In one hole, which set a series of world records for drilling, can be seen an entirely new future for the oil industry – and that future, as always, is driven by technology and the push into new frontiers.
Until Jack came along with its promise of unlocking a new, ultra-deepwater oil province of up to 15 billion barrels, conventional theory said the decline had started in global oil production, and the future was one of constantly rising prices and falling output.
Jack flicked the switch. The future now is not so much conventional, but unconventional, in the sense that this seems to be the future of major oil discoveries.
Obviously, one hole does not convince everyone, not even The Slug. Much more drilling is needed, and in water depths of 2100m, plus a hole depth of 6000m, simply getting to any prospective pay zone will take months, and cost tens, if not hundreds, of millions of dollars.
To even be considered economic in water that deep, any discovery must be in the elephant category – and almost by definition, it is a place in which only the super-majors can play.
But having said that, if the super-majors have found a new playground, imagine how that clears the way for smaller companies to snap up some of their terrestrial assets as they go underwater elephant hunting (or is it time we started calling them whales?).
To put the Jack discovery into perspective, it is a field that is officially measured at 500 million barrels recoverable, thanks to a sustained flow rate of 6000 barrels a day from testing just 40% of the pay sands. The full 1000 feet of pay could not be tested because of equipment limitations.
Geologically, however, Jack has unlocked a structure known as the lower tertiary. This may cover hundreds of square kilometres, and spill over from the permits controlled by Chevron (50%), Devon (25%) and Norway’s Statoil (25%).
It is the potential for the lower tertiary that has companies in the gulf scampering to secure access to what is an entirely new concept in ultra-deepwater exploration.
Exact details of the discovery, such as oil quality, precise size and geological structure, are a closely-guarded secret within Chevron, which obviously sees this information as giving it a business advantage over its rivals – and a lever to gain access to tenements held by nearby explorers.
But there is obviously no doubt Chevron believes it has unlocked a door that opens up an entirely new world of deepwater exploration that will require a new generation of knowledge and oil drilling tools.
Simply finding enough ultra-deepwater drill rigs will be a challenge, albeit one that rig builders will be delighted to know has arrived.
The next step for work on Jack and its surrounding package of tenements, is to sink at least one more ultra-deep well, which Chevron says is planned for the second half of next year, though The Slug reckons that might be accelerated.
The new well is said to pencilled in for downdip and to the west, with a target depth of 29,000ft.
Drill detail and gee-whiz statistics aside, such as the Jack target being the deepest yet for using a perforating gun, this discovery is a game-changer for a host of reasons.
The first is that it is in waters that until now have been out of reach – but not any more. Jack’s location and water depth mean that the world of oil has suddenly been stretched. Rather than being restricted to the fringes of continents, Jack has opened up the potential for exploration of the ocean floor.
The second is that the restrictions placed by government on oil exploration in many areas will not apply in the emerging deepwater game. True, there may be a new raft of restrictions, but the future of the oil business could well be out of sight, and potentially out of mind.
The third reason for Jack’s game-changing status is the effect it will have on the rest of the oil world, including the authoritarian states that refuse to open their borders to western (and modern) exploration companies. In one discovery, their view of the world has changed. They no longer hold all the aces in their game of “strangle the west” because the west has just earned a get-out-of-jail card – a one-eyed ace called Jack.
None of the reasons for celebrating Jack is cause to totally dismiss Peak Oil as a reality that will eventually arrive.
But this single hole has provided an entirely new outlook for the oil patch oil as it pushes further offshore, away from countries run by dodgy dictators, and into international waters which, after all, represent about 75% of the earth’s surface.
In effect, peak oil has been delayed, providing the world with breathing space to better plan for the inevitable decline.
