Last week, Chevron/Statoil ASA/Devon announced that the Jack field in the Gulf of Mexico was successfully tapped. The test well is flowing at the maximum 6,000 bbl/day rate. The oil is light and sweet. Initial speculation is that the untapped fields around Jack have economically recoverable reserves of 3 billion to 15 billion barrels. The field is about 270 miles southwest of New Orleans, about 170 miles off the coast. It will take 4 or 5 years to fully develop the field.
The first thing to note is that this well is very deep by U.S. standards. The sea floor is at 7,000 feet and the well is drilled 21,000 feet below that, for a total of 28,000 feet. Also, the well operates at 15,000 to 20,000 lbs. of pressure. By comparison, a Clinton sand stripper well in Ohio -- where my dad produces oil -- normally totals roughly 2,500 - 3,500 feet and is under a couple hundred lbs. of pressure. MIT Technology Review has a nice rundown of the technology used for the Jack well. Suffice it to say that these drilling technologies are rather new and the scale and logistics of operating under these conditions are much different than that with which I am familiar personally. Very impressive.
Business Week has a good commentary that points out what this find indicates for the argument for peak oil.
But the capability to find and recover petroleum at extreme depths, temperatures, and pressures, as demonstrated by the Chevron team, may indeed tip the balance of supply and demand in the long term. There will be a new frenzy of drilling at these depths in the Gulf of Mexico, where about a dozen promising exploration wells have already been drilled.
Other parts of the world that once appeared beyond the pale may also come into play. Areas believed to have oil deposits extremely deep beneath the ocean floor, which could now become commercially recoverable, include the North Sea off the coast of Britain, the Nile River Delta off the coast of Egypt, and possibly coastal Brazil, says Andrew Latham, a vice-president at energy consultancy Wood Mackenzie in Edinburgh, Scotland. Other analysts say West Africa could harbor lots of ultra-deep deposits. The areas have produced oil before but never from these depths.
But given the powerful combination of high oil prices and new technology, the industry is gaining confidence that supplies will grow. It's pushing hard to produce oil and gas from difficult tar sand and shale fields as well as rejuvenating older fields with enhanced recovery methods. Cambridge Energy Research Associates predicts world oil and natural gas liquids capacity could increase as much as 25% by 2015. Says Robert W. Esser, a director of CERA: "Peak Oil theory is garbage as far as we're concerned."
By the way, CERA's chairman is Daniel Yergin, the author of The Prize, the authoritative history of the oil industry. I have a lot of respect for what CERA has to say.
As some of you know, on August 31, 2004, my brother bet me $1,000 that oil production would peak in the next 10 years. I try not to make stupid bets and am sanguine that he will have to pay up. :-)