Exploration

A shout-out to my artist, Laura, for bringing this to my attention: Snopes.com, a well-known urban legend “buster” site, has recently taken on none other than the Bakken Shale play in the northwest US as its target. I’m sure this will come as quite a surprise to the legions of companies who are staking claims in the area.

Snopes got curious about a post it came across that virtually screams the praises of this giant field. “The Bakken is the largest domestic oil discovery since Alaska’s Prudhoe Bay and has the potential to eliminate all American independence on foreign oil,” the post related. “The Energy Information Agency (EIA) estimates it at 503 billion barrels. Even if just 10% of the oil is recoverable … at $107 a barrel, we’re looking at a resource base worth more than $5.3 trillion.”

Well, obviously oil is no longer selling at $107 per barrel. That’s strike one.

Next, the post mentions “a recent technological breakthrough” that has “opened up the Bakken’s massive reserves” without mentioning, specifically, what that technological breakthrough might be. Ever inquisitive, but lazy as hell, I decided to look no farther than my own backyard, swiping a copy of Hart’s recent Bakken Shale Play Book from our library. In the technology section, more than one “breakthrough” is mentioned: cableless seismic, horizontal drilling, staged fractures as well as penetrating natural fractures, fracture monitoring, multilateral wells, advanced measurement-while-drilling techniques, predictive geosteering, completion design, and artificial lift techniques, to name a few. So now, with this “new technology,” the industry has opened up access to more than 500 Bbbl. Of light, sweet oil. Costing Americans just $16 per barrel. Enough energy to fuel the American economy for 41 years.

Recent USGS estimates put the amount of recoverable reserves closer to 3.65 Bbbl. Strike two, perhaps.

However, I have to take umbrage at the Snopes.com rebuttal as well. Saying that the post was “intended to sell subscriptions to an investment newsletter,” it allows as how geologists have agreed with most of these assessments, yet it poo-poohs the idea that the Bakken is a big play.

“Ceratainly, 3.65 BBbl of recoverable oil is nothing to sneeze at, but a little perspective is in order,” Snopes.com notes. “The US currently imports an average of about 10 MMbo/d … so even if all the estimated undiscovered oil in the Bakken formation were extracted today, it would only be enough to wean the US off of crude oil imports for one year. That’s still a good thing, but it’s not nearly ‘enough  crude to fully fuel the American economy for 41 years straight’ as claimed above.”

OK, OK. I get it. We have, on one side, “The Post,” which is breathless in its enthusiasm. We have, on the other side, “Snopes.com,” which prides itself on popping balloons full of nonsense. Did either side think to call the United States Geological Society, which provided the latest reserve estimates for the Bakken, or indeed any of the operators active in the play? I think, if they had (and of course I didn’t, only having come across this gem today), they might have discovered that there is more than a kernel of truth to the post, and more than a kernel of truth to the rebuttal. The fact is that the Bakken, like every other shale play in the US, is fraught with hazards, and at some commodity price level, the economics no longer make sense. But it is a truly monstrous play, and companies that do well in the Bakken are the companies that know how to apply the best technology in the most cost-effective way. Odds are good that the Bakken is not going to wean American from foreign oil. But it and its shale play counterparts are doing a good job of putting this country back on the map as a formidable producer of hydrocarbons.

As I write this it is 6:10 a.m. EDT, 5:10 a.m. CDT. I’m no stranger to business travel and weird hours, but this isn’t a business trip – it’s supposed to be a vacation.

The goal – to give my 17-year-old daughter the chance to visit some college campuses on the East Coast of the US. The result – a VERY interesting few days.

Let’s start on Monday. We drove from Portland, CT, to Bennington, VT, to visit a campus there. Our Garmin decided that the most direct route was not necessarily the quickest (and we had an appointment), so it took us through upstate New York for a ways. After Bennington we decided to make the short trip to New Hampshire because it was the only New England state my husband and I had never visited. By the end of the day we had been in five states. This is a bit tough for those of us who live in Texas to imagine.

Bennington College was also interesting. With only about 600 students, it still manages to offer myriad majors. One student, after several semesters, decided to create her own major in “scientific journalism.” If only I’d known. I did it the hard way.

Tuesday we visited two more campuses in Connecticut. Wednesday we spent most of the day traveling from Connecticut to Washington, D.C.

The goal of the Washington part of the trip was to meet up with one of my husband’s former professors from the Colorado School of Mines. This man kicked off the inaugural Guy T. McBride program for the humanities 30 years ago and, since retiring, has spent most of his time in the DC area. He is originally from India but has made his home in the US for several years. His charge was to give us an “insiders’ tour” of our nation’s capital.

What a sobering experience! Here is a man who speaks with an accent telling three American citizens thousands of things about our country and capital that we never knew. We spent an entire morning in the Library of Congress, learning about the architecture and the paintings and just about everything else the building had to offer. We saw books that originally belonged to Thomas Jefferson. We were allowed to enter the private reading room used only by members of Congress and met the delightful woman who supervises it in the mornings, who told us all about the ebony inlays in the floor, the fact that the inlaid wood patterns and the beautifully sculpted marble fireplace were both created by the same artist, and even the rumor that a wooden box near the doorway was once a place for unruly Congressmen to stash their alcohol (but not their guns) so that brawling didn’t occur during the legislative process.

That afternoon my daughter soaked up the National Museum of Natural History, introducing me to skulls of scary-looking things long before I’d had a chance to read their names on the display (she’s a bit of a paleontology nerd). Then it was off to my favorite stop of the tour – the Newseum.

This is a relatively new museum showcasing everything to do with the First Amendment, freedom of speech. But it mostly focuses on the media, housing everything from a studio where kids can practice being news reporters to an incredibly moving 9-11 exhibit. I could have spent hours there. There was even a display about digital technology that asked visitors to ponder the use of blogs in the pursuit of disseminating news. Hmmm …

Our final stop, after dark, was the Vietnam War Memorial. I’ve only ever been there during the day; at night it’s an eerie experience. We were joined by a man who could have been a docent – he knows as much about the history of the wall as anyone you could hope to meet – but is actually a homeless disabled vet who is routinely denied benefits from the Veterans Authority.

The college search is barely in its infancy. But opportunities for “higher learning” seem to abound.

Once upon a time I wrote about most aspects of the oil industry, including, occasionally, pipelines, gathering systems, compressors, etc. Then my publisher decided I should focus on exploration, and I’ve rarely looked back. (There was that one last-minute feature on tubulars, but we won’t go there.)

So I’m very comfortable attending shows like SEG, AAPG, and EAGE. I have at least a general grasp of the technology and know enough to ask the experts the write the stuff that I still don’t understand.

This week I had to step way outside my comfort zone. It started simply enough – my husband was planning to attend the annual Gas Processors Association (GPA) meeting in San Antonio, Texas, and he wanted me to go to the Tuesday evening festivities since they featured a band that dresses up like the Fab Four and does a bunch of their old hits. (I am a huge Beatles fan.) This all seemed doable – fly to San Antonio Tuesday afternoon, attend the event, spend the night, and drive back with my husband Wednesday morning.

If only it had been that simple. My husband, clever dude that he is, is aware of the fact that Hart produces the show dailies at GPA. What if, he wondered, I attend the entire conference and offer to cover a couple of sessions for the newspaper – wear both my reporter and corporate wife hats simultaneously, in other words.

The idea had its merits. I’d attended a few GPAs in the past and was impressed by the vast number of hospitality suites, all offering great food and, of course, free wine. I was less certain about the show coverage, but I figured that if I asked for the more general assignments and let our gas processor reporters cover the technical stuff, I should be OK.

WRONG. The first session I covered was on a new rule that the EPA is proposing that affects how compressor engines are overhauled. I wish I could tell you more about it, but that’s about as much as I gleaned.

The second session was supposed to be on the price outlook for natural gas liquids but was all over the map. One speaker basically preached the gospel of natural gas and encouraged his listeners to do the same. Another had so many charts tracking pipeline expansions that I became rather bleary-eyed. The third guy talked about Canadian oil sands and how commodity prices and pipeline constraints may affect the availability of diluent, a necessary ingredient to turn heavy oil and bitumen into anything that is of use. Him I understood well enough to at least write a 650-word article.

I left after the third speaker because I was on deadline. It’s probably a good thing, too, because the fourth speaker apparently asked more than once if there were any reporters in the room.

In addition to not understanding the technical sessions, I also barely knew anyone there other than a couple of people my husband worked with at Phillips 25 years ago. This isn’t necessarily a bad thing – I can strike up a conversation with a turnip – but after attending so many SEGs and feeling like I was at a high school reunion, it was strange to find a whole segment of the industry that I don’t know at all.

So I guess they say new experiences are good for us. But experience is also a good teacher, and what I’ve learned is that I’ll stick to the hospitality suites at GPA from now on and let someone else do the writing.

I find it continuously amusing how poorly kept “secrets” are in the oil and gas industry. Let’s examine a recent case in point. At a technical conference last fall, an oil company made an announcement during a talk that it would be undertaking a “ground-breaking” seismic survey. Requests to this oil company for more information were met with polite refusals. So I turned to Plan B.

Part 1 of Plan B was to determine the contractor shooting the survey. This was done in about 5 minutes via an e-mail to a close friend who “knows these things.” Since I also know the president of the company shooting the survey, part 2 was my e-mail was to him. Would he be interested in helping me put together an article about the survey? Why, certainly, but only with the permission of the oil company.

Having already established that said oil company would not be willing to release any information until after the survey was shot, I decided to keep my mouth shut, find another article for our March issue, and wait for developments.

So imagine my surprise when the survey in question was referred to, repeatedly, in multiple scenarios. Firstly, at the annual meeting of the International Association of Geophysical Contractors, the contractor who will be shooting the survey mentioned the scope – 79,000 multicomponent channels, which will need to come from multiple vendors since no one vendor has that many systems ready to deploy. Two weeks later, at the joint Geophysical Society of Houston/Society of Exploration Geophysicists Spring Symposium, the survey was mentioned at least three times during the Wednesday session alone, once by the vendor supplying much of the kit. While I’m not the best judge of audience reaction, I can’t say that there were gasps of amazement from the assemblage of geophysicists present, meaning that this was probably not news to the vast majority.

So far I’ve given away no information that would indicate the oil company, the service company, or the vendor involved in this huge survey. Nor did any of the aforementioned speakers. I do find it amusing that they even backed off from mentioning the location, although anyone familiar with “basins in Northwest Colorado” can probably make a best guess as to the basin in question.

So my question is this – why are we tiptoeing around this? Either you don’t know what I’m talking about, in which case I’ve given you very little useful information, or you know exactly what I’m talking about, which I guess you probably shouldn’t. But since you already do … well, what, exactly, is the secret?

… and not a drop to drink — no, wait … Not to butcher “The Rime of the Ancient Mariner,” but since I’ve been spending so much time lately attending every single talk I can and inteviewing God and his minions just to have something to write about, I’ve come across some interesting tidbits. Scott Tinker of the Bureau of Economic Geology at the University of Texas-Austin gave a talk at a recent Houston Geological Society dinner where he set about discussing various sound bites within the industry, and one which he went to great lengths to debunk was the whole “the world is running out of oil” debate. This brings to mind one of my favorite press release intros: “Oil is getting harder to find.” I have, in fact, asked folks from PR firms not to waste my time with that sort of preamble — I think my readers have a pretty good grasp on that fact already.

But is it? Some recent discussions hit home the fact that there is still a lot of underexplored potential in the world. For instance, in last week’s blog I noted that there has been no presalt exploration in the Congo Basin offshore West Africa, despite the fact that Petrobras has made some potentially huge finds in the presalt areas of the Campos and Santos basins, which are roughly analogous to the big fields offshore West Africa. Presumably the majors who operate these fields wil start examining the presalt geology once the shallower targets have been drilled up.

Secondly, there’s Gabon. Our March activity spotlight will focus on this country, which is kicking off a licensing round by hiring CGGVeritas to do extensive surveying of its offshore acreage, including yet more deepwater acreage that is directly analogous to the Tupi and other presalt finds offshore Brazil. While Gabon has considerable hydrocarbon production onshore, those fields are now in decline, and the shallow-water domain has yielded few discoveries. The deep water, on the other hand, could serve up some significant finds.

Finally there’s the Republic of Guinea. You’ll read more about this in my March online newsletter and also in our April issue, but a small Houston-based independent is sitting on 80,000 sq km of highly prospective acreage in an area where only one well has ever been drilled. It needs partners to help pay for more evaluation, but early indications hint at world-class reserves.

And this is just off the coast of West Africa. I don’t claim to be an expert in underexplored terrain, but I think the industry has plenty of elephants yet to find, particularly in or near countries that have not been open to foreign investment in the past but which may have recently undergone a change in regime. I look forward to the next big announcements.

For companies that only wish they had deep enough pockets for the prolific basins offshore West Africa, the speaker at the recent Geophysical Society of Houston’s technical luncheon outlined the wild ride the lucky ones have had.

Kurt Rudolph, chief geoscientist for ExxonMobil, said that this play has been “one of the most efficient exploration programs undertaken by the industry.” Several reasons exist. Firstly, the regulatory climate forced companies to make aggressive development plans or risk forfeiting their acreage. Secondly, the technology was mature when it needed to be – good seismic data was available to image the very complex subsurface. Companies were able to image the reservoirs and the fluids.

Overall, while volume discoveries on the continental shelf show a steady increase over time, deepwater discoveries show a much more accelerated accumulation over a much shorter period.

Rudolph discussed four major aspects of the play – the petroleum system, the reservoir and seal systems, direct hydrocarbon indicator (DHI) analysis, and production. The two major areas of his focus are the Niger Delta and the Congo Basin, and each have very different petroleum systems. The Niger Delta is characterized by a large clastic wedge over the oceanic crust with a series of normal faults collapsing downdip. It contains an abundance of traps.

The Congo Basin has salt, which always tends to complicate things. Here the synrift has opportunities for both carbonate and clastic reservoirs. Over a large part of the slope the prime source is mature, but there is increased reservoir risk as one goes toward the outboard part of the basin. So far there is no documentation of presalt hydrocarbons.

In terms of reservoir and seal systems, the main producing reservoirs tend to be in confined channel complexes. These tend to have good reservoir and resource quality, but, Rudolph said, ‘it’s a complicated plumbing system.” It’s not a simple matter of drilling anticlines; good seismic definition is a must.

He next compared the company’s success rate using DHI analysis (primarily spectral decomposition) vs. not using it. In most cases the success rate using DHI is much higher – a 60% success rate with DHI support vs. 35% without.

In one case, the company had a deep objective under shallower known reservoirs. The seismic was not providing particularly good resolution at the deeper level, but using frequency-based analysis at 11 Hz, interpreters made another discovery beneath a producing oil field, “always a good thing,” Rudolph noted.

ExxonMobil has also had good success using time-lapse seismic over its deepwater West Africa fields, he said. In the Zafiro field, for example, impedance contrasts between the datasets helped geoscientists see oil being displaced by water. In Kizomba A, modeled sweep using a producer/injector pair at the north end of the field showed fairly uniform sweep; the actual 4-D data indicated that the sweep became less efficient farther away from the wells.

“Four-D is a very powerful surveillance tool,” he said. “We’re often surprised at the results.”

Overall, he said, deepwater West Africa offers a good prolific system with good-quality reservoirs but also heterogeneities that force a new level of understanding. Future opportunities, he added, will be more subtle, requiring further improvements in technology.

There is an adage that you can’t teach an old dog new tricks. Now, I don’t really like to be considered “old” or “a dog,” but in this case it just might apply.

We have been blogging now for several months, and while I still find it to be a rather bizarre and narcissistic form of public expression, at least I’ve more or less settled into the routine. Next on the list of new things to throw at us was webcasts, or, as they’re referred to around here, “webinars.” (Puhleez.) And here’s where my patience is starting to fray.

What is a webinar? It’s very similar to a panel discussion that one might attend at SEG, only it’s online. Sometimes they’re sponsored; other times participants pay a small fee to log in, turn up their audio, and hopefully be enlightened and educated. The technology is really pretty neat — panelists can run PowerPoint presentations online, and participants can e-mail questions to the panelists. As the moderator, I mainly sit back and watch the show, mindful, of course, that if no one asks any questions I’d better come up with something quickly.

So here’s my issue — webinars were presented to us as yet another novel way to get information to our readers, but we’re having trouble generating much excitement about them. I think there are a number of reasons. First of all, people are still really busy and can’t necessarily spare 30 or 40 minutes in the middle of a hectic day. Secondly, we’re still struggling to find topics that interest a wide range of people. Thirdly, it’s tough to get the “big names” to participate because of bureaucratic issues, but it’s hard to generate an audience unless the big names are involved.

So here’s my challenge: tell me what you want to learn more about. Tell me who you’d really like to hear talk about it. If you’ve been asked to participate in a webinar in the past and have not felt comfortable about it, tell me why. Unlike blogs, I think webinars have a bright future in the energy publishing industry. But like so many other things about this brave new world, some of us older “dogs” just can’t quite sniff our way past the obstacles yet.

I’ve been going to the North American Prospect Expo (NAPE) on and off since 1996. Back then it was held at a couple of hotels in the Galleria, and for a claustrophobic like me it was really a rather terrifying experience — so many people, so little room.

Since its move to the George R. Brown convention center, the show has had plenty of room to grow, and it truly has become one of the most vibrant shows in the industry. It’s one of those shows where you can feel the energy vibrating through the hall. NAPE visits recall the wildcatter foundation of the oil industry — empty booths with “sold out” signs because the company sold its prospects during the icebreaker the previous night; booths titled things like “Three Guys and a Prospect” or “Mom & Pop Oil Co.” It’s a curious mix of investment banks, analysts, majors, independents, and a single geologist with a neat idea to share.

The last time there was a downturn, you’d not know it for the crowds and energy at NAPE. This year was different. While attendance on the first day was good, about 16,000, it was not up to usual NAPE standards. According to the Simmons Morning Energy Note distributed by Bill Herbert of Simmons & Co., “there was definitely less of a ‘buzz’ compared to the last few years.”

Herbert noted that most private operators are taking a wait-and-see approach because the current cost structure is too high. “They are seeing costs come down, but not fast enough to encourage putting the drill bit back to work,” he wrote. From a merger and acquisition standpoint, “the bid/ask spread remains too wide to drive transactions at this point.”

About the only play that really created any buzz was the Marcellus shale play, mostly, Herbert wrote, because of its extent and early development stage. Simmons counted about 25 Marcellus deals as well as other Appalachian properties.

It will be interesting to get final numbers and see how much genuine activity took place as opposed to a lot of tire kicking. Watch this space.

While scanning the Wall Street Journal for an article I never could find on “shrewd spending cuts” that will help the oil and gas industry survive the downturn, I scanned the “What’s News” section on the front page. Here are just a few of the delightful headlines: “State unemployment rates increased across the country last month.” “Yahoo warned that the weak advertising market will hurt sales.” “The UK will guarantee more than $2.9 billion in loans to support the country’s ailing audo industry.” “A Los Angeles man, apparently distraught over job problems, killed his wife and five children before taking his own life.”

In our industry, the news has been similarly grim. After stating rather optimistically in my January column that oil companies might learn from their past mistakes and not lay a bunch of people off this time around, news of layoffs in the energy sector has become almost a daily event. And fourth-quarter earnings are beginning to be reported, indicating that the industry is already facing financial difficulties.

ConocoPhillips had the worst news, reporting a lost of $31.76 billion in the fourth quarter, while revenue dropped 16% to $44.5 billion. Officials blamed the write-downs of several investments made in better times.

Royal Dutch Shell reported its first quarterly decline in a decade as it announced a $2.81 billion fourth-quarter loss. Revenue dropped 24% to $81.07 billion.

I’m generally an optimistic person, but this is starting to get me down. Already one of my good friends has been laid off. I suspect more will follow. Seismic contractors will have their backlogs for awhile, but I fear that this crisis could land them back in the doldrums pretty quickly. The energy industry is a fascinating industry to cover as a journalist, but not when it’s imploding.

Sure wish I could find that article on shrewd spending cuts.

At a time when good news seems scarce, ExxonMobil and partners Hess and Petrobras have very good news indeed — a find near the prolific Sugarloaf structure offshore Brazil that might yield as much as 10 billion barrels of recoverable reserves.

Already the structure’s northern flanks have hosted Petrbras discoveries such as Carioca, Bem-te-Vi, Caramba, and Guara. The new find, named Azulao, is in Block BM-S-22 in the Santos Basin and is considered to be on the southern flank of the Sugarloaf structure. It’s also being touted as possibly “the biggest yet” in this emerging province.

The partners are using the Seadrill-owned drillship West Polaris to drill the prosepct, located in about 7,294 ft (2,223 m) of water. They plan to drill back-to-back wells on the block, locating the wildcats nearer to the top of the structure to test the theory of a contiguous reservoir of light oil and gas. Final results on Azulao are expected early this year.

The block covers about 1,069 sq miles (2,769 sq km) and is about 205 miles (330 km) from Rio de Janeiro. Water depths range from 6,889 to 7,874 ft (2,100 to 2,400 m).

ExxonMobil operates the block with a 40% stake. Hess also has 40%, and Petrobras has the remaining 20%.

According to a Bloomberg report about a note Neil McMahon, an analyst with Sandford C. Bernstein & Co., sent to his clients earlier this month, this discovery has the potential to be “the most signficant wildcat exploration well in ExxonMobil’s portfolio. The company is going back to basics with a renewed focus on exploration.” The article adds that the block is one of 13 wildcat exploration projects that the company is drilling or is scheduled to begin worldwide.

Despite this good news, all three companies’ stock prices dropped. I guess this exemplifies the saying, “No good deed goes unpunished.” I for one am thrilled to see a huge company like ExxonMobil focusing on wildcat exploration. The comapny, like most majors, is flush with cash and uncertain about the future. But instead of hunkering down and riding out the storm, it’s embarking on a worldwide rank exploration plan that has “risk” written all over it.

Way to go, guys.