The Economic Outlook for Offshore Petroleum Production

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This paper was prepared for the 40th Annual California Regional Meeting of the Society of Petroleum Engineers of AIME, to be held in San Francisco, Calif., Nov. 6–7, 1969. Permission to copy is restricted to an abstract of not more than 300 words. Illustrations may not be copied. The abstract should contain conspicuous acknowledgment of where and by whom the paper is presented. Publication elsewhere after publication in the JOURNAL OF PETROLEUM TECHNOLOGY or the SOCIETY OF publication in the JOURNAL OF PETROLEUM TECHNOLOGY or the SOCIETY OF PETROLEUM ENGINEERS JOURNAL is usually granted upon request to the Editor PETROLEUM ENGINEERS JOURNAL is usually granted upon request to the Editor of the appropriate journal provided agreement to give proper credit is made. Discussion of this paper is invited. Three copies of any discussion should be sent to the Society of Petroleum Engineers office. Such discussion may be presented at the above meeting and, with the paper, may be considered for publication in one of the two SPE magazines. Abstract This paper considers the economics of offshore operations under three related subtopics:the economic justification for offshore operations,production cost sensitivity to water depth, andthe possible economic impact of some drawing board concepts on future production costs. The paper concludes that there is production costs. The paper concludes that there is economic incentive for offshore operations to the limits of the continental shelf (and possibly beyond for particular areas), that present production method costs are economically production method costs are economically prohibitive in deep water, that offshore operations may prohibitive in deep water, that offshore operations may be extended to greater depths by evolutionary operational improvements and enlightened governmental regulatory policies, and that the petroleum industry must seek its own solutions petroleum industry must seek its own solutions to problems if the economic outlook is to improve. Introduction During the past few years there has been increasing interest in offshore petroleum production by firms and individuals who have not production by firms and individuals who have not always been associated with the industry. Frequently these "outsiders" have been attracted by petroleum companies that have openly encouraged them to participate in the search for technology improvements; others have been attracted by big oil company money; some were attracted to the glamour of oceanography, and I suspect some were attracted because their own businesses weren't doing too well. Because of these outside interests, the petroleum industry has been entertained by a succession of exotic technological disclosures in finest San Francisco North Beach tradition. Some of us have bumped our heads in virtually every new submarine constructed during the past four years. We were on this grand tour to see first hand answers to the problems of offshore as they developed. For brief periods, I thought economic breakthroughs were near. I silently cheered for many of these drawing board concepts, as I am sure many of you did. However, I live in the real world of economics and I must admit my disappointment, when time after time, I discovered to my amazement that production economics had been ignored in the development of these concepts.