Investing in offshore oil – the daily reckoning electricity rates el paso

It’s an area almost 500 miles long and 100 miles wide… with the potential to hold 100 billion barrels of oil… possibly the largest single oil prospect anywhere in the world. It’s so new that the geologists and engineers are still working to figure out how big it is.

But right now, I’ve heard informed estimates that this new oil bonanza might turn out to be bigger than all the reserves in Iran or Russia. Even bigger than the legendary Ghawar oil field in Saudi Arabia. In fact, it’s bigger than almost all the oil fields in Iraq put together.

The discovery that I’m talking about is off the coast of Brazil. The initial well located an oil reservoir that the Brazilians have named “Tupi.” Just this one field holds 8 to 12 billion barrels of recoverable oil. It’s about the size of the giant field at Prudhoe Bay, Alaska. And there’s MUCH more to come.

How about going down there in a submarine? Could a Navy nuclear submarine operate that deep? Nope. I can’t tell you how deep Navy submarines dive (it’s classified). But I can say that 9,356 feet is more than four times deeper than the crush depth of even the most powerful sub.

But first, if you’re still skeptical about the prospects of drilling in water 10,000 feet deep… and then through 10-20,000 feet of salt formations, I can understand. So here’s proof that deepwater crude is only a matter of time – direct from one of the world’s leading oil men…

T. Boone had a darn good point. There are far fewer onshore opportunities now than there used to be. Most of the biggest onshore oil and gas prospects are either already drilled — North America’s been drilled like a pin cushion — or locked up for environmental or political reasons, like the Arctic National Wildlife Refuge in Alaska or Venezuela’s Orinoco Belt.

It used to be that the shallow coastal areas were good bets. Over the past few decades, the shallow coastal waters yielded immense volumes of oil and natural gas. In the U.S., oil companies have been drilling in the shallow waters of the Gulf of Mexico since the 1940s. They even drilled offshore Southern California in the 1960s. But the good shallow offshore prospects are pretty much drilled by now. So, the industry is moving further offshore into deepwater, defined as more than 1,000 feet.

Deepwater crude is a key focus of the international majors. Why? Well, as I mentioned above, the onshore areas in the U.S. are mostly drilled-up. Other large swaths of land are off limits. And overseas, the big international companies are frozen out of many regions due to resource nationalism and related politics. Most oil-prospective countries have their own national oil companies (NOCs), like Saudi Aramco, or Pemex in Mexico, or Petroleo de Venezuela (PdVSA).

The energy industry has new geological models and better geophysical technology and data. Today, we’re benefitting from vast improvements in signal processing and data crunching. We live in a time of revolutionary advances in drilling capability.

Some of the world’s most significant new discoveries are coming from deepwater. Earlier, I mentioned the 8 – 12 billion barrel Tupi field that Brazilian state-owned Petrobras found a few years ago offshore Brazil. In a recent trip to Rio di Janeiro, I actually laid my hands on some of the tools that made the trip down to the bottom of that well, through a mile and a half of water and over 4 miles of rock.

But the deepwater crude is not restricted to Brazil. You also see significant investment and discovery in the Gulf of Mexico, off West Africa, in the Mediterranean, in the North Sea, in the Asia-Pacific Region. And eventually, it’s going to move up north into the Arctic.

It’s one thing to find deposits of deepwater crude. It’s quite another thing entirely to extract all that oil. Once you find the oil, then you have to invent a system for bringing it up and ashore. Somebody has to design the system, engineer the equipment, schedule the massive — miltibilion dollar — construction effort. Just the logistics are a major project in and of themselves.

You have to figure out how to handle underwater oil and gas when it’s flowing at pressures of tens of thousands of pounds per square inch. You also have to determine how to get it ashore from hundreds of miles out at sea. And, of course, you have to manage the program. You have to be able to drill and maintain wells and equipment over time.

If you’re looking for a little more speculation, try looking at the smaller companies supplying the technology – the ones making the drill bits… the ones building the offshore oil drilling rig ships… and the ones providing the 3-D and 4-D maps of the ocean floor.