OTC 2019: Hess VP says offshore oil ‘a growth business’

Offshore | May 11, 2019

HOUSTON – Growing demand for energy and for petroleum products will spur offshore activity in the near term and the upstream oil and gas industry needs to be ready to answer that need, said Gerbert Schoonman, Vice President, Global Production—Offshore, Hess Corp., at the Offshore Technology Conference on Thursday.

In his presentation entitled “Keeping the Faith,” Schoonman stated that offshore and deepwater will remain critical to meeting future energy demand.

Schoonman noted that credible long-term energy forecasts predict that global energy demand will grow by about 25% by 2040. “The energy mix will change, and the use of renewables will grow,” Schoonman said. But oil demand will also be growing as part of that mix, “and offshore oil is a growth business.”

He noted that upstream investment has declined by 40% since 2014, and while onshore shale production has stepped in to fill a production void, “it won’t be enough” going forward, Schoonman said. “Offshore has a key role to play in meeting future demand.”

The global oil and gas industry will need to invest $6 trillion in offshore development by 2040 to meet future demand, Schoonman said. “We will have to add twice what the US is producing now,” he predicted. Some $200 to $250 billion/year will need to be invested in the global offshore market to do that, he said, including shallow-water, deepwater, and ultra-deepwater fields.

Going forward, Schoonman said that it will be vitally important for operators to maintain their investments, both onshore and offshore, and throughout the cycles of price fluctuations that inevitably occur.

The offshore market, he added, currently benefits from some “compelling economics.” He noted that while the onshore Bakken play has breakevens of $55/bbl, the offshore Liza discovery has a breakeven of $40/bbl.

Schoonman conceded that at present, there are not too many new projects being developed in the Gulf of Mexico. “But we have the opportunity to change that,” he said. New seismic technologies are can image hydrocarbon reserves below the salt layers, drilling costs have come down, and operators are turning to standardized production facilities. With these new technologies and cost efficiencies now in play, “we think that there will be a lot of projects in the Gulf of Mexico in the future.”

“We are optimistic about the Gulf,” Schoonman said. He noted that Hess has been among the top 5 players in the last two lease rounds in the US Gulf of Mexico, in terms of acquiring acreage. “So we are putting our money where our mouth is.”

He also noted that Hess continued to develop a number of offshore projects even in the midst of the downturn: Tubular Bells and Stampede in the Gulf of Mexico; North Malay Basin in the Gulf of Thailand; and the Liza project offshore Guyana.

At present, drilling and other work is continuing at the Tubular Bells field, and at the nearby Esox prospect in the Gulf of Mexico. If successful, the Esox prospect could become another high-return tieback for Hess, Schoonman said.

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