Head Of Total Questions Possibility Of 100Mb/D, Skeptical On Shetlands Project's High Costs

[hatrack]

The accelerating cost of producing oil and gas from new frontiers is hindering the development of vital reserves west of Shetland, one of the world’s top oil barons claims.

Christophe de Margerie, the chief executive of Total, France’s largest company, has also questioned whether it is possible to raise global oil output from today’s 85 million barrels per day to 100 million barrels per day, given the cost and logistical challenge. Addressing the Scottish Oil Clubs on Friday night, Mr de Margerie said that he had warned Gordon Brown, the Chancellor, that the development of high-pressure and high-temperature oil and gasfields in the North Sea was in doubt without tax incentives. He said: “These fields are extremely difficult to produce. The cost of developing fields is so high that, given existing gas prices, these new fields are marginal.”

The recent and sudden collapse in the UK wholesale gas price has created a consumer price war between gas retailers. This has been welcomed by householders hit by rising bills but is forcing North Sea gas producers to question the economics of future developments, putting in jeopardy the supply of gas in the future.

Total is considering Laggan, a large gas discovery in Britain’s Atlantic margin where a government and industry task force is looking at ways of commercialising a clutch of oil and gasfields in the region west of the Shetland Islands. Some of the discoveries date back 20 or 30 years but the water depth and hostile environment have prevented development. Costs for the joint development of pipelines, wells and sub-sea installations have been estimated at £4 billion but the difficulty of building complex offshore facilities and the soaring cost of engineering and materials is causing the cost to escalate further.

EDIT

http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article1499942.ece

[rman]

1. in summary

"marginal fields" are expensive to exploit to begin with.

And now that we find ourselves in a position that we *need* the oil and gas that is in those expensive-to-exploit fields because less marginal fields are starting to get depleted and because of rising demand for oil and gas, we are confronted with rising cost of engineering and materials.

It looks like oil production is not the only thing that's peaking.


The weird thing here is the collapse of gas price in the UK.

[hatrack]

2. Two things - new Norwegian pipeline, and a winter that wasn't

It kind of reminds me of oil prices here - Saudi production continues to fall, and we're at, what, $58/bbl?

Go figure.