|In deep, and falling far short|
Chron, 15 May 2010
BP has a big problem in the Gulf of Mexico — and it's not just the oil spill emanating from the wreckage of the Deepwater Horizon. At another platform in the Gulf — this one owned and operated by BP, unlike the Horizon — the problem is the opposite: Not enough oil is coming out.
Thunder Horse is the massive 60,000-ton, $1 billion production platform that BP, after some engineering difficulties, brought into operation in 2008. It was supposed to produce 250,000 barrels of oil a day.
It hasn't gotten close.
Production from Thunder Horse's main field reached a peak of about 172,000 barrels a day in January 2009, then began declining, falling to 61,000 barrels by December, according to data from the Minerals Management Service.
“The field has collapsed,” said Matthew Simmons, CEO of Houston-based Simmons & Company International, an investment banking firm specializing in energy. Simmons, author of Twilight in the Desert, has studied the Thunder Horse data along with production at most other deep-water wells.
BP's initial projections that Thunder Horse would produce 1 billion barrels of oil now seem unrealistic, Simmons said.
A BP spokesman said the company won't discuss Thunder Horse production until year's end. However, he noted that the main Thunder Horse field is undergoing maintenance, which will affect production numbers for the current quarter.
The maintenance, though, doesn't address the declining production that has been going on for more than a year. Geologists who have studied the data and posted their findings on the energy website The Oil Drum have estimated that Thunder Horse's production is falling by as much as 3 percent a month, even though additional wells have been brought on line.
It's also curious that BP would be slowing production at the field for maintenance after just 18 months, Simmons said.
Pricey and declining
While the energy industry talks up the potential of deep-water production, many of the wells drilled so far show rapid declines similar to those that appear to be happening at Thunder Horse. The wells are among the most expensive drilling projects in the world, and the exploration companies need rapid payouts to generate a return on their investment, Simmons said.
In all, he's tracked as many as 25 deep-water wells that show rapid declines.
“That's been the pattern in all the deep-water fields,” he said. “We are at the twilight of offshore oil and gas.”
Because of the high drilling costs, companies typically drill few secondary, or appraisal, wells, which help determine the size of a reservoir.
Draining them fast
At the same time, generating the return to cover the drilling expenses requires draining the reservoirs quickly, which shortens the life of recoverable oil. The result is a faster decline and smaller reservoirs than are initially announced.
The energy industry became so enamored of its technology that it thought deep water was the next frontier — plentiful reserves in a politically stable environment. Instead, the promise of the “deep-water decade” is fading as quickly as production from the platforms that were supposed to usher it in.
“We've got to get off being so smug,” Simmons said of the industry. “The easy stuff is all gone.”
Meanwhile, elsewhere in the Gulf, BP's Macondo well, the site of the Deepwater Horizon disaster, continues to spew oil, feeding an expanding slick that threatens fragile coastline.
If Thunder Horse's decline is any example, it raises the question of whether deep-water drilling is worth it. One geologist I spoke with estimated that if Macondo had come on line, its actual production might not have met world oil demand for more than a day or two before it played out.
Instead, it may despoil the Gulf of Mexico for years.
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