To open a leading trade conference on offshore exploration and production, Matthias Bichsel, Shell’s Projects & Technology Director, shows how innovation is pushing the boundaries of what is safely achievable in deep water: finding oil and gas resources and developing them through subsea and surface facilities while protecting lives and the environment. He also points out several areas where more innovation – of both a technical and non-technical nature – is needed to overcome the challenges that lie ahead: increasing complexity in project planning and geology; rising capital costs; and stricter government regulations.

In-depth innovation for the future

Good afternoon, or goede middag, as we say in the Netherlands.

I’m very pleased to welcome you to the 2013 MCE Deepwater Development Conference here in The Hague. This annual gathering is one of the premier global forums for addressing the profound technical, economic and social challenges faced by the offshore energy industry.

I have a deep personal connection to all matters deep water, since I built and ran Shell’s global deepwater organisation from 1999 to 2002. So I’m thrilled that Shell is hosting this year’s conference.

Shell has been active in deep water for over 30 years, and we recognise that deep water is becoming ever more important in our industry’s efforts to meet the world's energy needs.

But as we move into ever deeper waters and take on more challenging projects, and as societal expectations of our industry continue to rise, innovation is becoming an absolute necessity.

There are many examples of how innovation has pushed the technological boundaries further and made operations safer. I’d like to share with you a few from Shell, as it’s the company I’m most familiar with.

I will then describe what I believe are the main challenges that the industry’s innovation efforts will have to address as we move forward.

But first, let me briefly lay out the context.

Deep water all over the world

The world’s energy needs are growing rapidly, more than doubling in the first half of this century, according to expert estimates.

Deepwater resources are expected to play an increasing role in helping to meet this energy demand. Of the remaining 2.7 trillion barrels of recoverable conventional oil resources in the world, the IEA estimates 45% is in offshore fields – and 25% of them are in water more than 400 metres deep. If we exclude OPEC countries, the percentages are even higher: 55% in offshore fields, of which one-third is in deep water.

Today, three deepwater regions – the Gulf of Mexico, Nigeria and Brazil – stand out. But interest in other deepwater regions, such as south-west Africa and north-west Australia, is growing.

Shell is an offshore pioneer, and it has been so for quite a while. In 1961, it created the first semi-submersible drilling rig, helping to make the Gulf of Mexico a major oil-producing region. In 1977, it built the first floating production, storage and offloading vessel, opening up the development of deepwater oil fields around the world. And since the eighties, we have been a leader in deepwater operations.

Today, our share of deepwater production amounts to some 330,000 barrels per day, with a strong growth outlook.

Shell’s deepwater portfolio

Our business strategy is designed to make the most of the deepwater opportunities out there. So we now have projects under development not just in the Gulf of Mexico, Nigeria, Brazil but elsewhere too.

Take Malaysia, for example. It currently has three deepwater field developments, and Shell’s the operator of two of them.

The Gumusut-Kakap field is already producing through a tie-back to the nearby Kikeh production facility. Peak production will come once a giant floating production system is in place later this year. Just to fit the production system on top of its hull required a world record lift of 23,000 tonnes.

Shell’s other deepwater project there is Malikai, which received the final investment decision at the beginning of this year. It’s significant because it marks the first time a tension-leg platform is to be fabricated and installed in Malaysia.

We’re not just building deepwater platforms but also actively exploring and appraising deepwater all over the world.

In the Gulf of Mexico, for example, recent significant discoveries have been added to our ‘to do’ list. Appomattox has turned out to be a giant field, with recoverable resources of more than 500 million barrels of oil equivalent . And the Vito field also looks very promising.

We also have plenty of exploration acreage to sift through. In the Gulf of Mexico lease sale last June, Shell was the highest bidder on 24 blocks. Our winning bids totalled more than $400 million. Why did we spend so much? Because the potential is so great: the Bureau of Ocean Energy Management estimates that the production from the June blocks alone could total 1 billion barrels of oil and 4 trillion cubic feet of natural gas.

The power of innovation

Overall, across our industry, there is an enormous amount of effort and investment going into deep water. This conference is a great opportunity for us to learn from one another, to accelerate progress in these developments.

I think the conference programme does a good job reflecting the immense power of innovation in:

  • installation and construction techniques;
  • floating production systems;
  • multiphase flows;
  • subsea gas compression;
  • the prevention and detection of leaks.

Shell certainly is interested in learning how others are innovating to shape the future of offshore energy. In fact, Shell is firmly convinced of the power of innovation across all of the energy industry. That's why we spend over $1 billion on R&D, year on year.

Case study: Mars B project

When it comes to deepwater developments, though, innovations are needed to:

  • find oil and gas resources;
  • develop those resources through wells and offshore facilities; and
  • protect lives and the environment.

I can illustrate this by telling you the story of our Mars B project. It would never have received the final investment decision without a series of innovations.

It begins, I have to admit, with a bit of hubris: we thought we fully understood the sub-salt geology at the Deimos prospect, to the west of the Mars field in the Gulf of Mexico.

But a wildcat well we drilled in 2004 proved us wrong. It did not strike the mother lode we had expected. There was oil on the drill cuttings; so we knew we were close. But we obviously had misinterpreted the squiggles on the seismic images – even though we were using state-of-the-art processing.

The trouble was the salt. It refracts and diffracts seismic waves every which way, invalidating the approximations used in the processing of the raw seismic signals. So we developed better processing algorithms that took full advantage of the increase in the number-crunching power of computers. And we carried out a new seismic survey – one in which the receivers sat on the ocean floor. This was the second-ever deepwater ocean-bottom seismic survey. It allowed us to “illuminate” the sub-salt structure with seismic waves from all different directions and angles.

This “all-azimuth”, ocean-bottom survey showed why the 2004 well had missed the oil: it was drilled with the wrong geologic model in mind. The new, clearer seismic images showed faulting to be a characteristic feature of the sub-salt formation.

On the basis of the clearer imaging, another exploration well was drilled in 2009. And, just a few hundred metres from the original well, we confirmed the existence of the oil-filled structure.

The new imaging also enabled us to identify another nearby prospect that we successfully tested. These two finds dramatically improved the project's economics.

That’s the end of the first chapter.

Chapter two begins with a question: How can we reduce the environmental impact and the cost of drilling wells for the project? Spoiler alert: the answer is an innovative drillship design.

The Bully drillships that Shell and Noble Corporation developed for such purposes are significantly lighter and shorter than comparable deepwater drillships. Its multipurpose drilling tower can handle 40 metre (or 135-foot) lengths of drillpipe at a time, and it can keep as much as 11,600 metres (or 38,000 feet) of drillpipe to hand in racks, making drilling safer and faster.

The vessel additionally boasts the latest electronic engine controls and an advanced dynamic positioning system. That combination saves fuel – which in turn not only lowers operating costs but also reduces carbon dioxide emissions.

The next chapter of the Mars B story revolves around the platform’s design and construction. It has a cast of hundreds scattered among five construction yards and several design offices around the globe. Co-ordinating their work required more than the usual 3D computer-aided designs. The computer applications had to integrate another dimension: time.

So our design offices took engineering from 3D to 4D. They now have much greater insight into the concurrent activities going on at the construction sites, and that helps keep the work safe and efficient. It also helps keep the project on track despite the vagaries of fortune – like natural disasters. A tsunami in Japan that disrupted steel deliveries to fabrication yards, for example. Or a typhoon that hit South Korea when construction of the hull was taking place there.

The 4D computer model can also quickly reveal if there would be incompatible activities taking place at the same time in the same place – for instance, if welding on an overhead structure is scheduled for the same week that workmen are painting below. Those activities can then be rescheduled or extra precautions can then be taken for everyone’s safety.

Indeed, safety is a theme that runs throughout the Mars B story. For instance, we are running fibre-optic cables from the platform all the way to shore. These enhance safety because they enable backup and remote-control systems to be located onshore. Their much greater data-carrying capacity also means that onshore and offshore teams can share much more information in real time.

Another example: the design of the platform takes many elements that would traditionally be in the hull and places them on the topsides. Personnel will thereby spend less time in confined places.

We like to think that the Mars B project is creating a model for HSE excellence in deep water – not just with design and technology features, but through the way the extended project team is working with a common vision: no harm to people; no leaks into the environment.

The project is also making a substantial commitment to social investment. That commitment takes several forms: a $2 million donation to support the restoration of two islands and a stretch of beach in the Gulf of Mexico, for example. Or the support of an orphanage in South Korea, where a major part of the construction has taken place.

The Mars B story is unfinished. The topsides of the platform are currently being fitted on the hull, and the wells still need to be completed. So several chapters have yet to be written. But I’m confident that, with a few more innovations, it will have a successful end.

Key challenges ahead

Let’s consider now some of the broader challenges that lie ahead for our industry in deep water. Innovation must save the day here too.

The first challenge is dealing with the increasing complexity of projects – as much in their subsurface features as in their surface facilities.

We’ve found that ocean-bottom sensors, like the ones that revealed the Mars B accumulations, provide a good way to peek under salt formations in deep water. But the current method of acquiring the seismic data has one major drawback: the remotely operated vehicles that place and retrieve the sensors. They are costly to operate and require a lot of time to move the sensors – one by one – to and from the seabed.

To alleviate this cost and time burden, Shell is developing underwater vehicles that can perform that task autonomously. Because the coean-bottom sensors would be deployed in much larger quantities and at lower cost and higher speed, they should increase the resolution and efficiency of marine seismic surveys.

In the Parque das Conchas project offshore Brazil, Shell intends to introduce another seismic innovation: a full-field ocean-bottom cable installation. It will be the deepest life-of-field installation in the industry. And it will be the first done through the turret of a floating production, storage and offloading vessel. I’m curious to see what it will deliver in terms of time-lapse seismic: comparing the subtle differences in seismic data collected months or even years apart.

We also are likely to confront more high-temperature/high-pressure reservoirs in deepwater fields. The drilling of wells into the two Gulf of Mexico finds I mentioned earlier – Appomattox and Vito – is rendered more difficult than in other fields in the Gulf because of this.

As far as the surface engineering is concerned, I have already mentioned how scheduling has to be integrated much more tightly into our planning. But the industry will have to go further – from “4D” to “5D” – adding the availability of materials to the three physical dimensions plus time.

This kind of progress will be important as we all face up to another challenge for our industry: rising costs. We need to get better at managing capital costs – for instance, through a design one / build many approach. And our operational costs need careful scrutiny and innovative solutions too.

There are things that can help, like rigless well interventions. Shell has opted for these at Parque das Conchas to boost recovery while keeping the economics viable.

As a last challenge – but certainly not least in importance – our industry needs to be mindful of stricter government policies and regulations. Just a few weeks ago, for example, the European Parliament proposed legislation that requires operators to submit hazard reports and emergency response plans before being granted a licence to drill offshore.

The fundamental challenge here is to optimise both safety and production. Shell has several priorities in this area: they include advanced well design, capping systems and downhole technology.

Recently, we’ve been testing two novel technologies of ultimate resort. One is the Emergency Separation Tool, which uses shaped charges to sever a tubular above the blow-out preventer stack, allowing the tubular to drop below the stack so the BOP can close. The tool cuts clean through heavy-weight drillpipe, drill collars and casings – stuff that the shear rams of the BOP may not be able to cut.

The second technology is the Collapsible Insert Device. Fixed into a double-walled tubular, it sets off a small, focused explosion to crimp the inner wall and thereby block the well flow downhole. It too would be activated in the event the BOP malfunctions for any reason.

New technologies like these and others I’ve mentioned, and the many more we will hear about over the coming days, will surely help the industry to overcome its technical challenges.

But let’s not discount non-technical innovations. By these I mean new ways of thinking and working – which in my view are equally vital to our industry’s success.

At Shell, for instance, we now recognise that we have to “harvest” all the experience and expertise that already exists around deep water to standardise and replicate as many of the good practices and designs as possible. Standardisation actually requires a surprising amount of innovation.

We also seek to leverage the benefits of globalisation, and to introduce new contractual arrangements and risk-management techniques for the volatile future ahead.

An innovative collaboration with Transocean, for example, led to Shell’s order for “7th generation” drillships. These will be even safer and more capable than anything out there today.

Innovation can also be applied to developing people's talents and skills: for instance with new teaching tools – rig simulators, iPads and the like. I see a particularly strong role for these kinds of tools in promoting a safety-above-all-else mindset throughout an organisation and its partners.

Whether it’s a matter of tools and techniques, processes and procedures, or strategy and planning, we need to be alert to the possibilities for improvement. Even seemingly small changes in procedure can sometimes yield remarkable results.

A case in point: On several platforms in the Gulf of Mexico, Shell teams no longer have monthly performance reviews. Instead, they have daily 15-minute calls. They review the previous day’s performance and the current day’s targets. Results are written on a white board, with green ink for targets met and red for shortfalls. In 2012, these and other similar techniques helped cut unscheduled downtime by 40%.


I’m sure there are plenty of other success stories out there – and not only from Shell. So, over the next couple of days, let’s keep our eyes and ears open. I’m sure that there’s a lot for us all to learn. And I also urge you to share what you know, so that others can learn from you.

This opportunity, at an event with such high level attendance, is rare. It reflects how vital deep water is to the future supply of the world’s energy, and how vital innovation is to pushing the safe boundaries of what is possible in deep water. Let’s make the most of it.