The World is coming for American oil

Christopher Helman, Forbes Staff
I'm based in Houston, Texas, energy capital of the world.


7/18/2012 @ 1:26PM |24,448 views
Why The World Is Coming For America's Oil

The Maersk Developer drilling the Kilchurn prospect for Statoil in the Gulf of Mexico. Credit: Johannes Worsøe Berg

(This article appears in the August 6, 2012 issue of Forbes Magazine.)

Norway’s national oil company is betting $20 billion that the future of the energy business lies under the U.S. They’re not alone. 

Out the helicopter window, as the muddy waters dumping out of the Mississippi River give way to the deeper and deeper blue of the Gulf of Mexico, the oil and gas gear gets bigger and bigger. Shallow jack-up rigs evolve into spars and tension-leg platforms. Finally, 150 miles out, we descend on the 330-foot-tall, 60,000-ton semisubmersible drill ship Maersk Developer, leased and operated by my host, the Norwegian oil giant Statoil.

The Developer is sitting in 3,100 feet of water, its roaring diesel engines turning a drill bit 16,000 feet below the seafloor. The target is a prospect called Kilchurn, 25,000 feet down. In June Statoil completed the Kilchurn well at a cost of some $120 million but was keeping mum on the results.

The Developer rig is similar to Transocean’s ill-fated Deepwater Horizon. As a semisubmersible it is basically a superstructure sitting on top of two cigar-shaped submarine hulls that are equipped with four dynamically positioned thrusters to keep the rig nearly stationary, even in stormy seas.

But this ship is newer and more modern than the Deepwater Horizon, and as everyone on board will tell you—repeatedly—it’s equipped with more safety precautions and redundant systems. The Developer was the

first rig to meet all the new standards required by the Bureau of Ocean Energy Management—because Statoil already had those practices in place. “We haven’t had to change the way we do business,” says Jason Nye, head of Statoil’s Gulf of Mexico operations.

Tested by four decades exploring the unforgiving waters of the Norwegian continental shelf, Statoil has more experience working in waters deeper than 300 feet than any other company in the world. They’ve built some of the biggest structures on earth, like the Troll platform, which measures nearly 1,600 feet from its foundation on the seafloor up to the tip of its flare boom. Statoil’s standards were already good enough that the company received two of the first ten drilling permits issued after BP’s spill.

The message Statoil wants to get across by taking me on this tour is clear: Trust us. That’s understandable, considering that Statoil (which is publicly traded, though 67% of its shares are owned by the government of Norway) is the fifth-largest acreage holder in the Gulf and plans to drill three deepwater wells here this year. But there’s an even bigger reason for the p.r. push: Statoil has more than $20 billion worth of oil and gas assets in the U.S. and has bet still more that drilling into America is the company’s best bet for growth.

Statoil CEO Helge Lund has big plans to increase its output from a current 2.1 million barrels per day to more than 2.5 million by 2020. The U.S. will be the biggest driver of that growth, with production here more than tripling from 150,000 barrels per day today to 500,000. That Lund has chosen to invest this much in the U.S. speaks volumes both about America’s oil and gas future and the state of the industry in the rest of the world.

“There can be no doubt that America is in the midst of an energy renaissance,” says global energy guru Joseph Stanislaw, who now works with Deloitte. Soaring oil output from the Bakken Shale fields, coupled with increased deepwater output primarily from the Gulf of Mexico, has pushed up U.S. domestic oil production by 12% since 2008. This is the first increase in a quarter-century and has confounded predictions that domestic output was set on an inexorable downtrend.

America’s potential oil and gas growth is so great, predicts professor Amy Myers Jaffe of Rice University’s Baker Institute, that by the 2020s the capital of energy will likely have shifted back to the Western Hemisphere, where it was prior to the ascendancy of Middle Eastern mega-suppliers such as Saudi Arabia and Kuwait in the 1960s. Statoil isn’t the only national oil company horning in. After failing to land Unocal in 2005 amid political contretemps, China’s Cnooc has put up $2 billion for joint ventures with Chesapeake Energy and another $2.1 billion to dig into Canada’s oil sands. Sinopec has done a $2.5 billion shale JV with Devon Energy and bought Canada’s Daylight Energy for $2.1 billion. Malaysia’s Petronas is closing on a $5.35 billion takeover of Canada’s Progress Energy. And Korea’s KNOC invested more than $9 billion in U.S. finds.

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galonga 1 week ago
“Statoil has more experience working in waters deeper than 300 feet than any other company in the world”

The journalist needs to research more before making uninformed comments such as this, as everyone knows in the industry it is Petrobras which masters deep water drilling.

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Christopher Helman , Forbes Staff 1 week ago
i’m not sure you’re right. statoil has been at this for 40 years.

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Elliott Castillo 1 week ago
Petrobras…the same Brazilian State Owned company that has YET to start drilling in what was thought to be the largest deep water oil deposit in the Western Hemisphere from 6-7 years ago? Or is it the same Pertrobras that is so good at estimating the oil fields in their OWN backyard that they constantly have to cut it in half because they got all excited and jittery at the prospect of black gold chilling on their beautiful coast?The author of this article said it himself, Brasil barely has the infrastructure in place to undergo both Deep water and massive oil drilling endeavors. Brasil does have have one very big thing going for them…Energy independence

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Anon 1 week ago
Speaking as a near thirty-year veteran of the international oil and gas drilling industry, I’d wager that the Royal Dutch/Shell group of companies (Shell) have at least ten times Statoil’s experience — counted as numbers of wells drilled — in conducting drilling operations in water depths of 300 ft or more. Statoil have a capable and experienced drilling organization, but your claim that “Statoil has more experience working in waters deeper than 300 feet than any other company in the world” is patently absurd. You didn’t do your homework — ranked by number of wells drilled in those water depths, Statoil probably doesn’t even make the top ten list.

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Christopher Helman , Forbes Staff 1 week ago
interesting question. we need to find some solid numbers on shell. statoil has been calling itself the world’s largest offshore opertor ever since the merger with norsk hydro. they have roughly 490 subsea production wells now. they produce 1.4 million boepd offshore norway alone. as you know, that’s a lot.

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Tristan Day 1 week ago
The formatting of this article is absolutely appalling, how can you possibly allow it to be published on a website like this? Some examples:

foreverybarreltheyextracted.
ac- quire
hydrocar- bons
tem- porarily
develop- ment
oil- and gas

Did someone just copy and paste it from a screen grab?

It’s an interesting article but it was an absolute pain to read.

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Christopher Helman , Forbes Staff 1 week ago
thanks, we’ve fixed the formatting issues.

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Wayne Burger 1 week ago
An average 2 liter engine emits 500 cubic liters of super-heated gas per minute idling (2lt x 1000rpm=2000 cubic liters divide by four as only every fourth stroke is a power stroke and you get 500 cubic liters/minute idling- not driving). Now think about it 500 x 60 (per hour) x 24 (per day) x 2-3 billion (the amount of cars on the planet) and this is only at idle and for a 2 liter engine, the heat emitted by said engine as well as radiator’s and exhausts have also not been added or for that matter the worst offenders such as aircraft, shipping, trucks and commercial vehicles, power stations producing electricity cannot even come close to what oil is doing to our planet. In essence oil has been dead within the soil for MILLENIA and now we are spreading this death and in so doing destroying our children’s future and sending them the wonderful reactions of climate change and skin cancer, so it is not even a pleasant death! If we value OUR children we need to stop driving them to their DEMISE!

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Christopher Helman , Forbes Staff 4 days ago
do you really think the heat emitted by internal combustion engines is material relative to the heat this planet receives from solar radiation? i doubt it, but maybe you have some statistics.

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Wayne Burger 4 days ago
Have you ever heard of one scientific law namely for every action there is an equal and opposite reaction. If you take two heating elements instead of one what is the end result? Please lets not play the bullshit baffles brains game.

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John Anderson 5 days ago
Surprised no mention of the Statoil summer event announced June 20, 2012

PetroFrontier Corp. – Australian land position averaging 87% working interest on 14.1 million acres. Will use horizontal drilling and multistage frac technology.

PetroFrontier teamed up with International oil company Statoil recently on June 20, 2012 in farm-in arrangement. The 67% owned by Norwegian government Statoil is the world leader in shale resources such as PetroFortier’s South Geogina Basin.

Where are Statoil’s shale resources Marcellus/Eagle Ford/Bakken?
http://www.statoil.com/en/ouroperations/explorationprod/shalegas/pages/where.aspx

Statoil talking about Australia:
http://www.ogj.com/articles/print/vol-110/issue-07/general-interest/statoil-plans-to-triple.html
“Separately, Statoil announced plans to partner with Canada’s PetroFrontier Corp. on four exploration permits and two exploration permit applications in the southern Georgina basin in Northern Territory, Australia (OGJ Online, June 20, 2012).
Statoil said its Australia shale activities will rely on unconventional expertise it has developed in the US where it has leases in various shale plays.”

See Statoil video on shale and tight rock resources
http://www.statoil.com/en/ouroperations/explorationprod/shalegas/pages/theimportanceofshaleforstatoil.aspx

Statoil enters Australian Shale Play
http://www.statoil.com/en/NewsAndMedia/News/2012/Pages/20Jun_Australia.aspx

Other Article: http://tinyurl.com/86efdoh

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Leslie Smith 2 days ago
What I wonder is whether or not people understand just how many things are actually made out of oil? Everyday items that we take for granted. It is time that we start doing our own investing and drilling and adding refineries so that we can process our own products. We need to cut out the middle so that the outside forces do not control our economy.

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