Like It or Not, Deepwater Oil and Gas Holds the Key to Energy Transition

Oil and gas has long been the lifeblood of the energy industry. And even though it has provided great benefits to the world, a large slice of society wants to shift from hydrocarbons to alternative, more sustainable sources of energy.

Even in the face of such opposition, industry experts during the Deepwater’s Role in the Energy Transition panel at the 2023 Offshore Technology Conference said that hydrocarbons still play an essential role in the search for a more sustainable source of energy.

“Deep water production is going to grow more quickly than any other resource. This is where we're going to see most production grow out to 2030. You can really see it outstripping all other resource,” Julie Wilson, director at Wood Mackenzie, said during May 3’s panel. “We’ve seen some great exploration in new frontiers over the past 10 to 15 years. And those resources are now coming on stream, places like Brazil pre-salt are growing production and Guyana is growing production as well, with lots of phases to come on stream.”

Those places are only a few examples of deepwater growth, with a myriad of projects set to come onstream. In 2022, Wood Mackenzie was involved in 22 countries producing deepwater projects. By 2032, that number will grow to 33 countries.

According to Wood Mackenzie, more than twice the amount of hydrocarbons needed to meet global energy demands have been discovered, but the resources have never been developed due to a plethora of issues. Resources were oftentimes too dirty, too far from market or too expensive to safely develop.

The oil and gas investment required to meet demand growth is $500 billion per year for the next 10 years. So far there has only been an investment of approximately $300 billion to $400 billion. Exploration of new resources is required to find better hydrocarbons than are already in the current portfolio of operators.

As Clare Gardner, South America exploration director for Hess, put it: “If we just rely on the proven resources we have, there will be [a] significant supply gap.”

Exploration has continued to uncover high quality resources that are low carbon with a low breakeven point — at least once every two years to five years. Western hemisphere margins have delivered 150 billion boe resources over the past 15 years. One example of this is the Guyana-Suriname Basin.

The Guyana-Suriname province has attracted over 15 international oil companies due to its hydrocarbon-rich reservoirs. Guyana delivers “advantage barrels” which Gardner said are low emission and have a low breakeven point. The breakeven for the first four sanctioned projects in the area were between $29/bbl and $35/bbl. Guyana has one of the fastest growing economies in the world, as the basin went from discovery to first oil in less than five years with more reserves yet to be discovered. There are over 50 exploration and appraisal wells in the Stabroek Block, with resources underpinning more than six hub-class projects.

Actively searching for low emission reserves isn’t the only way that operators are looking to curb greenhouse gases.

BP has developed 14 new oil and gas projects over the past three years, with four more to come before year’s end. While oil and gas has and always will remain an integral part of BP’s business model, they have begun transitioning to other energy sources.

“Refining is really become an exciting part of BP's portfolio,” said Sarah Hill, BP vice president of procurement. The company is “transitioning these refineries to becoming an energy hub and really looking at every build for tomorrow. We have five new major projects in the biofuel space planned for these refineries.”

BP has been collaborating with what Hill calls “top suppliers” to develop more sustainable solutions. Those solutions include the use of green steel, although volumes aren’t currently suited for mass use, as well as tracking the carbon footprint of their supply chain and using circular methodology to identify opportunities for reduction, reuse, recycling and recovery.

Petrobras is also taking a similar approach to BP, marrying oil and gas with sustainability. Petrobras is among the most carbon efficient in the oil industry, said Maiza Goulart the company’s head of research and development. Their projects seem to bear that out, she said. In 2022, they completed the world’s largest carbon capture, utilization and sequestration project. The company reinjected 10.6 million tonnes (MMtonne) of CO₂. From 2008 to 2022, Petrobras has reinjected a total of 40 MMtonne CO₂. The company has a commitment to accumulate “80 MMtonne CO₂ by 2025,” said Goulart.

Petrobras is home to the high-pressure separation technology, or HISEP, which separates and reinjects gas with high CO₂ content produced alongside the oil while still on the seabed. The company is also constructing two FPSOs with an all-electric configuration

As Brandon Finley, commercial director of new energy at TechnipFMC, said, “You need different technologies and different solutions for the different areas of transitioning.”

“Deepwater will be needed. If you think about parts of the country, like the west coast of the U.S., deepwater is essential,” Finley said. “In places like Portugal, deepwater renewables are essential if you want to go offshore. This is going to be very important on a global scale to do this, because you may not need it in some markets, but other markets will. [Transition] is going to take all of us… We’re a company, and we want to make money, but the reality is that the amount of work and the demand going forward, we don't need to worry about competition.

“We need to worry about how to move the energy transition forward.”