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Offshore Exploration No Wallflower, Despite Bloom in Unconventionals

The headlines of late may be all about the boom in the onshore, but the offshore industry is doing quite well, thank you, as witnessed by the 90,000-plus engineers, scientists and investors from the world over who have taken up short-term residence in Houston at the 45th Annual Offshore Technology Conference (OTC).

The four-day event, considered to be the largest of its kind in the world, isn't only about shallow and deepwater exploration. The key word is technology, with thousands of exhibitors showing off the greatest and the grandest in machinery and computer wizardry at the NRG Center (formerly Reliant). By the end of the event last year, an estimated 104,000 people from 130 countries had passed through the congested hallways.

Success and failure often go hand in hand for drillers, as BP plc knows well. Four years ago the biggest Gulf of Mexico (GOM) leaseholder was considered by some a pariah after the Macondo well blowout left 11 men dead and its reputation -- and finances -- in tatters. However, BP's makeover once again has made it the top developer in the deepwater Gulf of Mexico (GOM), where it now has 11 rigs in operation, a record for any company (see Daily GPIMay 1).

BP America Inc. Chairman John Mingé, who addressed a sold-out breakfast crowd on Monday, said the newfound resources being unearthed in the onshore and offshore are beyond any boom times operators had in the past. There were a few small "booms," but mostly, "we just had busts, busts, busts, busts, busts." The company now is more optimistic than ever about what it sees in the United States.

"It's a great time to be in American energy," said Mingé. "Every industry has its critics, and we have ours." However, the search for new resources remains "hugely challenging...Energy is essential and the need is not going away."

As BP's executives have detailed post Macondo, the producer has a much different portfolio today, Mingé noted. The well tragedy "forced us to take a close look at who we are," and the "hallmark of an explorer" is to persevere when things are in doubt. Improving safety conditions in the offshore translates into the booming onshore as well, he said. Accidents in North America's transport network of rails involving crude transportation also have been "tragic," and they are requiring a safety rethink by operators and regulators.

Still, he believes the U.S. pipeline infrastructure is up to the task of carrying more oil and gas. "Just because pipes are old doesn't mean they're bad," he said. "I know pipes that are 40 years old that are like new."

The annual gathering in Houston draws those hoping to ferret out the best research and development (R&D) techniques available. According to a preliminary global survey by Lloyd's Register Energy issued on Monday, energy sector R&D today is being driven by improving operational efficiency, improving safety and reducing costs. About one-third (34%) of the respondents said R&D spending would be up by at least 10% in the next two years.

About 250 professionals from 17 countries already have responded to the survey, which is to be completed in June. Close to 64% of those responding are at manager level and 36% are at the director level or higher. Companies with up to US$20 billion annual revenue were surveyed; more than 92% were either from a publicly-listed or privately-held company. Twenty percent of those surveyed are based in the United States.

What's piquing the most interest is subsea and remote technology; solutions that support increased uptime and efficiency; and applying nanotechnology to better enhance recovery. The respondents said they planned to use more R&D collaboration through partnerships, joint ventures and acquiring startups.

"The preliminary results indicate we can expect strong growth for technology," said Lloyd's Register Energy President John Wishart. More than three-quarters of the respondents believe innovation is speeding up.

"While technology is moving ahead faster than regulation, society and governments are becoming more demanding in their expectations from regulators, and engineering systems have become more complicated and integrated," said Wishart. "The current findings underline that new technology is not a barrier.  It is seen as the catalyst for a better performing oil and gas sector and a competitive necessity among the key operators."

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