Blind Faith: Size matters Posted by: McQ
on Sunday, November 18, 2007
I just returned from a whirlwind trip to Houston and Corpus Christi where I had an extremely interesting couple of days learning a little bit about the oil industry. I and a few other bloggers were able to hear from a large player in the oil industry - Chevron. And we were there, specifically, to see their deep water production facility, "Blind Faith" before it is deployed to the Gulf of Mexico.
Incidentally, for you that are wondering, the name of the platform came from a code name assigned to the two leases that Chevron was bidding on at the time. The theme for the code words the company used was rock and roll bands. The idea is to have everyone in the company refer to the particular lease by the code name rather than the government assigned name, such as Mississippi Canyon blocks 695 and 697. That way should your competition overhear you at lunch talking about this hot lease your company is bidding on, Blind Faith won't mean a thing to them.
We first got an overview of how the the leasing process works. Geophysicist Barney Issen demonstrated the amount of research necessary to determine the possibility of finding oil in a lease site. Much of it is through a computerized system that Chevron has built which maps the undersea based on seismic data gathered prior to the bidding process. It is, obviously, this data and other information as well as the analysis generated from this data by which the decision to bid or not bid is based. And, of course, it is an ever evolving science in which the ongoing goal is more data in finer detail. Think of the amount of color information available in a 1 megapixel shot vs. a 5 megapixel shot of the same subject. Now consider a 10 megapixel shot. They started years ago at the 1 megapixel level and are striving to surpass the 10 mp level as they get more an more sophisticated all the time. As Barney said, his computer is running 280 gigabytes of memory to make the calculations necessary to determine whether or not the possibility exists that oil is located on particular lease sites.
Because of the cost of the leases and the cost of gathering the data necessary to evaluate their potential, when any well is drilled in the sea, and before it produces a single drop of oil, it will have cost Chevron (and anyone else for that matter) 100 million dollars. And considering that on average only 1 in 5 attempts actually produces a significant amount of salable product, that is a huge up-front investment.
That brings me to my point about "size" mattering. I think one of the more relevant points I learned was the size of the investments oil companies like Chevron routinely make in search of product. Right now, not counting Blind Faith, it has 27 projects world wide each costing a billion dollars or more. Blind Faith is a billion dollar plus project - again, before the first barrel of oil is extracted.
Billion dollar (and multi-billion dollar) projects aren't undertaken unless you make a profit and can put that profit back into research and development and building the platforms necessary to produce the product. Since most of the oil which is easy to extract has already been extracted, that which is left is harder and harder to bring up out of the ground. New technology both for finding and extracting oil are necessary. And that costs money. Profits. No profit means no exploration or technological advances. No exploration means our supply eventually dries up. No technological advances means that even if new supplies of oil can be found they can't be extracted because the means to do so won't exist. Size matters in profits too.
The Blind Faith production platform is an amazing sight. We arrived at the Blind Faith site on a perfectly beautiful Corpus Christi morning, and the obvious dominant feature was the platform itself. It rises the equivalent of 29 stories from hull keel to the tip of its flare boom. Its final total displacement is over 40,635 tons. When it is in place in the Gulf and moored, it will have an overall height of 245 ft (20 stories).
In January, the production platform will be towed out into place in the Gulf over the Mississippi Canyon and become the 2nd deepest production well in the world. The first belongs to Chevron's 25% partner, Anadarko Petroleum Corp, an independent producer. Anadarko owns the deepest water production site, also in the Gulf over the Mississippi Canyon, known as Independence Hub. It sits in 8,000 feet of water. What Anadarko brought to the partnership was experience with the first deep-draft semi-submersbile production platform, and those lessons learned were applied to the Blind Faith production.
Once Blind Faith is towed into position, an 11 day journey, it will take 8 days and 8 lines to moor it in place. As you might imagine, the mooring lines must be pretty massive themselves. Each mooring point will be a 105 ft long and 18ft diameter steel pipe driven into the sea floor. Each mooring line connecting to the platform will be over 9,000 ft long and consist of 9.5 inch thick polyester mooring ropes as well as chains which have individual links weighing 365 pounds each.
Of course the platform will be permanently occupied with a crew of 47 and produce oil and gas 24/7 at about 40,000 bbl a day of oil and about 40 million cu.ft. of gas a day beginning in the 2nd quarter of next year. Oil and gas will then be sent via pipeline to refinery locations in Louisiana and Alabama. The platform has a service life of about 25 years and has been designed to withstand a 100 year storm and a 1,000 year storm.
The technical aspects of recovering oil and gas from those depths is significant. Heat and pressure are certainly obstacles, with 300 degree (F) and 15,000 psi being typical. Obviously the engineering of both the Blind Faith platform and the drilling are meant to address those challenges and many more. When all is said and done we're talking about a production platform sitting in 7,000 feet of sometimes violent Gulf of Mexico water over a drilling site expected to go to 24,000 feet all in the name of supplying what customers are demanding.
The scale of this hunt for product is global, the investments made by those looking for it are gigantic as are the risks they take as well.
I'm going to have a lot more to say about all of this in subsequent posts, but I did want to add another impression I took away from this trip. Our guide on our portion of the tour on the Blind Faith platform was a man named Emile Beaudreaux. Now that, my friends, is a classic Cajun name. A very engaging personality, Emile took great pains and went to great lengths to explain the intricacies of oil production on that facility. It's a project he's been working on for 2 years. His pride in Blind Faith was obvious from the first word he had to say about it. This is his baby and, he will be running it once they get it in place. It will be his home away from home as he will be the person in charge of the operation.
I talk a lot about the pride I see in our military about their profession, their equipment and what they do. I saw the same level of pride and professionalism in Emile. He is personally invested in this project and he can't wait to make it a producing facility. I found his pride and sense of ownership to be both impressive and assuring. We often think of big oil companies as monolithic faceless giants that don't give a good hoot about anything but profit. Mr. Beaudreaux and many others I met, showed me a significantly different and praiseworthy side and one the oil industry needs to spend a bit of time and energy presenting to the public out there. Good people.
This is the first of a few posts I'll be throwing up on the blog over the next few weeks talking about the trip, what I saw and some thoughts about some tangential subjects that come to mind. Consider this as a sort of trip report.
As always the disclosure statement:
"API has underwritten Bruce McQuain's travel expenses to attend the Chevron location tour in Houston and Corpus Christi, Texas. Bruce is not required to blog about API initiatives. The only requirement as a condition of underwriting these expenses was to include this disclosure of this relationship on his blog."
"API", is the American Petroleum Institute. I want to thank them for the opportunity to see and hear from an industry I frankly don't know much about. But as everyone knows, it is an industry critical to our economy and our national security. Fascinating trip, fascinating time, fascinating industry.
Brian Westenhaus, blogging at New Energy and Fuel, comments on the trip. I'd bookmark this site if I were you. Brian has a hands-on background in the energy business, is an excellent writer and has a very interesting view (and opinions) of how it should develop in the future.
Some more discussion of the trip on our podcast here.
Well, McQ, I have good news and bad news for you. The bad news is you’re helping me. You’re giving me info and links that I can use in my first year seminar "Syriana" which looks at Islam, terrorism, American foreign policy and the oil industry (the movie gives a take off point, and we examine it critically, but really go from there). So you’re helping me do my work, I know that must irk you. ;-)
Ah, but the good news is that this is information from you reflecting your perspectives, so at least you can know that you are influencing how I teach my class and therefore your perspective gets injected into the class discussion. I look forward to the blogs and links about the energy industry, and really appreciate your comments and the first link you provided. I definitely will book mark that site and use it as a resource. Thanks! (And I truly mean that!)
Great post. One question; I’m guessing that you mean something other than 280 megabytes since that really isn’t very much anymore. It’s barely more than 1/4th a gigabyte and I’m running 3 GB on my laptop. 280 GB sounds more plausible as the large of amount of memory needed to execute these sorts of calcs.
As Barney said, his computer is running 280 megabytes of memory to make the calculations necessary to determine whether or not the possibility exists that oil is located on particular lease sites.
...that I can use in my first year seminar "Syriana" which looks at Islam, terrorism, American foreign policy and the oil industry...
Given your bent as displayed in comment threads here, Scott, I can only hope that your biases do not permeate. I’d be unsettled if I were to learn that one of my best friends son was attending your courses.
If you are ever in the Houston area again, I can show you around. I was in the oilfield for many years and my Wife works for Conoco Phillips. It always amuses me that when the price of oil goes up how we are the big villains to people like Erb. but when the price of oil is way down and all of us are out of work, we never hear a peep from his like.