The Case for Offshore Steam

When we talk to folk in the industry, about our plans to steam the Pilot, Elke & Narwhal fields in the middle of the Central North Sea, sometimes we get a pretty sceptical reaction, sometimes we don’t. I prefer it when we get to talk positively about the potential of steaming offshore reservoirs, but not everyone has an open mind. You see, that’s not how the industry develops heavy oil in the North Sea. How to develop North Sea heavy oil was all worked out in the early nineties by the people who put together the development plans for Alba, Captain, Harding & Gryphon, the last wave of heavy oil developments in the UKCS.

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Not a single FDP so far

Crikey, we are half way through May, that's half way through the second quarter of 2016, and so far this year there hasn't been a single new field development plan approved by the OGA. In fact there hasn't been an FDP approved since Scolty & Crathes in October last year, over six months ago. Don't blame the OGA, they can't approve what hasn't been submitted. It is all of us, in the oil and gas industry, who haven't managed to get a project ready enough to make that formal FDP submission.

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What is the long run average oil price

I read lots of commentary claiming that only now (when Brent is less than $35/bbl) are we getting back to the long run average oil price, which of course is where some economists think it should be. Of course nothing has changed since 1861 so the price back then is just as relevant as last year's price... or perhaps the geology has got a little tougher, and safety standards improved a tad. But the kind of economists who believe in long run average prices probably also believe that technology is making things in the oil patch cheaper and cheaper.

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How Far Can Costs Fall?

Back in February, I wrote about how I expected upstream capital costs to fall as the oil price collapsed,  and then in July, I wrote again with an update on how the IHS UCCI (Upstream Capital Costs Index) had actually fallen up to that time. Well, this is a further update on that, mixed in with a bit of speculation on how far the fall might go before we touch bottom. 

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2014 Was Not 1985, So 2015 Will Not Be 1986

Back in February 2015, Bob Dudley, BP's CEO, said in a Bloomberg TV interview that the fundamental supply and demand picture remind him of 1986 where we could go into a period of lower oil prices perhaps staying in a range below $60/bbl for as long as three years. He added "It will be a long time before we see $100/bbl again." I suspect it will roll along a little sooner than that, but that might just be wishful thinking on my part.

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Rise Early, Work Hard, Strike Oil

Everyone knows  J. Paul Getty's formula for success: rise early, work hard, strike oil; and pretty much everyone I know in the oil business rises early and works hard, some of them even strike oil. So it's hard to find many oil folk who don't believe in the quote, of course the tricky bit is the last part of the aphorism. Striking oil generally requires a decent dollop of good fortune as well as brilliant geoscience and that elusive material, money; however when we do strike oil these days we generally manage to keep it in the well unlike these pioneers in times past who needed to have a decent turn of speed when they struck oil.

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If Not For You, LTO & SAGD, We'd Be Sad and Blue

I spotted a very interesting chart from Gregor MacDonald that showed world oil production over recent years excluding the USA. The chart was pretty flat and that got me to wondering about how much the world has come to depend upon Light Tight Oil in the USA and for that matter Steam Assisted Gravity Drainage projects in Canada.

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Oil Industry Service Sector – Nimble Like a Ninja

Just like a Ninja the oil industry service sector has responded to the demands of the market place and reduced the cost of doing business in the upstream world by more than 15% in just six months. It turns out that I was a pessimist when I first wrote about this in February 2015. I thought then that it would take 18 months for there to be such a significant reduction in the industry's cost base.

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