According to the Rystad Energy consulting firm,
ultra-deepwater offshore oil production is expected to grow at
19% annually through 2030, 19 times faster than conventional land
Source: Seadrill 2014 Howard Weil Energy Conference
One of the latest techniques in offshore drilling is offshore
fracking, what David Wethe of Bloomberg calls "the next frontier
in fracking." This article explains how this new technique works,
the challenges it faces, and how you can profit from it.
Challenging drilling environments
Source: Wikimedia Commons
Offshore fracking has been around for over 20 years, but not
until recently has new technology allowed this practice to take
off in places such as South America, Africa, and, most of all,
the U.S. Gulf of Mexico. For example, the geology in many
offshore formations consists of loose sand and shale, much like
sand on a beach. This causes sand to get clogged and damage pipes
and equipment due to the high pressures and speed at which oil,
gas, and sand are extracted (much like a sandblaster).
New techniques such as the use of thick sand filters and
increased use of frack sand (which props open cracks in shale and
helps oil and gas flow), has helped make the technique
economically viable. But thanks to the need for drilling in
waters over a mile deep and the need for up to 125 tons of frack
sand per well, the cost per well can be staggeringly high: up to
$100 million per well and $1 million per day to operate.
According to Ron Dusterhoft, an engineer for the world's
largest fracking company,
, "It's the most challenging, harshest environment that we'll be
working in. ... You just can't afford hiccups."
Obama's on board the offshore-fracking train
Recently the U.S. Department of Interior's Bureau of Ocean Energy
Management opened up 21.6 million acres of land for auction from
interested oil companies such as
Royal Dutch Shell
in what is known as the Lower Tertiary basin. This formation is
thought to hold 15 billion barrels of oil, worth $1.5 trillion at
To help cash in on this mother lode, oil companies are
expected to increase offshore fracking by 10% between 2013 and
2015, according to Douglas Stephens, president of pressure
pumping at oil service provider
That kind of energy/economic potential has gotten the
attention of the Obama administration. Mike Connor, deputy
secretary of the Department of the Interior, said of the
This sale underscores the President's commitment to create
jobs and home-grown energy through the safe and responsible
exploration and development of offshore energy resources. ...
The Gulf of Mexico has been and will continue to be a
cornerstone of our domestic energy portfolio, with vital energy
resources that spur economic opportunities and further reduce
our dependence on foreign oil.
How can you cash in?
As previously mentioned, major oil companies such as BP, Royal
Dutch Shell, and Chevron are all investing billions of dollars to
tap the riches of the Lower Tertiary Basin. But an even better
way to profit from offshore fracking is with the oil service
companies that provide the fracking expertise -- companies
such as Halliburton,
, Baker Hughes, and
Superior Energy Services
Baker Hughes is especially well poised to prosper, owning
a third of the world's offshore fracking fleet and some of the
industry's best technology. For example, it recently fracked a
well for Brazilian oil giant
in 8,211 feet of water that reached to 27,000 feet beneath
What about environmental concerns?
"Deepwater fracking in the Gulf should be banned immediately as
the true impacts to the marine environment are unknown," says
Jonathan Henderson, coastal resiliency organizer for
the Gulf Restoration Network. Such are the concerns activists,
including writer Cherri Foytlin, who fears that chemical
contamination of the Gulf could destroy the fragile ecosystem of
If the BP oil spill of 2010 taught us nothing else, then
perhaps it should be that policies, both environmental and
economic, should center around the compatibility of an ethic
that truly represents the value of our oceans and waters as a
life source that we who live in the Gulf know them to be.
On the other hand, stringent regulations already exist to
prevent just such environmental devastation. Offshore fracking is
regulated by both the EPA and Department of Interior's
Bureau of Safety and Environmental Enforcement, under
the Clean Water Act and its National Pollutant Discharge
Elimination System permit program. The program requires extensive
treatment of fracked water (mostly sea water is used) that
removes all but trace amounts of fracking chemicals, permits no
oil contamination, and imposes strict toxicity limits on water
discharged into the Gulf.
Offshore fracking represents one of the most promising, yet
challenging, ways to increase global America's oil production and
reap immense economic benefits. But the seven companies mentioned
above, especially the oil services companies, represent great
ways for long-term investors to cash in the $1.5 trillion that's
up for grabs in the Gulf of Mexico.
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7 Ways to Profit From the Next Era in Offshore
originally appeared on Fool.com.
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