Introduction to aspects of economics and logistics

Abstract

During the past five years the oil industry has moved its exploration and development programmes into progressively deeper waters, so that production operations in 150 m (500 feet) of water are becoming conventional, and exploration in water depths of over 300 m (1000 feet) commonplace. The first part of this introductory paper is devoted to areas of opportunity in the deeper waters of the sedimentary basins of the world, with particular emphasis on the technical merits of these areas, and the size and high productivity necessary to justify their development. A description follows of the trend in licensing terms, the tax and financial arrangements that might apply, and the growing involvement of national oil companies and national energy policies with their consequent effect on the control of developments, right to export oil, and the division of profits. The increasing importance of logistic and environmental factors on the technological requirements both in exploration and development is outlined, and some examples drawn of their political and sociological impacts. The development of supporting infrastructure in remote environments, of national preference for materials and services, codes of practice and further constraints in the overall capital investment programmes, are also outlined. The final section deals with the economic implications of these international activities where during the course of the next 25 years it is expected that offshore oil production rates will double. The nature of the risk investments where exploration wells now cost between £3 and £5 M each, and capital costs for individual projects are over £1000 M, are examined, reflecting differences between the private sector objectives and national oil company objectives. Examples can be drawn from events in O.P.E.C. areas during the past five years.