Offshore Oil and Gas Supply

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Offshore Oil and Gas Supply Working Document of the NPC North American Resource Development Study Made Available September 15, 2011 Paper #1-3 OFFSHORE OIL AND GAS SUPPLY Prepared by the Offshore Supply Subgroup of the Resource & Supply Task Group On September 15, 2011, The National Petroleum Council (NPC) in approving its report, Prudent Development: Realizing the Potential of North America’s Abundant Natural Gas and Oil Resources, also approved the making available of certain materials used in the study process, including detailed, specific subject matter papers prepared or used by the study’s Task Groups and/or Subgroups. These Topic and White Papers were working documents that were part of the analyses that led to development of the summary results presented in the report’s Executive Summary and Chapters. These Topic and White Papers represent the views and conclusions of the authors. The National Petroleum Council has not endorsed or approved the statements and conclusions contained in these documents, but approved the publication of these materials as part of the study process. The NPC believes that these papers will be of interest to the readers of the report and will help them better understand the results. These materials are being made available in the interest of transparency. The attached paper is one of 57 such working documents used in the study analyses. Also included is a roster of the Subgroup that developed or submitted this paper. Appendix C of the final NPC report provides a complete list of the 57 Topic and White Papers and an abstract for each. The full papers can be viewed and downloaded from the report section of the NPC website (www.npc.org). i Working Document of the NPC North American Resource Development Study Made Available September 15, 2011 Offshore Subgroup Chair Richard P. Desselles, Jr. Chief – Resource Evaluation U.S. Department of Methodologies Branch, the Interior Resource Evaluation Division, Bureau of Ocean Energy Management Members John D. Harper Director, Energy Geological Survey of Canada Sally A. Kemp Engineering Technologist Anadarko Petroleum Advisor Corporation Denis Lavoie Research Scientist, Quebec Geological Survey of Division Canada Dawn W. Peyton Senior Reservoir Engineer Anadarko Petroleum Corporation Paul Schlirf Geoscience Advisor, Anadarko Petroleum Deepwater Gulf of Mexico Corporation Thierno S. Sow Economist, Bureau of Ocean U.S. Department of Energy Management the Interior SIGNIFICANT CONTRIBUTERS Paul Mortensen Technical Leader Hydrocarbon Resources National Energy Board - Canada SPECIAL ACKNOWLEDGEMENTS Grant Schluender, Senior Drilling Engineer Anadarko Petroleum Corporation Keith Mahon, Senior Geological Advisor Anadarko Petroleum Corporation Mike Beattie, General Manager Facilities Anadarko Petroleum Corporation ii Working Document of the NPC North American Resource Development Study Made Available September 15, 2011 Executive Summary This paper is a comprehensive literature review of studies about the potential supply, production projections and technologies that have enabled access to North American offshore oil and gas resources. We begin with a background of the United States (U.S.) lower 48 offshore oil and gas industry, as well as the dynamics of development and production along the water depth dimension. We provide an outlook of the moratoria and access to offshore lands, estimates of resources in those restricted areas, and the potential effect of those policies on the prospects of US lower 48 offshore oil and gas production. Development pathways and production projections for oil and gas are documented based on the Department of Energy’s Energy Information Administration annual energy outlook reports and findings. We then examine the long term prospect of offshore oil and gas production to the year 2050. These same background, development and production prospects of Canada’s offshore oil and gas resources are also undertaken in this topic paper followed by a comprehensive review of the current, emerging and future offshore petroleum technologies and their effects on the expansion of North American offshore production possibility frontier. The technology chapter is built off two important technology topic papers that accompanied the 2007 National Petroleum Council’s study: “Facing the Hard Truths about Energy; A Comprehensive View to 2030 of Global Oil and Natural Gas”. The first of those topic papers is “Exploration Technology”. It focused on five identified core technologies in which future developments have the potential to significantly impact exploration results over the next 25 years, namely: Seismic; Control Source Electromagnetism (CSEM); Interpretation Technology; Earth Systems Modeling; and Subsurface Measurements. The second of the technology papers is “Deepwater Technology”. It identified four top priority deepwater-specific technological challenges most important to the future development of the world’s deepwater resources, namely: 1. Reservoir Characterization; 2. Extended System Architecture; 3. High-Pressure and High-Temperature (HP/HT) Completions Systems; 4. Metocean Forecasting and Systems Analysis. iii Working Document of the NPC North American Resource Development Study Made Available September 15, 2011 Key Findings Offshore development and production of hydrocarbons are significant to total North American (U.S. and Canada) supply of crude oil and natural gas. The expansion of offshore development and production is ascribed overall to technological progress keeping pace with more challenging offshore environments leading to larger field discoveries in ever increasing water depths. Government economic incentives, such as the Deepwater Royalty Relief Act, have brought about renewed interest and more intense efforts in the development of hydrocarbon resources in the Gulf of Mexico (GOM). The extent to which this growth trend is expected to last depend largely on access to publicly owned offshore lands, economic incentive legislation and policies, as well as on continued increase of productivity and technological advances. Ultimately, the inherent interplay between depletion and technological progress will set the boundaries of the development and production possibility frontier for the recoverable hydrocarbon resources in offshore North America in general and in the U.S. lower 48 offshore in particular. We expect U.S. lower 48 offshore oil production to increase from 1.8 million barrels of oil per day in 2010 to 2.3 million barrels per day in 2035 through average annual growth rates ranging between 0.2 and 0.9 percent according to the Energy Information Administration’s Annual Energy Outlook 2011(AEO2011). Offshore natural gas production is expected to rise from 2.4 trillion cubic feet per year in 2010 to 3.8 trillion cubic feet per year in 2035 through a range of annual growth rates from 0.4 to 0.7 percent according to the AEO2011. These annualized growth rate ranges encompass production projections for both the constrained and unconstrained development pathways. Beginning around 2030 and extending to the year 2050, we expect the bulk of oil and natural gas production in the lower 48 offshore to originate from the deepwater Gulf of Mexico in the emerging Lower Tertiary trend and the extension of existing and new trends into areas that are currently poorly imaged. Also, we expect additional impacts on oil and natural gas production from increased access to Pacific and the Atlantic offshore regions Technological progress and innovation are the key factors that would enable development and production of oil and gas in new frontier regions located in deep water and in deeper reservoirs. Most notably, technologies adapted to the High Pressure High Temperature environment are the key drivers for the huge oil and gas resources hosted in the Lower Tertiary formations of the GOM. Subsea technology and extended architecture systems will boost production of offshore oil and gas in remote and challenging environments of the deep and ultra deepwater areas which lack the basic infrastructure needed to produce and transport hydrocarbons to shore. Innovative seismic technologies that allow for better imaging of the sub salt horizons in the GOM are pivotal to the expansion of hydrocarbon resources via additional newer discoveries. In the US lower 48 offshore, newer geologic plays and trends such as the Lower Tertiary and deeper reservoirs are expected to contribute to current and near future production of crude oil and natural gas. Canadian offshore production of oil and gas is relatively lower in comparison to the U.S. lower 48, and is confined to the eastern shore in Newfoundland/Labrador and Nova Scotia. Removal of the imposed and the de facto moratoria will provide better opportunities for increasing oil and gas development and production in offshore Canada. iv Working Document of the NPC North American Resource Development Study Made Available September 15, 2011 Table of Contents EXECUTIVE SUMMARY ________________________________________________________________________ I KEY FINDINGS ______________________________________________________________________________ IV LIST OF FIGURES____________________________________________________________________________VII LIST OF TABLES_____________________________________________________________________________ IX CHAPTER 1: OUTLOOK FOR NORTH AMERICA OFFSHORE OIL AND GAS DEVELOPMENT ________1 1.1. BACKGROUND DEVELOPMENT AND PRODUCTION OF U.S. LOWER 48 OFFSHORE OIL AND GAS.____________1 1.2. MORATORIA AND ACCESS TO U.S. LOWER 48 OFFSHORE
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