OTC panel: Deepwater’s low-cost, low-emission profile to keep it competitive in coming decades

By Stephen Whitfield, Associate Editor

E&P companies face a difficult balancing act. They have to address the world’s growing push for renewables and environmental sustainability, which impact investment trends and business strategies, at the same time that factors like the COVID-19 pandemic, the Russia-Ukraine war and global inflation push them to explore for and produce more hydrocarbons. 

According to a panel of analysts and industry experts at the 2023 Offshore Technology Conference, this approach of increasing E&P activity while incorporating low-carbon solutions will define operator activity in the near- and long-term future. Deepwater oil and gas will play a key role in enabling that journey.

“Deepwater production is going to grow more quickly than any other resource,” said Julie Wilson, Research Director, Global Exploration at Wood Mackenzie. “All of the hype you’ve heard about tight oil and LNG, ignore all of that. Deepwater is where we’re going to see the most growth.” 

Wood Mackenzie estimates that, by 2050, the world’s total discovered and prospective oil resources will be more than double its base-case energy transition outlook oil demand forecast, and natural gas resources will be close to double the expected demand. However, not all resources will be cost effective and/or emissions efficient, so the industry will have to become much more selective.

“Advantaged” barrels, which Wood Mackenzie defines as resources with breakeven price below $30/Brent and an emissions intensity of less than 20 kgCO₂e/BOE, will be prioritized in the coming years. However, only 28% of the resources in commercial undeveloped fields currently meet those criteria. This means operators will have to invest in solutions to help turn disadvantaged resources into advantaged resources, Ms Wilson said.  

“Total resource is not the issue,” she explained. “Many of the resources we have in our database have never been developed because they are too expensive, too dirty or too far from markets – whatever the reason, they’re disadvantaged. There’s still a great deal of demand required, and exploration of new resources is going to be required.” 

Going forward, E&P operators will likely produce some of the disadvantaged resources in order to meet demand, but they will be looking to offset some of the cost and emissions by maximizing production from more advantaged developments like deepwater. 

One example is the Guyana-Suriname Basin, which already has more than 50 wells on the Stabroek Block even though exploration in Guyana only began in 2019. Joint venture partners ExxonMobil and Hess made nine discoveries on the block last year and, just in April,  announced sanction of their fifth project there – Uaru. Upon startup in 2026, the project is expected to produce 250,000 bbl/day of oil. 

Clare Gardner, Exploration Director – South America at Hess, pointed out that the average breakeven prices of the first four sanctioned projects in the area – Liza Phase 1, Liza Phase 2, Payara and Yellowtail – ranged between $29-$35/bbl. 

“If you look back to the beginning of 2019 with Guyana, we were getting zero production. Now we’re getting 75,000 barrels a day in Q1 2023. The pace and scale at which these projects are coming online is just phenomenal. We feel the basin is going to play a key role in future deepwater growth – we still have billions of barrels yet to find there,” Ms Gardner said. 

The area also holds great potential for low-emissions energy, she added. In December 2022, Hess announced plans to spend $750 million on carbon credits under the United Nations Reducing Emissions from Deforestation and Forest Degradation (REDD+) program. The deal, which will see Hess purchase 37.5 million REDD+ carbon credits from the Guyanese government, is designed in part to help offset carbon emissions from its deepwater E&P activity. 

Carbon capture and storage

For Petrobras, carbon capture and storage (CCS) has been a primary driver in reducing emissions intensity from its deepwater megaprojects in the Brazilian pre-salt, increasing the efficiency with which it produces hydrocarbons while also reducing greenhouse gas emissions.

Maiza Goulart, Head of Petrobras’ Research and Development Center, said that many of the operator’s fields in the basin carry a high amount of CO₂, particularly in the natural gas, and this CO₂ can challenge the topside production capacity of its FPSOs. So, in 2018, the company began reinjecting CO₂ produced from its production platforms into reservoirs beneath the seabed. 

Currently, all 21 Petrobras production platforms operating in the pre-salt incorporate CCS combined with enhanced oil recovery techniques, and this effort has paid dividends. 

Last year, the company reinjected 10.6 million tonnes of CO₂, a 22% increase from the 8.7 million tonnes it reinjected in 2021. According to the Global CCS institute, the 10.6 million figure represented approximately 25% of the total CO2 that was stored globally last year.

Petrobras is also developing a high-pressure separation (HISEP) technology, which will separate and reinject gas with high CO₂ content produced alongside the oil while on the seabed. A two-year pilot test period is expected to begin at the Mero 3 presalt field upon its startup in 2024. The operator is also aiming to install the system in other pre-salt fields, such as Libra Central and Jupiter, if the pilot proves successful.

“This is going to be a very important solution in increasing the energy efficiency and the reliability of high-CO2 fields we have in the pre-salt,” Ms Goulart said. “If we can use the HISEP system to avoid having to do the reinjection process at the surface, it could have an impact on the CAPEX, OPEX and lead times of our pre-salt fields. It’s a good example of how our technology profile can help support our goals.”

CCS was also cited by TechnipFMC as a key pillar of its energy transition plans. In 2021, the company entered a strategic alliance with Talos Energy on front-end engineering design and storage site characterization for Talos’ CCS hub in the US Gulf of Mexico. That same year, TechnipFMC acquired Magma, a manufacturer of a hybrid flexible pipe that could become an enabler for efficient CCS in offshore environments, said Brandon Finley, Commercial Director – New Energy at TechnipFMC. The pipe is made of a combination of carbon fiber and polyether ether ketone and is resistant to highly corrosive natural gas, like the high-CO₂ gas in the Brazilian pre-salt. 

“CCS is the type of market that’s allowed us to integrate both our surface and subsea divisions to look at how we can make the most optimal solutions,” Mr Finley said. “We’ve really been able to jump into a market that we think is maturing very quickly. As we move further and further into deepwater, we think we’ll be able to take advantage of some of these technologies that have been developed in oil and gas.”

Supply chain management

Beyond operators’ efforts to reduce emissions, another theme that emerged from the panel session was the value in decarbonizing the deepwater supply chain. Romain Chambault, VP – Global Services and Offshore at Baker Hughes, emphasized the role that service companies can play in helping the industry to commercialize and scale deepwater and low-carbon technologies.

“The biggest challenge for us is how can we partner not only with our clients but throughout the supply chain,” Mr Chambault said. “We’re not going to find the solutions all by ourselves. We have to leverage the supply chain to actually scale the technologies that are going to help us. When we’re working with small developers, they don’t necessarily know how to scale their technologies to bring them to market. We can provide that scale.” 

BP also says it has been focusing on better supply chain management in order to boost the efficiency of its deepwater projects while lowering its carbon footprint. The company’s partnerships with its vendors, for example, are key to successful adoption of sustainable solutions, said Sarah Hill, VP – Procurement, Americas and Manufacturing at BP. 

Last year, the company signed a memorandum of understanding with Thyssenkrupp Steel to decarbonize steel production, primarily through the replacement of coal-fired blast furnaces, used to turn iron ore into steel, with hydrogen-powered plants. The operator is also developing methods to track the carbon footprint of its supply chain so that it can identify opportunities for emissions reduction.

Supply chain management has become especially critical for BP as it expands its deepwater portfolio, Ms Hill said. The operator has developed 14 oil and gas projects, including Mad Dog Phase 2 in the US Gulf of Mexico, over the last three years and plans to start up four more projects this year – GTA Phase 1, KG D6 MJ, Seagull and the Tangguh Expansion.

“We really need to understand how we can support our deepwater business with our sustainability agenda and how we can create that partnership,” Ms Hill said. “Our suppliers have been helping us to achieve immediate supply chain emissions reductions in an area that can be hard to crack.”  DC