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by BK Lim (1 May 2011)
The Deepwater Horizon (DWH) blowout on the 20 April 2010, overshadowed earlier evidence that the Macondo well was destined to trigger a major disastrous event. On 15 July 2010, I was barred from a drilling website for innocently exchanging information on the mysterious BP massive shares sell-off by Tony Hayward. That further triggered my interest in the ensuing Gulf Disaster. I was told to follow the money. And if the money trail was right then, this was a disaster made to happen on purpose for economic windfalls. So far all the evidence that surfaced thereafter have substantiated instead of diminishing this theory. Is that why deep water exploration is so attractive because of the high cost and high risk?
In geohazards survey circles (despite the purpose of preventing hazards), there has always been suspicions that old vessels were deliberately operated until they sank for insurance compensation and other sinister purposes. See figure 156-1. These are small frauds involving a few millions dollars here and there. Where there are easy millions to be made, you can be sure of the frauds behind the schemes.
So could the Deepwater Horizon disaster a multi-billion setup? Was the Transocean Marianas intended to go down at Macondo Well A in Nov 2009 instead of the DWH in 20 April 2010? Was the sinking of DWH a backup plan when Hurricane Ida rescued Transocean Marianas from its watery grave?
Tony Hayward sold off 1/4 of his BP shares holding prior to Marianas damage by Hurrican Ida
Tony Hayward sold off 220,000 shares at 587.5 p 10 days before the Transocean Marianas abandoned Well A on 9 Nov 2009 due to damages sustained by Hurricane Ida. One day after the pullout, Tony Hayward bought back the BP shares (56 lots) at a higher price of 595.2 p.
This is the similar pattern of massive sell-off (> 220,000 shares) only to buy back days later at smaller lots of 10- 90 shares; as if to cover their tracks of insider trading. That at least 4 BP directors sold and buy back in unison weeks before the 20 April 2010 blowout incident cannot be mere coincidence.
Now, recent researches by fellow gulf activists have confirmed what we have always feared. Are disasters being purposely perpetuated for monetary gains?
As oil prices shoot up (above $75/barrel) the costs of exploration, production and maintenance also increase. Unlike land-based Middle East low-cost production (less than $10/barrel), offshore production costs can range from $20 to $75/ barrel depending on the water depth and size of the fields. Deep water production costs are definitely higher; probably much higher than $80/barrel.
With a long gestation period of at least 2 years, hundreds of millions sank in for exploration costs, less than 60% chance of success and more hundreds of millions in engineering production costs, why would deep water oil exploration be economically attractive at all?
So let's take the case of Macondo prospect. The budgeted cost of drilling the first exploration well alone was 90 million USD. And it went over the budget; more than $100,000 million. Even if we assume the total cost of exploration to production to be just $500 million, at 200,000 bpd production rate and the price of oil at $100/barrel, it would have taken 25 years to payback just the high capital expenditure alone. This does not make sense for any investor.
Therefore we see oil field concessions being traded like commodity futures. It is a known fact that oil reserves can be manipulated for economic advantage. But is there an easier, faster and surer way of making a windfall, if not for oil company itself, at least for the elite insiders. All high cost offshore projects are heavily insured against Force Majeure. Thus, instead of gambling with 60% success rate and more than 3 years of production installation to reaping in the profit, disasters can be a good insurance pay off besides the windfalls to be reaped from the stock price fluctuation and the recovery operations as we have seen in the BP Mega Oil spew in the Gulf of Mexico.
It was recently brought to my attention that ENI rehired the Transocean Marianas to BP for drilling the Macondo well (Well A) in October – November 2009 at $446,000/day. ENI hired the Transocean Marianas at $565,000/day for a 2 year contract. Typical of offshore rig contracts reporting, the periods of hire and drilling were intentionally shifted by a couple months to protect market information.
But why would ENI rehire at a loss of $120,000/day to BP unless they too knew that the aging Marianas would not live out her 2 year contract period? Why hire the aging Marianas (1978) at $565,000/day when the state-of-the-art Deepwater Horizon rig (2000, $560 million) only cost $500,000/day? ENI's Saipem 10000 (1985, $400 million) which was capable of drilling in waters over 7,000 ft cost only $356,000/day.
Was ENI expecting a Force Majeure to profit from a quick insurance compensation? Was the Transocean Marianas saved from a disastrous blowout by Hurricane Ida? Now, that would be a coincidence would it?
Upcoming Rig Contract Commencements – 13 November 2009.
Two contracts are due to start before the end of the year. Eni will start drilling in the GOM with Transocean's Marianas semisubmersible Dec. 2, 2009. The NOC has contracted the rig for two years at $565,000/day. The Marianas is currently working at the Macondo Field at Mississippi Canyon Block 252 No. 1 for BP at $446,000/day.
The contract will terminate in Q3 2012. However, the Deepwater Pathfinder, an ultra-deepwater drillship, was contracted by ENI in 2008 for a start date in February 2010. The rig is contracted through 2015 at a dayrate of $650,000. This contract carries the highest dayrate on record that Eni has agreed to pay.
Just two weeks later, Eni will start the $650,000/day contract for Transocean's Deepwater Pathfinder. The drillship will drill for Eni in the GOM until Feb. 3, 2015. Currently the Deepwater Pathfinder is working for KNOC and Addax for $600,000/day off Sao Tome and Principe at Lemba 1X. The drillship then will work for Lukoil from Dec. 1, 2009 to Feb. 15, 2010 for $630,000 off Cote d'Ivoire before Eni starts its contract.
deep-water-oil+drilling/619 – 14 Feb 2008
Unfortunately, deep water drilling comes with a price...
In 2007, Brazil reported the discovery of a massive offshore oil field. The Tupi discovery boosted Brazil's proven oil reserves more than 50%. But don't let this ultra-deep field's huge numbers fool you-it's going to take a lot of time and money to bring Tupi into production. In order to extract the oil, producers have to go through 7,000 feet of water, over 10,000 feet of sand and rocks as well as another 6,000 feet of salt. Nevertheless, Brazil's state-run oil company, Petrobras, is confident that Tupi could be producing one million barrels a day within 15 years. By that time, it might be a case of, "too little, too late."
Investing in Deep Water Drilling
The Tupi field is a perfect example of the kind of difficulties offshore producers face. The fact is that deep water projects can get extremely expensive. The day rate alone for renting a drilling rig during 2007 upwards of $500,000 or more! For investors, deep water oil drilling has opened the door wide open for oil service companies. Rig companies like Transocean (NYSE: RIG) have been making a killing off the rising demand for offshore drilling equipment.
http://www.reuters.com/article/2009/07/28/oil-cost-factbox-idUSLS12407420090728 – 2 July2009
The International Energy Agency (IEA) -- in its latest November 2008 world energy outlook -- gave the followingestimates for the all-in costs of producing oil from various types of hydrocarbons in different parts of the world: Oilfields Estimated Production /source Costs ($ 2008) Mideast/N.Africa oilfields 6 - 28 Other conventional oilfields 6 - 39 CO2 enhanced oil recovery 30 - 80 Deep/ultra-deep-water oilfields 32 - 65 Enhanced oil recovery 32 - 82 Arctic oilfields 32 - 100 Heavy oil/bitumen 32 - 68 Oil shales 52 - 113 Gas to liquids 38 - 113 Coal to liquids 60 - 113 Source: International Energy Agency World Energy Outlook 2008 (Compiled by Martina Fuchs, Christopher Johnson, Karen Norton,Joe Brock and Barbara Lewis, Editing by James Jukwey)
http://www.forbes.com/2010/01/21/biggest-oil-fields-business-energy-oil-fields.html – 21 Jan 2010
The world gets its daily ration of 85 million barrels of oil from more than 4,000 fields. Most of these are small, less than 20,000 barrels per day. Giants, producing more than 100,000 bpd, account for just 3%. Then there's the megafields that gush out 1 million bpd. These are the most important sources of energy in the world--fields worth fighting over. In figuring the top 10 fields of the future, we're not interested in most of the giants of yesteryear, and not necessarily even the giants of today. Just the giants of tomorrow--those fields that might not even be producing yet, but will likely be doing better than 1 million bpd a decade from now.
The once and future king of the world's oil fields, Ghawar, in Saudi Arabia, ranks first on our list. It is thought to have had more than 100 billion barrels of recoverable oil in place. At 160 miles long and 16 miles wide it confounds even the most experienced geologists. With something on the order of 60 billion produced over the past 60 years, you'd be excused for thinking that Ghawar was sliding into its twilight years. Yet the Saudis insist that Ghawar is still going strong, producing 4.5 million bpd from six main producing areas with the ability to do 5 million bpd if called upon.
