The energy industry’s lack of investment in offshore long-cycle projects is bound to create a widening gap between supply and demand by 2020, Hess CEO John Hess recently told a gathering of energy industry leaders, experts, government officials and policymakers in Houston.
“While the spotlight has been on shale, the lights are off on offshore deep water assets,” he warned. “We’re not investing enough to keep the offshore development pipeline full and that’s going to start showing itself three and five years from now.”
Mr. Hess participated in the “Adapting to the New Energy Era” plenary led by IHS Markit Vice Chairman Daniel Yergin. The plenary included Ashok Belani, Executive Vice President Technology at Schlumberger Limited and Miguel Gutiérrez, Chairman of YPF, S.A. CERAWeek by IHS Markit, is ranked among the top five corporate leader conferences in the world.
Hess has taken a different approach offshore. “We’re investing through the cycle. While most people don’t think that offshore can make economic sense at these prices, there are exceptions and we’re very fortunate to have one of those exceptions in offshore Guyana,” he explained.
Hess has 30 percent ownership in the Exxon-operated world-class Liza discovery offshore Guyana — which is economically viable at $40/barrel. The Liza oil discovery on the 6.6 million acre Stabroek block has been confirmed as one of the largest in the world in the past 10 years. Liza and the recent Payara discovery underpin estimated recoverable resources of 1.4 billion to 2 billion barrels of oil equivalent.
The company has continued to develop two Hess-operated offshore developments, North Malay Basin in Malaysia and Stampede in the deepwater Gulf of Mexico, expected to add a combined 35,000 barrels of oil equivalent per day of production and contribute significant cash flow when they come online in 2017 and 2018 respectively.
Meanwhile, onshore, shale producers like Hess have continued to improve production and costs during the downturn, Hess said
“There are really three major factors that kept the shale industry resilient: cost, technology and financial markets,” Hess said during a CERAWeek 2017 gathering. Lean process improvements and technology innovations, including using data analytics to determine where to drill, have reduced by half both shale well drilling times and costs for Hess in recent years, he said.
In the North Dakota Bakken, where Hess has a more than 12-year inventory of drilling locations, returns are attractive even at lower oil prices, Hess said. Hess is increasing its Bakken rig count there from two to six this year “which gets us back on the growth trajectory where we should be — up 10 to 12 percent next year,” he said.
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