Brazil’s Petrobras made headlines recently with the discovery of potentially rich offshore oil fields that hold the promise of more than 40 billion barrels of recoverable oil… the largest oil find in the Western Hemisphere in three decades.
“If confirmed by further drilling the reserves will be triple the size of Alaska's Prudhoe Bay, the largest U.S. field,” according to a report in Bloomberg news.
So, with a discovery of such titanic proportions, why hasn’t it put a dent in skyrocketing crude oil prices?
Perhaps it’s because the Petrobras discoveries were found more than 6 miles beneath the South Atlantic Ocean.
No More “Easy” Oil
It’s been said that all the “easy” oil reserves have already been found, and exploited long ago. Nothing drives that point home quite as well as this story of Brazil’s promising Tupi and Carioca oil fields.
These promising new offshore oil discoveries lie more than 150 miles off Brazil’s coastline; in water that’s as deep as 32,000 feet beneath the surface. That’s nearly twice as far down as the world’s deepest producing offshore wells.
At such depths, the water pressure on drill pipes is 18,000 pounds per square inch – that’s enough to crush a pickup truck like a beer can.
The engineering challenge in extracting oil from such depths is mind-boggling. An oil company executive says: “What we do at that water depth in the ocean is similar to NASA's space program, but they get to do it without any pressure trying to attack them.”
$200 Million Offshore Wells
On the ocean floor, the drilling equipment must be capable of operating at temperatures near freezing. Once there, the oil is still deep beneath the seabed under a layer of salt more than one-mile thick.
That’s another big obstacle, because even the best seismic mapping gear can’t penetrate salt crystals very well. So pinpointing the most lucrative oil deposits can be difficult at best. If Petrobras drills in the wrong spot, they’ve wasted lots of time and money.
Petrobras isn’t saying exactly how much it spent on the initial test wells, but similar drilling by Exxon and Chervron in the Gulf of Mexico cost $180 to $200 million for EACH well… and that was much shallower water.
Getting through this ancient salt bed at the bottom of the sea means using high-tech diamond encrusted drill bits made out of the same material used in nuclear reactor fuel rods.
Chevron shattered as many as a dozen drill bits – at $50,000 a pop – at EACH of 14 deep water drill sites in the Gulf of Mexico. That project cost the company nearly $5 billion.
Petrobras Climbs the Ranks of Top Producers… But at What Cost?
Once Petrobras successfully taps into its offshore oil bonanza special pipes are needed to carry it to the surface. These pipes must be designed to carry oil at temperatures above 500 degrees Fahrenheit.
As one oil analyst says, “A big find might not be a good find if it costs so much to develop that it's not commercially viable.” As I said: all the easy oil has already been found.
This 40 billion barrel find could catapult Petrobras into the upper ranks of the world’s biggest oil producers.
The reality is: the oil from these offshore fields would most likely never make it to a refinery without crude above $100 a barrel.
As far as making a dent in the global supply-demand inmbalance, the first significant oil from Tupi isn't expected to flow until 2012 to 2015 at the earliest.
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