The Final Frontier?

Given the extreme environmental risks and high cost of drilling in deep water  made apparent by the disaster in the Gulf, why are oil companies like British Petroleum looking to deep water wells as the "final frontier" of oil exploration? Increasing world demand for oil faces diminishing supplies of easily extracted oil and gas. World demand is forecast to increase at about 2% per year. The Second Great Depression has caused oil consumption to pause. During 2008-2009 there was a net contraction of 3.5%, but demand will outstrip total world capacity between now and 2030. Current world capacity is 88Mbd whilst demand forecasts project demand growing to as much as 115Mbd or three times Saudi Arabia's current export.  As the graphic shows this frontier now extends up to 3.5 kilometers deep. Petrobras' Perdido platform on the Tupi field is the deepest. ;The costs of such wells are extreme. The Tupi exploratory well and related seismic data collections cost $220 million, but oil prices over $50-80/barrel justify the costs involved according to analyst Andrew McKillop writing at Market Oracle.com.

The dire straits outlined, one would think the industry would do more to control the huge amount of wasted resource associated with its operations.  Perhaps 60,000 barrels a day is being lost at the Macondo blowout. Wells with rated capacities of 60,000 barrels/day can attain loss rates of 1200-1300 barrels/day just in normal operations.  Methane, a powerful greenhouse gas, is usually found with oil, but it is flagrantly flared worldwide as a waste product. The World Bank estimates the lost of associated gas in offshore operations to be about 150bcm a year.

If Forty-four considers the OCS deep water deposits to be America's security blanket, he should think again. BP owns a 62% share of the Tiber field on the same Mississippi Canyon formation that the Deepwater Horizonwas drilling before it blew up. Exploiting this resource will be hugely expensive, environmentally dangerous, and supply only 10 days of US consumption, if expected volumes are recovered (200-250M barrels over 10 years). BP says the Tiber deposit could hold 5 billion barrels, but the median figure for recoverable oil is only 5%. Brazil's deep water Tupi field, also considered to be a bonanza, could require as much as $240 billion to develop. Operations in depths of 5,000 feet where sea floor temperatures are near 2℃ are environmentally perilous. Crude does not dissolve easily in seawater under these conditions, and the effects of deep blankets of undissolved oil on marine life are almost entirely unknown.