Despite persistently high commodity prices, recent International Energy
Agency (IEA) reports indicate that world demand growth for oil in 2006 remained
broadly unchanged at 1.2mbpd or 1.4%. In 2007, this is forecast to increase to
1.9%. Both of these figures are consistent with long-term average growth
forecasts of 1.6% per year.
Economies in the OECD countries are proving resilient in the face of high
oil prices, as evidenced by US motorists accepting the reality of $3-a-gallon
petrol. Rising oil and gas prices have not dampened demand or economic growth
in rapidly industrialising countries, indeed growth in China accelerated to
approximately 8% in the first half of 2006.
The world supply of oil has grown to match demand. The call on OPEC crude
remains around 29mbpd, implying little change in effective physical spare
capacity of approximately 2mbpd. The IEA has lowered its expectations for
non-OPEC production growth, but this continues to see growth in 2007.
In the past 18 months supply has been affected by disruptions in the Gulf of
Mexico and Nigeria, slowing production growth in Mexico and production closures
in Alaska. There have also been growing signs of physical constraints on growth
in upstream activity due to a shortage of equipment and skilled
Around the world, governments understand that reinvestment in energy and
energy infrastructure is urgent if we are to avoid energy shortages that could
hamper economic growth. Saudi Arabia has begun massive investment in new
production capacity for both oil and gas, while exploration is underway in
North Africa, the US and Russian Arctic, Eastern Siberia, deepwater India and
Malaysia, the Norwegian Arctic Ocean, and West and Central Africa.
As far as gas is concerned, the IEA has recently published data that
indicate demand rising at a compound annual rate of 2.71% through to 2010. This
same set of data indicates that only half the investment needed to grow supply
to meet demand has been committed.
- Demand for oil and gas has continued to grow, despite recent prices
- Increasing production to match demand must be a top priority if global
economic growth is to be sustained
- New technology is playing an increasingly important role in the retrieval
of lower-quality hydrocarbons from complex reservoirs
Russia remains the fastest-growing area for global oilfield and information
services company Schlumberger. Drilling and measurements technologies have
become the fastest growing services as the success of horizontal side tracking,
as an alternative to the reservoir drainage technique, becomes more widely
recognised. Integrated project management work is also growing.
Growth is strong in the Middle East, driven principally by the extraordinary
increase in activity in Saudi Arabia, where the average rig count increased
from 49 in 2004 to 70 in 2005 and 100 in 2006. This activity was aimed at
increasing and maintaining Saudi Arabian oil production capacity. In Algeria,
seismic activity is strong and there are high levels of exploration drilling.
Overall, growth is running at more than 20%.
These areas promise sustained levels of new exploration and development.
They have the reserves to sustain long-term activity, their activity levels are
increasing and they are primarily land markets where the logistical
difficulties of rapidly ramping up activity are minimal.
To service this growth, the service industry currently faces a number of
important challenges. It is essential that the service industry's already
stretched supply chain is able to deliver the new equipment and products
required to meet the increase in activity. Meanwhile, the trend towards
exploration will affect the technology used in the industry, as well as the
overall uptake of technology, and the service industry must adapt to such
The industry will continue to struggle with the lack of trained
professionals. As a result, systems for the more effective use of the core of
specialists that exist must become more prevalent. Demand for integrated
project management services will increase.
Technology for non-conventional hydrocarbon recovery and production must be
deployed. As the quality of hydrocarbon declines, the importance of this
technology will increase. The service industry must accommodate this
As we enter a new exploration phase, infield exploration and the enhancement
of recovery from existing reservoirs will remain a key contributor to
increasing production. At the same time, accumulations of new oil in most of
the accessible exploration areas will be in smaller fields or will be more
difficult to recover. As a result, improved characterisation of the reservoir
will be more important than ever before, and this will require much better
evaluation of uncertainty and the consequent mitigation of risk.
In this new exploration phase, I am very excited about several technologies
that Schlumberger has introduced. Q seismic is a huge improvement over all
previous systems in terms of quality of seismic definition. Q technology
provides improved, low-noise, repeatable seismic measurements that reveal
subtle and complex reservoir details.
Unlike standard techniques, it acquires data from every sensor digitally,
avoiding conventional seismic signal averaging, and yielding information of
much higher fidelity. In addition, Q offers faster processing – enabling
usable time-lapse surveys offshore and quasi real-time results on land.
But Q technology also reduces risk. The integration of advanced wireline and
logging-while-drilling data, together with newer techniques such as controlled
source electromagnetics, offers even greater potential for understanding
Scanner services take evaluation to the next level by providing customers
with a 3D scan of a formation and thus a deeper understanding of reservoir
rocks and fluids. The first three services to be introduced are the Rt Scanner
multi-array tri-axial induction tool, the Sonic Scanner advanced acoustic
platform and the MR Scanner nuclear magnetic resonance tool. Scanner
technologies see deep into the formation at multiple depths simultaneously to
reduce the uncertainties associated with reservoir characterisation.
One critical area of reservoir characterisation that will benefit from such
technology is geomechanics – the study of rock stresses and long-term
formation integrity. This enables the quantification of the impact of the
drilling process, for example.
The integration of measurements is vital in the reservoir characterisation
field. To develop this market, Schlumberger has purchased TerraTek, the global
leader in geomechanical measurement and analysis. This will allow the company
to integrate advanced measurements to mitigate the risk associated with complex
reservoirs and lower-quality hydrocarbons.
Well testing is another technology that is growing in importance as interest
increases in exploration and the development of smaller or more complex
hydrocarbon accumulations. Due to cost and environmental pressures, oil and gas
companies have greatly reduced the number and duration of the flow tests they
perform on exploration and delineation wells in recent years.
While wireline formation testing tools have rendered the need for many tests
obsolete, there is a growing recognition that there is no substitute for
flowing the reservoir to make a good estimation of long-term reservoir
Schlumberger recently introduced the Scope series of measurement-
while-drilling and logging-while-drilling services, which dramatically improve
drilling performance and well placement. Scope represents one more step towards
improving recovery from smaller and more complex reservoirs. Scope services set
new standards for reliability and data quality, while quadrupling industry
standard data transmission rates.
PeriScope is a directional, deep electromagnetic imaging-while-drilling
service that is revolutionising well placement with its unsurpassed ability to
view the reservoir as the well is being drilled.
This technology enables formation and fluid boundaries up to 15ft away from
the tool to be continuously monitored so that horizontal and extended-reach
wells can be drilled entirely within the reservoir sweet spot. From the very
first field test, PeriScope customers have been able to eliminate sidetracks,
enhance production and increase recoverable reserves.
The timing of all these technology introductions is fortuitous, in that they
coincide with a new exploration cycle and with a growing need for better