The Risky Hunt for the Last Oil Reserves: Does Deep Sea Drilling Have a Future?

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It is companies in the West especially that now lack, for the most part, access to easy, cheap, promising sites in Asia and Latin America. Those sites are all held by national oil companies such as Saudi Aramco (Saudi Arabia), Gazprom (Russia), NIOC (Iran) and PDVSA (Venezuela), which are all fully or partly state-owned. These companies are the true giants in the industry and control more than three-quarters of global reserves. Saudi Aramco, in particular, is in a league of its own. If the corporation were publicly traded, it would be by far the world's most valuable company.

These national giants keep a professional distance from the oil barons in Houston, London or The Hague, and they're no longer letting Western companies call the shots. The state-run companies no longer need the West's money or expertise -- when they require the latest drilling technology, they contract specialized companies such as Schlumberger, Halliburton or Transocean.

"Big Oil," as the old private companies are still called, controls only around 10 percent of global oil and gas reserves. Only the most complex, expensive and dangerous projects remain for BP and similar corporations. Necessity is leading these companies to push their boundaries as far as possible, tapping reservoirs no one else wants to touch.

'No other Option Remaining'

"The reason BP and other oil companies have to push the limits of technology in exploration and extraction is that they have no other option remaining," says geologist Bitzer. Companies have invested billions in exploration at depths that wouldn't even have been considered in the past. Each new exploration method they develop is greatly celebrated within the industry. But, in reality, each is only further delaying the time when the flow of oil will finally dry up.

Oil companies long ago stopped using platforms firmly anchored to the ocean floor. Now swimming monstrosities known as semi-submersible drilling rigs float atop the world's oceans, bobbing above kilometers of water. Risers made of special steel or extremely strong composites lead down into the pitch black depths, since normal piping would burst there under its own weight.

At a depth of 1,500 meters, the water is 5 degrees Centigrade (41 degrees Fahrenheit), while the oil gushes out of the ground at nearly boiling temperatures. The result is extreme stress on the materials.

Meanwhile, engineers are plunging ever deeper. The Deepwater Horizon, built in 2001, was one of the world's most modern drilling platforms, capable of withstanding 12-meter (40-foot) waves and hurricane-force winds. The rig even operated at depths up to 3,000 meters (10,000 feet).

The risks are considerable. "The technical demands of drilling are magnified enormously with depth," explains Tim Robertson at the Seldovia, Alaska-based consulting firm Nuka Research and Planning Group. Strong deep-water currents often put stress on the risers. In addition, the oil must be kept as hot as possible, to prevent the natural gas it contains from freezing together with seawater into compounds called gas hydrates, which can plug the pipes.

But above all it is the enormous pressure in the underground reservoirs that makes the work so dangerous. Oil companies are drilling into rock layers where every square centimeter (0.16 square inch) is subject to pressure equivalent to the weight of a medium-sized car. Drilling into such an oil or gas reservoir presents a risk of the fuels shooting upward in an explosive and uncontrolled way.

A Dangerous Technique

Engineers try to prevent this type of dangerous blowout by constantly forcing drilling fluid into the borehole. This special liquid must be subject to the same amount of pressure as the oil and gas surging upward -- an extremely difficult undertaking.

Precisely such a dreaded blowout is presumed to have occurred on the Deepwater Horizon. The cause could be cement work carried out by Halliburton employees in an attempt to stabilize the borehole. It's a dangerous technique -- cracks form as the cement hardens, which can allow oil and gas to escape upwards with enormous force. One spark is enough to cause an explosion.

Is it truly responsible to take such risks? Critics say the entire industry is taking a risky gamble at the environment's expense. In addition, the costs of offshore drilling are just as astronomical as the technical challenges. The Deepwater Horizon was worth around $560 million (€430 million). The type of drilling the oil platform was performing at the time of the disaster costs around €100 million -- and all that was for a comparatively tiny oilfield, containing only a few million barrels.

It also seems likely that costs will rise again. Authorities will probably tighten safety requirements following this disaster, meaning the expense of deep water drilling will provide even less of a payoff.

Currently, around 30 percent of global oil production is obtained through offshore drilling. Less than 1 percent of global production, though, comes from rigs drilling at depths of more than 1,500 meters. "They play next to no role in our supply right now," says Steffen Bukold, an oil expert in Hamburg.

Still, many oil companies see a bright future in oil drilling on the high seas. Oil extraction through deep sea drilling currently costs between $35 and $65 (€27 and €50) per barrel, according to last year's estimates by the International Energy Agency. The price of oil is at about $80 (€62) per barrel.

"Deepwater has quickly evolved from a challenge into an opportunity," Riding says. He sees areas off the coast of Brazil and West Africa as "hot spots" for the flourishing offshore industry. The Gulf of Mexico too was seen until now as an attractive location.

Will Oil Companies Continue, Business as Usual?

Just back in late March, US President Obama announced the approval of new areas for offshore drilling off the eastern coast of the US, north of Alaska and in the eastern Gulf of Mexico. He backpedaled in the wake of the Deepwater Horizon disaster, discontinuing the awarding of new drilling permits for the time being.

Obama could use this situation as an opportunity to overhaul new energy legislation that is due to be passed soon by Congress -- and is riddled with concessions to the oil industry. But hardly anyone believes the president will retract his policies in the long term. Too much is at stake, both politically and economically -- there are nearly 22 billion barrels of oil to be found just in new oil fields, according to estimates, and all of that is in US waters.

More likely, the oil industry will continue just as it did before, despite the oil spill currently unfolding. Unlike the disastrous Exxon Valdez oil spill off the Alaskan coast in 1989, this time it's a subtle catastrophe taking place, a slow, silent death claiming birds, turtles and marine mammals in the Gulf of Mexico. It's a disaster in slow motion, and that fact may help BP to live the whole thing down quickly. Financial losses will hardly spell the company's downfall either, even if they amount to billions of dollars -- BP's profit increased to $5.6 billion in the first quarter.

The latest discoveries, in fact, have already been made. Before meeting its end at the Macondo oil field, the Deepwater Horizon was used for drilling in Keathley Canyon, 200 nautical miles to the west. Last September, it drove its super hard drill nine kilometers (5.5 miles) deep into the rock under the ocean floor -- a world record. BP estimates there are more than 3 billion barrels of oil in the reservoirs there.

"Beyond Petroleum" is the British company's perplexing yet startlingly successful advertising slogan. But it may be a long time indeed before the oil giant truly moves beyond petroleum.

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• Part 1: Does Deep Sea Drilling Have a Future?
• Part 2: 'The Technical Demands of Drilling Are Magnified Enormously with Depth'