Published in Oil & Gas Executive Report, Volume 2, Number 3, 1999, pages 36–42.

Deep water has been proclaimed the great new opportunity to stimulate new hydrocarbon growth. In what has been described as a feeding frenzy, many companies have paid high signature bonuses and accepted tough terms to join the new gold rush. In the last decade, the take up of deepwater acreage has been remarkable: most of the prospective deepwater acreage in depths of up to 5,000ft has already been leased, with significant areas extending to 11,500 ft. Most bids anticipated oil prices significantly higher than the levels of late 1998and early 1999, and the challenge is to make the plays profitable.

For deep water to be viable in today's world, the industry has to be looking to produce at unit technical costs generally no greater than U.S. $6/BOE. Is this realistic? History suggests that it might well be.

Over the past decade, deep water has established itself as a significant piece of the E&P business. The rapid advances in subsurface modeling/understanding and deep offshore technology have given the deepwater business a big impetus.

Conventional basins are maturing and the industry has spent a lot of effort on remote basins, such as the Arctic, with no existing infrastructure or markets or on technologically harsh environments, such as high-pressure/high-temperature reservoirs, but the results frequently have not met expectations. To replace produced reserves and secure future growth, the industry has focused attention more recently on deepwater acreage. The proving ground of the Gulf of Mexico contained the well-established infrastructure, the market and the mature service industry to encourage the deepwater pioneers, who were then emulated by others in more distant waters.

Defining deep water, for simplicity, as water deeper than 200 meters (650ft), some 3.2 million square kilometers of deepwater acreage was held underlease by some 240 companies by 1999, with 12 leading companies holding approximately one-third of this. The largest area of leased acreage is in Asia and, curiously enough, the smallest area is in the Gulf of Mexico.

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