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Associated Press
Employees at FMC Technology work to develop drilling equipment that can withstand up to 20,000 pounds per square inch for deep water oil drilling.

BP pushing limits in pursuit of deep oil

– BP’s strategy after the Deepwater Horizon tragedy: Go deeper.

BP is leading an industry-wide push to develop technology that can retrieve oil from formations that are so deep under the sea floor, and under such high pressure and temperature, that conventional equipment would melt or be crushed by the conditions.

One BP field in the Gulf of Mexico, called Tiber, makes the Macondo field that the Deepwater Horizon rig was probing look like simple puddle of oil. It is thought to hold 20 times the amount of oil as Macondo. At 35,000 feet below the sea floor – 6.6 miles into the earth’s crust – it is about twice as deep.

There’s an extraordinary amount of oil in similar discoveries around the world, several of which are controlled by BP. But BP first must figure out how to get it. New equipment, including blowout preventers far stronger than the one that failed on the Deepwater Horizon, must be developed. Then BP must convince regulators it can tap this oil safely.

Another disaster could threaten BP’s existence, but success could restore the company’s fortunes – and perhaps its reputation.

“There’s 10 to 20 billion barrels of oil just for BP in this,” says Kevin Kennelly, who runs BP’s global technology operations. At today’s prices, that’s worth up to $2 trillion.

After the Deepwater Horizon exploded, killing 11 workers, and spewing between 103 million and 176 million gallons of oil into the Gulf, questions were raised over whether BP – or any oil company – could safely produce oil from formations under thousands of feet of water and tens of thousands of feet of rock.

Three years later, there are a record 39 rigs drilling in the deep waters of the Gulf of Mexico, according to IHS Petrodata, as drillers probe enormous troves of oil in untapped formations – some of which are under especially high temperature and pressure.

And it is BP that is pioneering the push to exploit the most difficult of them.

Environmentalists are alarmed. “You hope (BP) has learned their lesson, but the nature of the business is that there are going to be spills, there is human error,” says Athan Manuel, director of the Sierra Club’s lands protection program. “These high pressure wells could cause another environmental disaster in the Gulf.”

For BP, drilling deeper is a bold and crucial step. CEO Bob Dudley told colleagues at an industry conference last year that management “thought very carefully before recommitting the company to the deep water following the 2010 accident.” The spill has cost BP $42.5 billion, and legal battles are ongoing.

BP decided to go forward in a major way. Dudley may not have had much choice – BP needs the oil. Its production is down 21 percent since the oil spill and its share price is 22 percent lower. Big oil companies need to find giant fields to generate enough oil to replace the steady natural declines of existing fields. These big fields are now only found in remote or difficult locations.

BP remains one of the few companies with the technical expertise and financial resources to discover and produce oil at these depths. It is the biggest producer, investor and leaseholder in the Gulf of Mexico, which accounts for 17 percent of domestic production.

The company’s new prospects are among the largest in the Gulf in a part of an emerging geologic formation called the Lower Tertiary.

The Lower Tertiary is also being explored by Exxon, Chevron, Shell and others. Some of the shallower locations are already producing oil, and over the next 15 years it is expected to become the dominant source of the Gulf’s oil, according to the consulting firm Wood Mackenzie. In all, the formation is thought to hold 15 billion barrels, worth $1.5 trillion.

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