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The Drill Down Oil and Gas Podcast: Offshore Drilling and Deepwater Drilling
In this episode of The Drill Down, Marty Stetzer sits down with EKT Interactive Associate Terry Gardner to discuss current topics and trends in the deepwater drilling segment of upstream oil and gas.
Learn more about Offshore & Deepwater Drilling
This particular podcast episode will be of interest to those folks in the oil and gas industry that are planning on attending this years Offshore Technology Conference (OTC 2016).
Of course, if you need to brush up on your understanding of the these upstream topics, be sure to check out Oil 101, our free 10-part introduction to the oil and gas industry.
It is available to everyone at www.ektinteractive.com.
Listen to The Drill Down with Marty Stetzer below:
Links
Oil 101 – A FREE Introduction to Oil and Gas
What is the difference between Upstream and Downstream?
Houston Museum of Natural Science: Weiss Energy Hall
SPE – Journal of Petroleum Technology
EKT Interactive Oil and Gas Podcast Network
What is Upstream?
What is Petroleum?
Offshore Drilling
Transcript
Marty Stetzer:
Hi, everyone, and welcome to the Drill Down with Marty Stetzer. This podcast is part of our EKTI Oil and Gas Learning Network, and brought to you by Oil 101, our free introduction to oil and gas. Today I’ll be speaking with Terry Gardner, a longtime friend and industry veteran. This is our first podcast on offshore and deepwater, and we’re really happy to have Terry help us focus on this important part of the business. Terry, welcome.
Terry Gardner:
Thanks, Marty. Nice to be here.
Marty Stetzer:
Terry, can you first start by giving our listeners your background?
Terry Gardner:
Well, I’m basically a mechanical engineer with some graduate work in engineering mechanics, and a 12-year or so stint in the aerospace industry before it went kerplunk, and I switched to offshore. I went to work for Exxon about 40 years ago. From then on I’ve been working in offshore oil and gas.
Marty Stetzer:
You’ve also done some consulting work besides working with Exxon, Terry, correct?
Terry Gardner:
That’s right. I retired from Exxon, consulted with BP for about five years, and since then I’ve been mostly teaching.
Marty Stetzer:
Terry, thanks for being part of EKTI. We originally met through our Houston Museum of Natural Science relationship in January of 2011. Can you tell our listeners who are interested in the industry what they can get from a visit to HMNS?
Terry Gardner:
The Energy Hall at the Houston Museum of Natural Science is really a great place to get introduced to the oil and gas industry. It has screens that you can touch and interact with, all kinds of information, and it spans the range all the way from geology and geophysics, exploration, all the way through production and even a little bit of offshore and some refining, so some of the downstream.
Marty Stetzer:
I think you told me at one time they were thinking of a possible upgrade to HMNS. Can you give us kind of the update on what’s going on there?
Terry Gardner:
They’re already committed to that, and in fact, in a couple of months, I believe the first of June, they’re going to shut down the hall, I’m sad to say, for about a year and move it up to the fourth floor of the museum, and then when it comes back on it’s going to be much more elaborate, bigger, and a lot more fun.
Marty Stetzer:
How long will it take to do the new renovations, are they estimating?
Terry Gardner:
I think what I hear is it’s going to take about a year and that might mean it’ll take longer.
Marty Stetzer:
Longer than this. Thanks, Terry. Now, can you talk over the training course that you designed and developed related to deepwater technologies and where it’s being offered today?
Terry Gardner:
Okay, well this gets back to where you and I met in the museum, and as I was a docent in that Energy Hall, it seemed to me that there was very little information, really, about the technology that’s being used to develop oil and gas in deepwater, which was really 10 or 15 years ago, just beginning to accelerate.
That led me to develop a course, which I have taught quite a number of times, to industries, designed primarily for professionals and in fact for engineers for the most part, and it is an overview of the technology which was used for developing and producing oil and gas fields in deep water. I have one-day, two-day, and three-day versions of it, depending on how much information somebody wants.
Marty Stetzer:
You’ve also done a ton of research and stayed current on these technologies, Terry, so one of the things you told me was these technologies were really part of why deepwater is so economic.
Terry Gardner:
It’s just amazing. Well, let me preface this by saying when I first came into the industry 40 years ago, I could see that almost everything that was done in the industry was developed by evolution, almost traditional ways of doing things, which evolved rather slowly. What has happened in the past 12 or 15 years in deepwater is exactly contrary to that. Technology has infused our industry from aerospace, from information technology, being used to allow advances at a spectacular rate. Yes, when you say I have to keep up, I spend most of my time in fact, trying to keep up with the advances made in the various aspects of deepwater technology, and incorporate them into updates in my course.
Marty Stetzer:
For those folks who are new, our listeners who are new, where does deepwater start versus say, conventional offshore developments? What’s kind of a definition?
Terry Gardner:
Well, it’s sort of like outer space, you know. Where does outer space start? It’s kind of vague, but typically, shallow water is considered those depths where you could stand a platform on the bottom that penetrates the surface and you could stand on it. That would be up to a maximum of about 1,000 feet. Between 1,000 feet and say 2,500 feet, is what we call deepwater, and then beyond that is ultra-deepwater. We are actually producing oil today in water depths almost out to 10,000 feet, two miles.
Marty Stetzer:
Unbelievable, just unbelievable.
Terry Gardner:
Yes, it really is.
Marty Stetzer:
And it’s safe, and efficient, and cost effective?
Terry Gardner:
Well, it’s expensive, and that gets to a point of these deepwater developments that needs to be made. It’s very expensive and it’s very risky in financial terms.
The reason it has been successful is that the reservoirs being found in deepwater and ultra-deepwater are very large and very prolific, which means that when you drill a well into them, you get a high production rate from that well. The economics work as a result of the large reservoirs and the large production rates, and they are capable of covering the expenses in extreme water depths.
Of course, this recent decline in the price of oil is having a major impact in deepwater, and we are just watching to see how that impact is going to play out.
It isn’t yet clear, but some trends are beginning to emerge.
Marty Stetzer:
Part of the issue I think you’ve told me is the length of time it takes to do these deepwater offshore developments, correct?
Terry Gardner:
That’s right. Typically from the time that a discovery is made in very deep water, ultra-deep water let’s say, even until the decision is made to move forward, can be two or three years, and a number of exploratory wells, trying to determine exactly how much oil there really is in that new discovery and whether it’s economic, and then figuring out how best to do it, what’s the most economic way to develop the field.
Then it takes on the order of four years to do the engineering, build the hardware and install it, and by the way, often expenditures reach five, six, seven billion dollars and thinking about that as an investment where you get no return on your investment until that first barrel of oil is produced, which is after you’ve spent four, five, six billion dollars. That’s why I say it’s financially risky.
Marty Stetzer:
I noticed in our recent issue of the JPT, which is the monthly publication of [inaudible 00:07:58], of the SPE, that it’s expected that 250,000 barrels a day of deepwater production is coming on this year, in spite of the low crude prices, and I guess it’s because all this capital investment is now “sunk cost,” and they’re shooting for cash flow and showing some return on that investment.
Terry Gardner:
These projects started … Well, two things combine, I think here.
These projects started when the price of oil was a lot higher and by the time the price of oil began to plummet, as you say, there was a whole lot of sunk cost and so it didn’t make sense to stop the development.
Secondly, for the most part, these projects are carried out by major oil companies, and usually several of them at a time in each project, cooperating.
They have the deep pockets and the capability, for the most part … I’m not speaking for every single one of them, to continue investing when projects make economic sense, even in the face of declining …
Of course, these fields, I guess it should be mentioned also, these fields are generally programmed to produce for 20 to 25 years, so we’re talking about long cycles, during which time most of us hope that the price of oil will, at least partially, recover.
Marty Stetzer:
Terry, the other thing I’ve learned being new to the industry, one of the best ways to learn about the offshore and deepwater is the Offshore Technology Conference.
Can you tell our listeners a little bit about where it is, what it is, and in a way what you’ve learned through the OTC sessions?
Terry Gardner:
The Offshore Technology Conference is terrific because it does two things.
First it brings together all the technologists, the engineers, in a number of specialized sessions, quite a number. I don’t know, 40 or 50 of them, in which specialists talk to each other, present papers, and share new technology.
The other part of it is the manufacturers display their wares in booths, and so you can wander around and talk to people from those companies and get to know what the latest technology is that’s being developed or is available. Just tracing the history of the Offshore Technology over the past 40 years or so that it has existed … In fact it’s more than that.
It’s probably well over 50 … You see such a wide variety of companies now displaying at OTC, companies that specialize in technologies that were never related to the oil and gas industry at all five or ten years ago, and have come in because of their application in this rapidly developing deepwater capability.
Marty Stetzer:
It’s interesting, Terry. I’m a mechanical engineer and I always looked on the OTC as being the world’s biggest science fair with equipment from the smallest automation pieces to complete blowout preventers and platforms. In fact, we’ve taken a number of our videography interns to the OTC, not only to see the equipment but how the equipment is presented to folks who are actually showing up and trying to learn something.
Terry Gardner:
That’s true and the typical displays at the technology conference are the blowout preventers and the drilling risers and the big pieces …
The derricks, and the big pieces of equipment that are a traditional part of the industry, but what’s fascinating now is you’ll walk around and you’ll see this in the smaller booths, these companies that have developed super sophisticated electronic stuff that is vital to making things continue to work, the communications for example, with equipment on the sea floor.
You think about equipment being placed on the sea floor, in eight, 10,000 feet of water, connected by very long cables with fiber optic communication, and now it’s possible for the manufacturer of some of the equipment which is on the sea floor to sit in their office thousands of miles away, and through the Internet they can actually communicate with their equipment on the sea floor and determine how well it’s operating, and in some cases actually even command changes or adjustments to make it perform better or even fix it when it fails.
Again, from thousands of miles away, communicating over the Internet with equipment that is under six or eight thousand feet of water. It’s just amazing, and you see companies like that displaying how they do it at the OTC.
Marty Stetzer:
The OTC, for our listeners, is usually the first week in May. It’ll be May 2nd to 5th this year, and Terry, you’re going to do a one-day version of your course, correct?
Terry Gardner:
On May 1st, the SPE, Society of Petroleum Engineers, will sponsor a number of courses, and my one-day presentation overview of deepwater technology will be one of those courses, on Sunday May the 1st.
Marty Stetzer:
Terry, thanks. We’re very happy to have Terry Gardner as an EKTI associate. Look for more detail on offshore and deepwater developments on our website, and watch for Terry’s upcoming EKTI podcast and YouTube videos presenting more detail on many of the deepwater technologies.
A reminder of his upcoming class at the OTC, and thank you very much, Terry, we enjoyed talking to you today.
Terry Gardner:
Pleasure. Thank you, Marty. Nice being here.
The post The Drill Down Oil and Gas Podcast: Offshore Drilling and Deepwater Drilling appeared first on EKT Interactive.
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By Marty Stetzer
5
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In this episode of The Drill Down, Marty Stetzer sits down with EKT Interactive Associate Terry Gardner to discuss current topics and trends in the deepwater drilling segment of upstream oil and gas.
Learn more about Offshore & Deepwater Drilling
This particular podcast episode will be of interest to those folks in the oil and gas industry that are planning on attending this years Offshore Technology Conference (OTC 2016).
Of course, if you need to brush up on your understanding of the these upstream topics, be sure to check out Oil 101, our free 10-part introduction to the oil and gas industry.
It is available to everyone at www.ektinteractive.com.
Listen to The Drill Down with Marty Stetzer below:
Links
Oil 101 – A FREE Introduction to Oil and Gas
What is the difference between Upstream and Downstream?
Houston Museum of Natural Science: Weiss Energy Hall
SPE – Journal of Petroleum Technology
EKT Interactive Oil and Gas Podcast Network
What is Upstream?
What is Petroleum?
Offshore Drilling
Transcript
Marty Stetzer:
Hi, everyone, and welcome to the Drill Down with Marty Stetzer. This podcast is part of our EKTI Oil and Gas Learning Network, and brought to you by Oil 101, our free introduction to oil and gas. Today I’ll be speaking with Terry Gardner, a longtime friend and industry veteran. This is our first podcast on offshore and deepwater, and we’re really happy to have Terry help us focus on this important part of the business. Terry, welcome.
Terry Gardner:
Thanks, Marty. Nice to be here.
Marty Stetzer:
Terry, can you first start by giving our listeners your background?
Terry Gardner:
Well, I’m basically a mechanical engineer with some graduate work in engineering mechanics, and a 12-year or so stint in the aerospace industry before it went kerplunk, and I switched to offshore. I went to work for Exxon about 40 years ago. From then on I’ve been working in offshore oil and gas.
Marty Stetzer:
You’ve also done some consulting work besides working with Exxon, Terry, correct?
Terry Gardner:
That’s right. I retired from Exxon, consulted with BP for about five years, and since then I’ve been mostly teaching.
Marty Stetzer:
Terry, thanks for being part of EKTI. We originally met through our Houston Museum of Natural Science relationship in January of 2011. Can you tell our listeners who are interested in the industry what they can get from a visit to HMNS?
Terry Gardner:
The Energy Hall at the Houston Museum of Natural Science is really a great place to get introduced to the oil and gas industry. It has screens that you can touch and interact with, all kinds of information, and it spans the range all the way from geology and geophysics, exploration, all the way through production and even a little bit of offshore and some refining, so some of the downstream.
Marty Stetzer:
I think you told me at one time they were thinking of a possible upgrade to HMNS. Can you give us kind of the update on what’s going on there?
Terry Gardner:
They’re already committed to that, and in fact, in a couple of months, I believe the first of June, they’re going to shut down the hall, I’m sad to say, for about a year and move it up to the fourth floor of the museum, and then when it comes back on it’s going to be much more elaborate, bigger, and a lot more fun.
Marty Stetzer:
How long will it take to do the new renovations, are they estimating?
Terry Gardner:
I think what I hear is it’s going to take about a year and that might mean it’ll take longer.
Marty Stetzer:
Longer than this. Thanks, Terry. Now, can you talk over the training course that you designed and developed related to deepwater technologies and where it’s being offered today?
Terry Gardner:
Okay, well this gets back to where you and I met in the museum, and as I was a docent in that Energy Hall, it seemed to me that there was very little information, really, about the technology that’s being used to develop oil and gas in deepwater, which was really 10 or 15 years ago, just beginning to accelerate.
That led me to develop a course, which I have taught quite a number of times, to industries, designed primarily for professionals and in fact for engineers for the most part, and it is an overview of the technology which was used for developing and producing oil and gas fields in deep water. I have one-day, two-day, and three-day versions of it, depending on how much information somebody wants.
Marty Stetzer:
You’ve also done a ton of research and stayed current on these technologies, Terry, so one of the things you told me was these technologies were really part of why deepwater is so economic.
Terry Gardner:
It’s just amazing. Well, let me preface this by saying when I first came into the industry 40 years ago, I could see that almost everything that was done in the industry was developed by evolution, almost traditional ways of doing things, which evolved rather slowly. What has happened in the past 12 or 15 years in deepwater is exactly contrary to that. Technology has infused our industry from aerospace, from information technology, being used to allow advances at a spectacular rate. Yes, when you say I have to keep up, I spend most of my time in fact, trying to keep up with the advances made in the various aspects of deepwater technology, and incorporate them into updates in my course.
Marty Stetzer:
For those folks who are new, our listeners who are new, where does deepwater start versus say, conventional offshore developments? What’s kind of a definition?
Terry Gardner:
Well, it’s sort of like outer space, you know. Where does outer space start? It’s kind of vague, but typically, shallow water is considered those depths where you could stand a platform on the bottom that penetrates the surface and you could stand on it. That would be up to a maximum of about 1,000 feet. Between 1,000 feet and say 2,500 feet, is what we call deepwater, and then beyond that is ultra-deepwater. We are actually producing oil today in water depths almost out to 10,000 feet, two miles.
Marty Stetzer:
Unbelievable, just unbelievable.
Terry Gardner:
Yes, it really is.
Marty Stetzer:
And it’s safe, and efficient, and cost effective?
Terry Gardner:
Well, it’s expensive, and that gets to a point of these deepwater developments that needs to be made. It’s very expensive and it’s very risky in financial terms.
The reason it has been successful is that the reservoirs being found in deepwater and ultra-deepwater are very large and very prolific, which means that when you drill a well into them, you get a high production rate from that well. The economics work as a result of the large reservoirs and the large production rates, and they are capable of covering the expenses in extreme water depths.
Of course, this recent decline in the price of oil is having a major impact in deepwater, and we are just watching to see how that impact is going to play out.
It isn’t yet clear, but some trends are beginning to emerge.
Marty Stetzer:
Part of the issue I think you’ve told me is the length of time it takes to do these deepwater offshore developments, correct?
Terry Gardner:
That’s right. Typically from the time that a discovery is made in very deep water, ultra-deep water let’s say, even until the decision is made to move forward, can be two or three years, and a number of exploratory wells, trying to determine exactly how much oil there really is in that new discovery and whether it’s economic, and then figuring out how best to do it, what’s the most economic way to develop the field.
Then it takes on the order of four years to do the engineering, build the hardware and install it, and by the way, often expenditures reach five, six, seven billion dollars and thinking about that as an investment where you get no return on your investment until that first barrel of oil is produced, which is after you’ve spent four, five, six billion dollars. That’s why I say it’s financially risky.
Marty Stetzer:
I noticed in our recent issue of the JPT, which is the monthly publication of [inaudible 00:07:58], of the SPE, that it’s expected that 250,000 barrels a day of deepwater production is coming on this year, in spite of the low crude prices, and I guess it’s because all this capital investment is now “sunk cost,” and they’re shooting for cash flow and showing some return on that investment.
Terry Gardner:
These projects started … Well, two things combine, I think here.
These projects started when the price of oil was a lot higher and by the time the price of oil began to plummet, as you say, there was a whole lot of sunk cost and so it didn’t make sense to stop the development.
Secondly, for the most part, these projects are carried out by major oil companies, and usually several of them at a time in each project, cooperating.
They have the deep pockets and the capability, for the most part … I’m not speaking for every single one of them, to continue investing when projects make economic sense, even in the face of declining …
Of course, these fields, I guess it should be mentioned also, these fields are generally programmed to produce for 20 to 25 years, so we’re talking about long cycles, during which time most of us hope that the price of oil will, at least partially, recover.
Marty Stetzer:
Terry, the other thing I’ve learned being new to the industry, one of the best ways to learn about the offshore and deepwater is the Offshore Technology Conference.
Can you tell our listeners a little bit about where it is, what it is, and in a way what you’ve learned through the OTC sessions?
Terry Gardner:
The Offshore Technology Conference is terrific because it does two things.
First it brings together all the technologists, the engineers, in a number of specialized sessions, quite a number. I don’t know, 40 or 50 of them, in which specialists talk to each other, present papers, and share new technology.
The other part of it is the manufacturers display their wares in booths, and so you can wander around and talk to people from those companies and get to know what the latest technology is that’s being developed or is available. Just tracing the history of the Offshore Technology over the past 40 years or so that it has existed … In fact it’s more than that.
It’s probably well over 50 … You see such a wide variety of companies now displaying at OTC, companies that specialize in technologies that were never related to the oil and gas industry at all five or ten years ago, and have come in because of their application in this rapidly developing deepwater capability.
Marty Stetzer:
It’s interesting, Terry. I’m a mechanical engineer and I always looked on the OTC as being the world’s biggest science fair with equipment from the smallest automation pieces to complete blowout preventers and platforms. In fact, we’ve taken a number of our videography interns to the OTC, not only to see the equipment but how the equipment is presented to folks who are actually showing up and trying to learn something.
Terry Gardner:
That’s true and the typical displays at the technology conference are the blowout preventers and the drilling risers and the big pieces …
The derricks, and the big pieces of equipment that are a traditional part of the industry, but what’s fascinating now is you’ll walk around and you’ll see this in the smaller booths, these companies that have developed super sophisticated electronic stuff that is vital to making things continue to work, the communications for example, with equipment on the sea floor.
You think about equipment being placed on the sea floor, in eight, 10,000 feet of water, connected by very long cables with fiber optic communication, and now it’s possible for the manufacturer of some of the equipment which is on the sea floor to sit in their office thousands of miles away, and through the Internet they can actually communicate with their equipment on the sea floor and determine how well it’s operating, and in some cases actually even command changes or adjustments to make it perform better or even fix it when it fails.
Again, from thousands of miles away, communicating over the Internet with equipment that is under six or eight thousand feet of water. It’s just amazing, and you see companies like that displaying how they do it at the OTC.
Marty Stetzer:
The OTC, for our listeners, is usually the first week in May. It’ll be May 2nd to 5th this year, and Terry, you’re going to do a one-day version of your course, correct?
Terry Gardner:
On May 1st, the SPE, Society of Petroleum Engineers, will sponsor a number of courses, and my one-day presentation overview of deepwater technology will be one of those courses, on Sunday May the 1st.
Marty Stetzer:
Terry, thanks. We’re very happy to have Terry Gardner as an EKTI associate. Look for more detail on offshore and deepwater developments on our website, and watch for Terry’s upcoming EKTI podcast and YouTube videos presenting more detail on many of the deepwater technologies.
A reminder of his upcoming class at the OTC, and thank you very much, Terry, we enjoyed talking to you today.
Terry Gardner:
Pleasure. Thank you, Marty. Nice being here.
The post The Drill Down Oil and Gas Podcast: Offshore Drilling and Deepwater Drilling appeared first on EKT Interactive.