What's new in exploration: Financial distractions, investor rationalizations, exploration laments

WILLIAM (BILL) HEAD, CONTRIBUTING EDITOR 

Exploration has always been who’s there first, and who can control the “find.” Since my birthday is Oct. 12, as a child, Columbus was my hero. Later I learned that he “discovered” America on a rather small sailboat crewed by criminals. They were not shooting seismic, but I am told a lot of shouting did occur when land was observed on the horizon. When the crew found persons alive on their discovery, conspiracy theories were applied to current political history. There is little mention of the sacrifice and perseverance required of the explorationists to “find.” Who controls the area is still in debate.  

P.S. Columbus and others never did find the fountain of youth. Available hydrocarbons nearby will have to do, to substitute perpetual energy over the human lifespan. Youth is, and has always led to, DOA, so live long and prosper [in comfort].

Fig. 1. The Gulf of America/Mexico is still open and available to operators pursuing new reserves and new ideas, with technological advancements to follow the ideas. Image: U.S. Department of the Interior.

“If I only had…” is a misdirection applied after some risk has been attempted, and new information from failure is learned. New tech designed to lower risk has never prevented failure. The bubble of the 1990s did not result in more oil or gas. Hot air, yes. Such revelation tech has been a significant distraction from principles learned on the road of those who have gone before.  

Case in point, George Mitchell’s insistence with his small crew to break up low-perm reservoirs, but with deliberation and more pressure. Fracing has been around as a wellbore tool for over a hundred years; used to extensively break rock for flow perm over short vertical intervals, maybe since the 1950s. When the investment community found out that promoter George was successful fracing over distances years into his sweat, well, nobody bad mouthed fracing. That is, until certain green politicians asked for billions in speculated reparations. Thankfully, we did not stop exploration. However, exploration effort and existing tech went elsewhere. 

With great “I told you so,” I read in last month’s World Oil where two observations jump out: 

Fig. 2. Significant effort was made in comparing the advantages of dry trees vs. subsea trees. Image: SPE.

1. Quitters lose. The winners are today’s heroes along exploration coastlines in northeastern South America and along western African’s former colonies. 

Not to be denied, The Gulf of America/Mexico is still open to new reserves and new ideas, and tech to follow the ideas, Fig. 1. Every time the market gets tough, and money is tight, oilcos flee to the Gulf. The Gulf represents about 97% of all offshore U.S. oil and about 14% of total U.S. output. Ukraine? Iran? Not my ship stuck at Hormuz. Gordon Feller [World Oil, April 2026] states my Gulf is in a Renaissance. I believe him. Love the photos.

2. The article, in World Oil, April 2026, Part One, by Roy Shilling et al. at Frontier Deepwater Appraisals; Lower Tertiary misdirection in the ultra-deepwater has already cost billions in lost reserves. This article is a major READ for all explorationists when they sit in on FID meetings. Why?

Wet tree was the new tech of 2012, along with Jules Verne projects. That effort proved that we could do “it” safely on the sea floor, reducing riser weights [Archimedes], Fig. 2. The hope was to maybe contain well pressure issues at the sea floor. What we really did in the name of tech and saving a current dollar was lose tremendous amounts of return in the process. The capital fight slowed exploration to almost a halt, plus unrealistic promises to the Obama DOE. 

Fig. 3. Thunder Horse was pitched as a showcase for dry trees in the U.S. Gulf. Image: bp.

The argument was based on the amount of front-end cash. Thunder Horse was the dry tree poster child costing over $5 billion, Fig. 3. Industry took the “we can do it” approach and ignored the “should we do it” concern. The claims were $2 billion to $3 billion for wet trees for the same production. Busted! Read more detail here: https://en.wikipedia.org/wiki/Thunder_HorsePDQ [less the dicta or the wow!]. 

A state-of-the-practice presentation was made at OTC by James Pappas and myself, discussing the dry tree/wet tree research underway by the industry, DeepStar, and REPSEA, circa 2016. Fortunately, NETL/DOE has not buried this article. Our summary supports the work by Roy Shilling:  

“The results of nine years of study have shown that there were no major technical show-stoppers. Since the original quest was to save money, the objective has become a more difficult moving target. Lessons learned suggest a possibility to use deep-draft dry tree (DT) designs as less costly wet tree vessels.” 

Head, W. J., & J. M. Pappas, J. M., “Quest for the perfect dry tree application, Summary of RPSEA and DeepStar projects over the last 10 years,” In Offshore Technology Conference (p. D041S053R001), OTC, May 2016. 

When working for RPSEA [DOE], I functioned as RPSEA’s ultra-deepwater project manager. We spent millions of tax dollars on riser tech, cement issues, deepwater inspections, blowout prevention, deflagration prevention, next-gen 3D or 4D seismic, and yes, Jules Verne and wet tree. We authored many tech papers, but none, none advised on production schedules and reservoir plans, as Shilling points out. I look forward to Part Two of the series by Roy and his firm (Editor’s note:  It is in this issue.)