The latest move in offshore drilling: oil rigs on the ocean floor

Chris Sorensen on Royal Dutch Shell and the hunt for black gold in the Arctic

Maybe it’s better, down where it’s wetter

FMC Technologies

Royal Dutch Shell’s efforts to drill for offshore oil in the Arctic, one of the harshest environments on Earth, have so far been a lesson in humility. Last season’s drilling program was marred by numerous delays, equipment failures and a towing mishap that left the company’s $290-million Kulluk drill rig grounded off the coast of Alaska during a fierce storm.

The oil giant’s $5-billion Arctic program was unceremoniously suspended in February before a single offshore well was completed (Shell had planned to drill as many as 10 wells in the Chukchi and Beaufort seas over the next few years, but was only able to start two). Adding insult to injury, Shell was publicly criticized by the U.S. Department of the Interior, which demanded a detailed plan to address issues ranging from logistics to oversight of contractors before any further drilling would be allowed to go ahead. “Shell screwed up in 2012,” Ken Salazar, the recently resigned Secretary of the Interior, was quoted as saying. Undeterred, Shell recently signed a memorandum with Russia’s Gazprom that includes offshore exploration in Russia’s Arctic shelf.

With an estimated 30 per cent of the world’s undiscovered natural gas and 13 per cent of its undiscovered oil, the Arctic, and Shell’s struggles there, highlight both the risks and rewards oil companies face in a world where most easy-to-access hydrocarbons have already been tapped. But some of the dangers could soon be ameliorated as the industry races to minimize the use of vulnerable floating platforms, and focuses instead on equipment that can be bolted directly to the sea floor, where it’s relatively protected from ice and violent weather. “Our vision of the future is that a lot of things you now see on platforms and oil rigs can be moved to the sea floor—the processing, separation and boosting,” says Patrick Kimball, a spokesperson for Houston-based FMC Technologies, one of several oil-services companies leading the charge into the deep. “When there’s ice covering the surface six months of the year, this approach offers advantages because everything’s on the sea floor and monitored with remotely operated vehicles,” Kimball says.

It’s an intriguing vision of the future, and one that also promises to be more cost effective. But it also raises some questions about the safety of all that remote equipment. BP’s disastrous underwater spill in the Gulf of Mexico three years ago took months to bring under control, and much longer to clean up. Responding to a similar catastrophe in the ice-choked Arctic, some fear, could prove to be well beyond the industry’s grasp.

Subsea technology is already in use, to varying degrees, around the world. A study last year by market research firm ASDReports estimated that spending on subsea production and processing systems infrastructure hit $9 billion in 2012. Other firms have estimated that total spending on subsea equipment will reach $139 billion by 2015.

To date, the main driver for moving equipment to the sea floor has been economic. In some cases, multiple wells are tied to a single surface vessel called a floating production, storage and off-loading unit, which looks like a cross between a freighter and an oil rig. More advanced operations deposit building-sized, yellow machinery on the bottom to separate oil and gas from seawater and sand, rather than pumping it all to the surface. Other machines process hydrocarbons so they’re easier to transport through pipelines. Among the first such operations was one implemented by Norwegian oil company Statoil in its North Sea Tordis field. Similar technologies are also being employed off the west coast of Africa, the coast of Brazil, as well as in the Gulf of Mexico.

The next piece of the puzzle, being worked on by both Statoil and Shell, is adding a subsea compressor to help boost production from deep-water wells, which tend to yield about 25 per cent less than surface wells because of the challenges associated with extracting oil and gas thousands of metres below the waves. Shell is currently testing a massive compressor in a water-filled pit in Norway that it intends to use for its Ormen Lange deepwater project in the Norwegian Sea. “Platforms will not become obsolete,” Mathias Owe, Shell’s manager for the project, recently told Reuters. “But for new developments, if they can be reached from shore, subsea will be a good challenger, particularly in harsh environments like the Arctic.”

How, exactly, the technology will be employed depends on the situation at hand. David Williams, a spokesperson for Shell Canada, says every oil field is different and therefore eschews a one-size-fits-all approach. “It depends on what you find to some extent,” he says. “You take into account the distance from the shore, whether it’s mainly gas or mainly oil and how the economics will work.”

With fewer floating rigs to be swamped by storms and fewer people working on platforms to be injured by malfunctioning equipment, the industry touts subsea technology as being safer than traditional offshore production methods. But building an oil factory on the sea floor carries significant risks of its own. Most subsea fields are so deep humans can’t visit them safely—even in submarines. All the installation and maintenance work is done by remotely operated vehicles swimming in near-freezing temperatures and total darkness. Kimball is among the first to admit that the design and engineering challenges are incredibly complex. “It has to be very sturdy because there’s tremendous pressures down there, both from the ocean and the pressure of the reservoir,” he says. “And you have to balance those forces in a salt-water environment that’s corrosive.” He compares subsea equipment to that used to explore outer space when it comes to safety and reliability—namely because the cost of failure is so high. “When they downsized the shuttle program here in Houston, we hired a bunch of quality engineers from NASA.”

If an accident does happen, particularly in the Arctic, authorities want to be sure oil companies will be capable of cleaning it up. As part of the approval process for its U.S. Arctic drilling program, Shell was required to deploy a containment dome that could be used to collect hydrocarbons in the event of a blowout like the one BP suffered at its Macondo well in the Gulf of Mexico. A hose connected to the dome would deliver the oil and gas to a surface vessel where it could be collected or flared off. But things didn’t go smoothly. Shell faced difficulties getting its oil-spill-response ship certified, and a test of the dome in Puget Sound in September was plagued with problems, including a remotely controlled submersible that became tangled in rigging and a malfunction that caused the dome to submerge so fast it crumpled like a beer can.

Despite the setbacks, Shell remains upbeat about its Arctic prospects even as one of its rivals, ConocoPhillips, recently suspended its own Arctic program, citing uncertainty over federal regulations. “I think we took some important steps in 2012,” Williams says. “We got our program under way and we completed the drilling part of the exploration safely after looking at it for many years.” It remains to be seen, however, whether those early steps can be followed up with working subsea wells and a safe, reliable system to process and transport the oil and gas they produce—either above the waves or below.


The latest move in offshore drilling: oil rigs on the ocean floor

  1. If you can still get a copy of March 2013 Popular Mechanics, there’s an really excellent article that deals with the Kuluk, the USA’s drive for energy independence, and the strigent regulatory guidelines that Royal Dutch Shell must adopt in order to extract any oil deposits in that region. With some 25 billion barrels at stake it’s amazing the lengths that any natural resource developer will go to gain access to it. To say that this is a risky undertaking is an understatement, as the potential for an environmental disaster almost outweighs the financial risk involved.

  2. PS. Although the estimates by a few oil consultancy groups, of 90 billion barrels of recoverable oil and 1,670 trillion cubic feet of natural gas deposits in the Chukchi Sea region seem a little high, the fact that Royal Dutch Shell has already invested some $4.5 billion in drilling operations would indicate they expect a reasonable return for the efforts expended to extract it’s resources.

    • The oil is indeed there, probably much more. The trick is to drill for it, find it, and get it out of the ground in a very hostile environment. It can be done, it has already been done back in the 70’s and 80’s. In those days they built artificial islands so the drill rigs were on solid ground. That may not work very well in very deep water, but as with all things, man can find a way.

      If you drive an automobile, or heat your home, then you owe a debt of gratitude to the companies spending billions of their own money to find new and innovative ways to supply YOU with the means to live your life the way you want.

      If you object to drilling, then you need to park the car, and start learning to exist in a cold house. You can’t have it both ways.

      • P.S. I was not implying you were anti-drilling… Sorry if you take it as such

        • I’m not against drilling for oil, gas, or methane hydrates. It’s just that the petroleum industry does not have a good track record when it comes to resource extraction. The spills can devastate entire ecosystems that took hundreds of thousands of years to form. Alaska. Gulf of Mexico. I hate wind farms. They’re basically a huge eyesore. I’m for solar power if the costs to consumers can be brought down to where it’s an affordable alternative. Fuel cells are still by far the best bang for the buck. Look to see them come on mainstream in the very near future.

  3. Go with wind and solar. It’s SOOO much easier, much cheaper and less risky.

    • The reason fossil fuel extraction is so predominant is because of the HUGE profit margins that companies gain from their development. Electric vehicles actually outnumbered cars at one point in time at the turn of the century. General Motors and Standard Oil conspired during the 1950’s to replace a reliable, highly sophisticated electric trolley system that ran down the eastern seabord, with gasoline buses. They invested millions in dollars lobbying Congress to achieve their objective. The US then embarked on a multi billion dollar program to build a massive system of interstate highways for the internal combustion engine. The infrastructure, meant to service this industry, uses fossil fuels as a source of energy. You just don’t change that energy dynamic overnight. It’s impossible to compete with the TRILLIONS of dollars invested in keeping the carbon culture alive and well even though it may very well be a relic of what should be a bygone era.

      • Delusions of big oil conspiracies dancing in your head … If wind & solar were dominant you’d be demonizing them as raping the pristine & untouched wind systems and sun … This has nothing to do with anything oil energy companies actually do; it’s all about designating who the fictional oppressors are …

        • LOL. You dipsticks are a dime a dozen nowadays.

    • I guess all the raptors, bats and other birds agree with you that wind power is the best way to go!..

  4. And adding to Louisette, it would be interesting to see how much extra energy could be created if every building both offices and homes could have solar panels and wind turbines on them.


    Business Consultant

  5. The article fails to mention that subsea technology has been pioneered in the fields off eastern canada for the better part of 15 years. The terra nova development was a pioneering application in a sub arctic environment.