A Peak Oiler and an Abiotic Oil Aficionado Walked into a Bar on the Gulf of Mexico…

Guest “Deepwater trip to Mars” by David Middleton

A Peak Oiler would look at this pie chart and declare that 93% of the oil and gas under the US Federal waters of the Gulf of Mexico has already been produced and that the Gulf will be produced out in about 5 years. An Abiotic Oil Aficionado would be even wronger…

Figure 1. 2018 end of year Gulf of Mexico cumulative production and remaining proved reserves. BOEM 2020-028, page 1

A Peak Oiler would declare that the following two graphs must be fake; while an Abiotic Aficionado would declare that they prove something even more ridiculous.

Figure 2. Gulf of Mexico Federal Offshore (Central & Eastern) Crude Oil Estimated Production from Reserves (Million Barrels). EIA.
Figure 3. Gulf of Mexico Federal Offshore (Central & Eastern) Crude Oil Estimated Production from Reserves (Million Barrels) EIA.

This will really torque off the Peak Oilers (and totally mislead the Abiotic Oil Aficionados):

Figure 4 Figure 3 divided by Figure 2.

How can production from reserves and reserves both continue to rise? Let’s take a trip to Mars!

There’s an old saying in the oil industry, “big fields get bigger.”

Gulf of Mexico: Where Big Fields Are Getting Bigger

January 2018 Barry Friedman, Explorer Correspondent

“When you combine the U.S. and Mexico, onshore and offshore, the Gulf of Mexico basin is one of the world’s most prolific hydrocarbon super basins. Over 250 billion barrels of oil equivalent have been discovered to date, and almost 20 percent (currently 18 percent) of U.S. oil production comes from the Gulf of Mexico.

That’s Cindy Yeilding, Senior Vice President, BP America, speaking about the petroleum power and potential of the Gulf as a preview to her upcoming presentation at the AAPG Global Super Basins Leadership Conference in Houston, which will include discussion of the region’s production history and the geologic trends, innovation, and, yes – even failures associated with the region.

The realm of the Gulf of Mexico is not just important to the United States.

“We will also highlight the Gulf of Mexico … and the promise it holds for Mexico,” she said.

Life from the ‘Dead Sea’

Industry has been exploring offshore possibilities in the U.S. Gulf of Mexico since the 1930s, when the first wells were drilled in a few feet of water. It was an exciting time, especially in the late ‘40s.

[…]

“Exploration in the deepwater U.S. GoM,” Yeilding said, “dates back to the late 1970s,” and like any exploration program, there have been failures, but also perseverance and tenacity.

And a watershed moment.

Yeilding pointed to Shell and BP’s discovery of Mars in 1989, a project about 130 miles southeast of New Orleans. Initial cost of the development was pegged at about a billion dollars.

It’s been a good investment.

[…]

AAPG Explorer

Mars/Ursa field, officially designated as MC 807 is located in the Mississippi Canyon area. It is currently the largest field in the Gulf of Mexico.

Figure 5. Shell Oil’s Deepwater Mission to Mars

The Mars mini-basin is nearly surrounded by salt massifs. It’s basically a canyon system that filled with massive turbidite sandstone sequences. It is so large that the seismic amplitude anomalies look like regional reflection events. Mars was discovered in 1989 and first put on production in 1993. Tyler Priest’s Shell Oil’s Deepwater Mission to Mars provides a fascinating timeline of the discovery and development of Mars/Ursa.

When the field first went on production, the proved oil reserves were 161 million barrels. As of year-end 2018, the field had produced 1.427 billion barrels of crude oil, with 315 million barrels of remaining proved reserves.

Figure 6. Reserve History for Fields Gulf of Mexico Outer Continental Shelf. BOEM

How did Shell manage to increase the original 161 million barrels of proved reserves to 1.742 billion barrels?

Reserves appreciation (reserves growth) is the amount of resources in known accumulations that is expected to augment proved reserves as a consequence of the extension of known pools or fields, discovery of new pools within existing fields, or the application of improved extraction techniques. Prediction of reserves appreciation is generally based on statistical analysis of historical field data. For the 2016 Assessment, reserves appreciation is only applied to the Gulf of Mexico OCS Region.

BOEM 2017-085, page 5

6.2.1 Reserves Appreciation
Estimates of the quantity of proved oil and gas reserves in a field typically increase as the field is developed and produced. This is known as reserves appreciation or reserves growth and was first reported by Arrington (1960). Root and Attanasi (1993) estimated that the growth of known fields from 1978 to 1990 in the United States accounted for 90 percent of the annual additions to domestic reserves. BOEM data for GOM OCS fields reveal that, since 1981, increases in proved reserves through appreciation have greatly exceeded new field discoveries and comprise approximately two-thirds of the total increase. Characteristically, the relative magnitude of this growth is proportionally larger in the years immediately following field discovery.

BOEM 2017-085, page 47

Proved reserves generally grow over time because they start out as a small percentage of the resource.

When you start out with a very big resource, it’s not unusual for the proved reserves to get bigger for quite a long time. While Mars/Ursa is an exceptional oil field and not typical of the overall Gulf of Mexico, the GOM super basin continues to get bigger.

Over the decades, advances in seismic imaging, drilling and production technology, enabled us to identify and drill hydrocarbon accumulations previously missed and drill in deeper and deeper water. As we gained better understanding of the geology, we found pay in Miocene and Lower Tertiary (Paleogene) reservoirs that we didn’t expect to be present in the deepwater. We also found larger fields that produced at much higher rates in deeper waters.

Figure 8. Gulf of Mexico oil production by water depth range (1947-2020). Data from BOEM via Lexco OWL.
Figure 9. Gulf of Mexico average well production rate by water depth range (1947-2020). Data from BOEM via Lexco OWL

How long can Gulf of Mexico oil production continue to grow? Based on projects currently under development, production could peak in the early 2030’s, or a lot sooner if the Democrats had one more Senate seat.

Figure 10. A Biden ban on “new oil and gas permitting on public lands and waters” would cut GOM oil production in half by 2028 and by nearly 80% by 2040. (NOIA)

It all depends on how much more oil we discover. In their 2017 resource assessment, BOEM estimated that the cumulative production had been 18.5 billion barrels with 64.4 billion barrels remaining in proved reserves, contingent resources, future reserves appreciation and undiscovered technically recoverable resources.

Only time, technology, the price of oil and politics will determine how much of the undiscovered technically recoverable resources become economically recoverable resources and eventually proved reserves. The vast majority of the UTRR are in the Central Gulf of Mexico, deepwater, Upper Miocene to Lower Tertiary… But we don’t know what we don’t know… And won’t know it until we clearly see it in the rearview mirror.

Figure 12. BOEM 2017-085

However, past history shows us that government agencies almost always grossly underestimate what the oil industry will find and produce. Alaska’s North Slope has already produced over 16 billion barrels of petroleum liquids. Currently developed areas will ultimately produce a total of about 30 billion barrels. The government’s original forecast for the North Slope’s total production was 10 billion barrels. The current USGS estimate for undiscovered oil in the Bakken play of Montana & North Dakota is 25 times larger than the same agency’s 1995 estimate. In 1987, the MMS undiscovered resource estimate for the Gulf of Mexico was 9 billion barrels. Today it is 48 billion barrels, 3 billion more than it was in 2012.

The MMS (Now BOEM/BSEE) increased the estimate of undiscovered oil in the Gulf of Mexico from 9 billion barrels in 1987 to the current 48 billion barrels because we discovered a helluva a lot more than 9 billion barrels in the Gulf over the last 30 years. Almost all of the large US fields discovered since 1988 were discovered in the deepwater of the Gulf of Mexico. In 1988, it was unclear whether or not the deepwater plays would prove to be economic. The largest field in the Gulf of Mexico, Shell’s Mars Field, was discovered in 1989. Prior to this discovery, few people thought that economically viable Miocene-aged or older reservoirs existed in deepwater. Dozens of not-quite-Mars-class fields have been discovered over the past 20 years… Most of those have only barely come on line over the last 10-15 years.

The most significant recent play in the Gulf of Mexico, the Lower Tertiary, wasn’t even a figment of anyone’s imagination in 1988. These are massive discoveries – BP’s Tiber Field on Keathly Canyon Block 102 is estimated to contain 3-6 billion barrels of recoverable oil. This play is still in its infancy.

Based on the government’s track record, the estimated 91 billion barrels of undiscovered oil under Federal offshore waters is more likely to be 600 billion barrels. That’s more than 100 years worth of current US consumption – And that’s just the undiscovered oil under Federal offshore waters.

However, we will at some point have produced half of the oil we will ever recover and Gulf of Mexico production will peak and begin its slow decline and no one will notice.

Just for Peak Oilers and Abiotic Oil Aficionados

Peak Oil, Abiotic Oil & EROEI: Real(ish) Things That Don’t Matter, Part One: Peak Oil

Abiotic Oil: Real(ish)Things That Don’t Matter, Part Deux

References

[BOEM] Bureau of Ocean Energy Management. 2017: 2016a National Assessment of Undiscovered Oil and Gas Resources of the U.S. Outer Continental Shelf, US Department of the Interior, Bureau of Ocean Energy Management. OCS Report BOEM 2017-085.

[BOEM] Bureau of Ocean Energy Management. 2020: Estimated Oil and Gas Reserves Gulf of Mexico OCS Region December 31, 2018, US Department of the Interior, Bureau of Ocean Energy Management. OCS Report BOEM 2020-028.

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August 12, 2021 at 12:24PM

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