the development and prospect of the offshore oil and gas

Advances in Resources Research ONLINE ISSN 2436-178X

Vol. 1, No. 1 (October, 2021) pp. 1-12 DOI: 10.50908/arr.1.1_1

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[Soliciting Contribution]

The development and prospect of the offshore oil and gas industry

Jin Yang1), †

Abstract

The ocean economy has become the focus of the world since the 21st century, and offshore oil and gas

have become important strategic energy due to the depletion of onshore energy. Many countries conducted

various research to accelerate the development and utilization of offshore resources. The development of the

offshore oil and gas industry has undergone a long period and experienced a leaping breakthrough from coast

to shallow water and deep-water. In addition, the production of offshore oil and gas has increased greatly. In

this paper, the development history of the offshore oil and gas industry is reviewed in terms of time, water

depth, and production. Then, the development of offshore oil and gas exploitation technology and relevant

equipment is demonstrated. After that, the challenges of offshore oil and gas development are indicated.

Finally, the overall development trend of the oil and gas industry is summarized that deep water,

intellectualization, and gas hydrates are the future focuses. The work of this paper has a certain value for

people to understand the development history and the prospect of the offshore oil and gas industry.

Keywords

offshore oil and gas, deep-water, exploitation technology, equipment development, challenges and trends

1. Introduction

The ocean area covers about 71% of the earth’s surface area, of which the offshore oil and gas resources

account for more than one-third of the global oil and gas resources. However, only 30% of them are proven,

which means the exploration of offshore oil and gas is still in the early stage. The offshore oil and gas

industry includes activities related to exploring, mining, transporting, and processing offshore oil and natural

gas. Due to the depletion of onshore oil and gas resources, exploring and developing offshore oil and gas

have become an important strategy of various countries and regions. At present, more than 100 countries and

regions have carried out offshore oil and gas exploration, and more than 50 countries and regions are

conducting oil and gas exploration in deep-water. Deep-water oil and gas have made an increasing

contribution to the reserves and production of global oil and gas. In this paper, the development of the

offshore oil and gas industry is reviewed and the future developing direction is explored based on the

characteristics of the offshore oil and gas industry.

1) College of Safety and Ocean Engineering, China University of Petroleum-Beijing † Corresponding Author. E-mail: [email protected]

Jin Yang. Advances in Resources Research, 2021, 1(1), 1-12

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2. The development of the offshore oil and gas industry

This part reviews and summarizes the development history of offshore oil and gas exploration and

development in terms of time, water depth, and production[1].

2.1. Review of development in the time dimension

2.1.1. Beginning period (1896-1950)

The history of offshore oil and gas development can be traced back to the late 19th century. In 1896, in

St. Barbara Strait in California, USA, to extend an oil field from land to sea, a wooden trestle bridge was

built from the breakwater to the sea with a water depth of only a few meters, and a drilling rig was installed

to drill a well. Oil was extracted from the sea for the first time. This is also the first offshore oil well in the

world. In 1920, Venezuela drilled on a wooden platform in Lake Maracaibo and discovered the first large

offshore oil field[2]. During this period, the drilling rig is built on the trestle bridge connected to the shore.

Strictly speaking, it is not a real offshore oil field, but an onshore development mode of the offshore oil field.

2.1.2. Initial development period (1950-1980)

It is widely believed that the development of offshore oil and gas began in 1947 with the world’s first

commercially produced oil well in the Gulf of Mexico which was drilling by a steel platform called “Brondau

20” in a water depth of 4.6 m. Since then, the world’s offshore oil and gas production has grown rapidly in

both production and its share of the world’s total oil and gas production. The Gulf of Mexico, Lake

Maracaibo, the Persian Gulf, the Caspian Sea, and the North Sea have gradually become active areas for

offshore oil and gas exploration, and in the 1970s, the North Sea has achieved the most remarkable results.

2.1.3. Scale development period (1980-2000)

Since the 1980s, offshore oil and gas equipment and technology have entered the informatization stage,

and the cost of offshore oil and gas exploration and development have been reduced. More countries and

regions are actively engaged in offshore oil and gas exploration and development. The demand for offshore

platforms in the world is increasing, and the utilization rate has increased significantly. From 1990 to 1995,

about 6,870 offshore exploration wells or appraisal wells were drilled, and the production capacity of

offshore oil and natural gas was significantly enhanced. The top five countries are shown in Figure 1, which

shows the large scale of offshore oil and gas production[3].

2.1.4. Golden period (2000-present)

The 21st century is known as the “Ocean Century”, and the ocean economy has become the development

focus of all countries. Accelerating the development and utilization of offshore resources has become an

important strategy of all countries in the world. In the past decade, 70% of the world’s major oil and gas

discoveries come from deep-water, and 3/4 of the top 50 important oil and gas development projects are

deep-water projects. In the next 10 to 20 years, the proportion of global oil and gas production from offshore

will reach 50%, and 35% of the world’s total offshore oil and gas production is expected to come from deep-


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water. In the future, more oil and gas will come from offshore, among which deep-water oil and gas have

greater developing potential, indicating that the golden period of offshore oil and gas has arrived[4-5].

Source: Xiao, L. World Petroleum Economics, 1991, 2, 22-32. Figure 1. The production capacity of offshore oil and natural gas (1990-1995).

2.2. Review of development in the depth dimension

2.2.1. Shallow water (0-500 m)

In terms of development methods and technologies, before the 1940s, civil engineering technology was

mainly used to build wooden structure platforms and artificial islands to exploit oil and gas. However, this

method can only be applied to coastal areas and inner lakes, and the operating water depth is generally lower

than 10m. During the 1950s and 1960s, with the rapid development of offshore oil and gas, mobile drilling

equipment, floating production system, and subsea production system emerged. The operation area

continued to expand, even began to extend beyond the continental shelf, and the operation area in which the

water depth exceeded 200 m, gradually approaching 500 m. At present, the area with a water depth of no

more than 500 m is called “shallow water”[6].

2.2.2. Deep-water (500-1,500 m)

From the 1970s to the 1980s, with the development of platform and drilling technology, the range of

offshore oil and gas exploration and development was further expanded, and the operating water depth

exceeded 500 m. The deep-water oil and gas in the North Sea and the Gulf of Mexico continental shelf have

been developed successfully. In 1979, the water depth of offshore oil drilling was close to 1,500 m, which

means offshore oil and gas exploration and development can be operated in the full range of deep-water.

2.2.3. Ultra-deep water (over 1,500 m)

In the 1990s, the water depth of offshore operation was constantly updated, reaching 2,000 m in 1999.

The operation has expanded from traditional areas, such as the North Sea and the Gulf of Mexico, to areas


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such as West Africa, South America, and the Australian continental shelf. In 2001, the operating depth in the

Gulf of Mexico reached 2,964 m[7]; in 2002, the operating depth of offshore oil and gas exploration reached

3,000 m; in January 2020, the French Total Petroleum Company completed the world record of deep-water

drilling in the Gulf of Mexico at a depth of 3,628 m. So far, offshore oil and gas exploration and development

can be conducted in ultra-deep water of 3,000 m, and the reserve numbers and production have increased

rapidly[8-10].

2.3. Review of offshore oil and gas production

2.3.1. Offshore oil production

(1) Up to 10% of total production

In the late 1940s, offshore oil production was only 40 million tons, accounting for 7.6% of the world’s

total. At the end of the 1950s, offshore oil production exceeded 100 million tons, reaching 110 million tons,

accounting for 10% of the world’s total oil production.


At the end of the 1960s, offshore oil production reached 329 million tons, accounting for 14.6% of the

world’s total production, equivalently an eightfold increase from the 1940s. In 1980, it reached 650 million

tons, accounting for more than 20% of the world’s total oil production, reaching 21.8%.


In 1991, offshore oil production approached 1 billion tons, accounting for more than 30% of total

production for the first time; in 1996, offshore oil production exceeded 1 billion tons; in the 21st century,

driven by high oil prices, offshore oil production has grown rapidly. In 2004, it increased to 1.34 billion tons,

accounting for more than 30% of the world’s total oil production, reaching 39.5%; in 2007, the proportion

was more than 35%.

Source: BP Statistical Review of World Energy 2020

Figure 2. Oil production in the world (2005-2019).


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In recent years, under the influence of low oil prices and the global “COVID-19”, offshore oil production

has grown slowly and declined (Figure 2). However, due to the rapid decline of onshore oil and gas

recoverable reserves, offshore oil’s proportion of world oil production will increase instead[11-13].

2.3.2. Offshore gas production


In 1985, offshore natural gas production was 352.4 billion cubic meters, accounting for about 20% of

the world’s natural gas production.


Offshore natural gas production continues to grow (Figure 3). In 2004, offshore natural gas production

increased to 750 billion cubic meters, accounting for 28% of the world’s total production. In 2009, the

proportion of offshore natural gas production to the world’s total natural gas production reached 30%. In

2015, this proportion was close to 35%, which became an important part of the world’s natural gas

production[14].

Source: BP Statistical Review of World Energy 2020

Figure 3. Gas production in the world (2005-2019).

3. Development of offshore oil and gas exploitation technology

The technology of offshore oil and gas development mainly includes offshore geophysical exploration

technology, offshore drilling and completion technology, offshore oil and gas production technology, and

gathering and transportation technology, which constitute a complete offshore oil and gas development

system[15-17].

3.1. Geophysical exploration technology

In terms of seismic data interpreting and processing, currently some international advanced companies

such as Petrobras, Shell, Chevron, ExxonMobil, BP, Total of France have applied big data and artificial


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intelligence technology to reservoir parameter prediction, reservoir prediction, geological stratification, and

logging curve reconstruction with missing data, and developed core algorithms to form a series of

exploration data processing software with complete system and independent intellectual property rights[18-

19].

In terms of deep-water exploration equipment, world-renowned oil service companies such as

Schlumberger, Baker Hughes, Halliburton, etc., have developed deep-water exploration equipment and

seismic exploration systems with stable performance, which lead the world in terms of exploration accuracy,

adaptability to water depth, excitation power, exploration depth, and adaptability to complex sea areas[18-19].

3.2. Drilling and completion technology

Offshore drilling and completion technology mainly includes offshore extended-reach drilling

technology, ultra-thick salt-gypsum drilling technology, dual gradient drilling technology, high-temperature

and high-pressure drilling technology, deep-water drilling technology, deep-water shallow well construction,

geological disaster prediction technology and offshore completion tool technology, etc. International oil

companies such as Chevron, British Petroleum (BP), Petrobras, and China National Offshore Oil

Corporation (CNOOC) have gradually realized large-scale commercial exploitation of high technology in

the Gulf of Mexico, Brazil, the North Sea, West Africa, and the South China Sea.

3.3. Offshore oil and gas production technology

Offshore oil and gas production technology mainly includes reservoir simulation, enhanced oil recovery,

wellbore artificial lifting, oil and gas water separation, underwater production system, and other technologies.

The current cutting-edge technology of underwater production system includes underwater long-distance

flow assurance technology, underwater power transmission, and all-electric control technology, underwater

installation technology, reliability and integrity management technology for an underwater production

system, polar underwater production technology, etc[20]. At present, the main international suppliers of

underwater Christmas trees are FMC Technologies, Cameron (Schlumberger), Vetco Gray (GE Oil and Gas),

Aker Solutions, and Drill-Quip.

4. Development of offshore oil and gas equipment

4.1. Drilling equipment

The development of drilling equipment mainly experienced leaping breakthroughs from the coast,

shallow water to deep-water. In 1961, the first semi-submersible drilling platform was built. So far, the semi-

submersible offshore drilling platform has been developed for the seventh generation. The new platform

adopts D90 design, which enables it to operate in ultra-deep water above 3,500 m with a maximum drilling

depth of over 15,000 m. The NOV hydraulic dual rigs, dual top drive design, and DP3 closed-loop power

management system are adopted too, and reduce the average operating time by 30%. At present, China’s

CIMC Raffles Company has successfully built the seventh-generation semi-submersible drilling platforms


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“Blue Whale No. 1” and “Blue Whale No. 2” (Figure 4), which stay a leading position in the world and are

suitable for global deep-water oil and gas operations.

(a) Blue Whale No. 1 (b) Blue Whale No. 2

Source: China Land and Resources News. 2017-07-13 (003). www.Chinanews.com (Assessed 2019/09/26).

Figure 4. Seventh-generation deep-water semi-submersible drilling platforms.

Deep-water oil and gas development equipment mainly include deep-water drilling and production

platform, deep-water riser system, underwater production system, and subsea pipelines, etc. At present, semi-

submersible platform, single-pillar platform (SPAR), tension leg platform (TLP), and other floating

platforms that can operate in deep-water have been widely used worldwide. Floating production storage and

offloading equipment, such as floating production storage and offloading (FPSO) unit, floating liquefied

natural gas (FLNG) unit, floating drilling, production, storage and offloading (FDPSO) unit and other deep-

water floating operation equipment emerge continuously. And steel catenary riser (SCR), top tension riser

(TTR), flexible riser (FR), hybrid riser (HR), and other underwater riser systems have been widely used in

deep-water area, such as the Gulf of Mexico, Brazil, and West Africa.

4.2. Production equipment

In recent years, the underwater oil and gas production system has developed vigorously. With significant

technical advantages and good economic benefits, they have received extensive attention and applications

from major oil companies. The technical requirements for installation, testing, control, and recycling of the

underwater production system are extremely high, and the requirements for material performance and sealing

technology are also very high. What’s more, the control system and valves are prone to problems and difficult

to repair. Therefore, underwater production systems such as underwater wellheads, underwater Christmas

trees, and underwater risers mainly come from the five major manufacturers, that is, FMC, Cameron, Vetco

Gray, Drill-Quip in the United States, and Aker in Norway.

4.3. Gathering and transportation equipment

Compared with the solution of “fixed jacket platform and subsea pipeline”, the “FPSO and single point

mooring system” has the advantages of low investment, quick results, reusability, and low risk. Especially,

http://www.chinanews.com/


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it is suitable for offshore development of medium, deep and marginal fields. Some people regarded FPSO as

the mainstream of offshore oil and gas development in the past 10 years, and the most dazzling “star” in

offshore engineering equipment, which reflects the broad application prospects of FPSO in the future deep-

water oil and gas gathering and transportation (Figure 5 and Figure 6).

Source: Zhang, X., et al. Oil Drilling & Production Technology, 2009, 31(2), 39-43.

Figure 5. System diagram of offshore oil and gas development equipment.

Source: Zhang, X., et al. Oil Drilling & Production Technology, 2009, 31(2), 39-43.

Figure 6. Diagram of major offshore oil and gas equipment.


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5. The challenges of offshore oil and gas development

5.1. Operational challenge

With the increase of water depth, the offshore distance of the platform increases, and the environmental

loads like winds, waves, and currents increase as well. Higher requirements are put forward for the stability

and safety of offshore platforms, and the increase of natural disasters such as hurricanes, typhoons, and soil

typhoons also bring great environmental challenges to deep-water operations.

5.2. Technical challenges

The rapid development of the offshore oil and gas industry is closely related to advanced technology.

With the increase in demand for oil and gas today, the exploration and development of deep-water oil and

gas have accelerated, which puts forward higher requirements for the intellectualization, unmanned

technology, high-efficiency, and safety of the offshore platform and related equipment. In the future, the

integration of artificial intelligence and big data technology with the offshore oil and gas industry will be an

important technical challenge.

5.3. Environmental protection challenges

The marine ecosystem is the main part of the earth’s biosphere, and the ocean is also an important part

of the ecological environment and climate regulation. Therefore, the exploration and development of

offshore oil and gas must pay more attention to the protection of the marine ecological environment. For

example, the Gulf of Mexico “Deep-water Horizon” accident caused serious crude oil spills, which brought

immeasurable damage to the marine ecological environment and sounded an alarm to the offshore oil and

gas industry. Offshore oil and gas operations must pay attention to the harmony between man and nature,

and properly handle the ecological protection in the process of exploration, development, and well disposal.

5.4. Economic challenges

In the current situation of low oil prices and ever-increasing demand in the oil and gas market, reducing

cost and increasing efficiency have become the common goal of all major oil companies. However, the

development cost of offshore oil and gas doubles as water depth increases. It is an important economic

challenge for offshore oil companies to generate more economic benefits while meeting the market demand.

6. Trends in the offshore oil and gas industry

The world’s offshore oil and gas industry is moving forward steadily in a broad prospect. The overall

development trend is reflected in the following three aspects.

6.1. The main growing area: deep-water

In 2030, the world’s oil and gas demand will exceed 10 billion tons of oil equivalent, and the problem of

the onshore oil crisis is becoming increasingly prominent. Thus, the future of oil and gas should be offshore,

and the development power of offshore oil and gas is mainly in deep-water (Figure 7). It is the future trend

of the oil and gas industry to demand oil and gas from deep-water[21].


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Source: Zhou, S., et al. Science and Technology Review, 2020, 38(14), 17-26.

Figure 7. Distribution of major deep-water oil and gas fields in the world.

6.2. Integration, intelligence, and environmental protection

Integration, intelligence, and environmental protection have become the main development direction of

deep-water oil and gas technology.

The exploration and development of offshore oil and gas towards deep-water must be equipped with

supporting offshore engineering equipment. The integration, unmanned technology, intellectualization and

high-efficiency of the equipment, and the protection of the offshore environment have become the main

developing direction of the technology and equipment of deep-water oil and gas exploration and

development in the future[22,24].

6.3. Arctic area and ocean gas hydrates become the new focus

There are more than 30 sedimentary basins in the Arctic area, and the area explored is more than 3.3

million square kilometers. It is rich in oil and gas resources and has a good prospect for exploration and

development. It is a reserved area for global offshore oil and gas exploration in the future. In addition, ocean

gas hydrates will also become a kind of new follow-up energy for human beings and gradually become a

new focus of offshore oil and gas exploration and development [23,25].

7. Conclusions

As a continuation of the onshore oil and gas development history, the offshore oil and gas industry has

experienced a development course of more than 70 years, and its importance has been widely accepted by

countries around the world. In the future, the ocean will be the main area of the production growth of oil and

gas in the world, and deep-water will be the main area of the production growth of oil and gas in the ocean.

A technological system for offshore oil and gas development, with geophysical exploration, drilling and


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completion, oil recovery, and oil transportation as its cores, has gradually been developed. Corresponding

equipment systems for offshore oil and gas exploration, development, gathering, and transportation have

been continuously improved and expanded. The “high investment, high risk and high technology”

characteristics of the offshore oil and gas industry, determines that the future development direction of this

industry must be equipment intensification, intelligent development, unmanned operation, safety, and non-

pollution. Looking back on the development history of this industry, the scale of development, operation

water depth, oil and gas production has been greatly improved. At present, deep-water is the most active area

for oil and gas exploration and development in the world. In the future, the ocean will gradually replace the

onshore and become the main battlefield of oil and gas exploration and development.

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