Deepwater Oil Rigs Drilling Ever Deeper

Big Bets on Hard to Reach Oil

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Editor's Note: To see an updated chart of how deep we drill for oil today, click here...


Deepwater drillers routinely do today what everyone thought was impossible 5 years ago. As cheap oil gets harder and harder to find, this trend is likely to continue. To see how quickly the technology is advancing, take a look at this chart from The Economist.

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The stakes are huge. Drilling this deep requires state of the art technology and huge amounts of capital. A mistake leading to drilling a "dry hole" can be extremely costly, up to $200m according to BP. But the companies who get it right stand to reap huge rewards, as long as the price of oil doesn't go much lower than it is today.

Brazil's partially-state owned Petrobas (NYSE: PBR) may be the most well-known deepwater name today. In 2007 they roiled the industry by announcing the discovery of up to 8 billion barrels of oil in the Tupi field 200 km off the Brazilian Coast. I've read that in order to make a profit on these costly rigs, they need the price of oil to be around $70/barrel. Over the long run, that seems like a good bet, with cheap easily extractable fields becoming increasingly scarce.


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