in the early years you had 2D seismic and later 3D seismic to locate probable geologic oil formations, you now have 4D systems…
These advanced systems can watch formations in real time.
These computers dwarf anything that has happened in the past. We’re talking about sound waves bouncing through the earth at 500 times per second.
All of that data is recorded and analyzed to take much of the risk out of knowing where to drill to find hydrocarbons.
Chevron (NYSE: CVX) is a leader in this field, as well as Schlumberger Limited (NYSE: SLB) and Siemens (NYSE: SI). Acorn Energy (NASDAQ: ACFN) is a small player you might want to keep an eye on, though they lost 96 cents a share last year.
It’s always a good idea to look at advancing technology and new trends in hydrocarbon production.
There is a constant quest for more oil for less money, and those companies that provide timely solutions can demand premium prices.
All the best,
Christian DeHaemer
Check us out on YouTube!Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor’s page.
