The Future of the World's Energy Supply

What is the future of the world’s energy supply?

Here she is, in all her haze gray glory. Meet the Transocean Discoverer Inspiration.

What is this floating giant? Well, in the big scheme of things Inspiration is the future of the world’s oil supply.

Inspiration, and other ships much like her, is the great, gray hope for anyone who plans to use liquid hydrocarbons any time in the next 50 or 100 years. If you use oil, then you had better want this baby to work as advertised.

The Most Powerful Drill Ship Ever Constructed

In a practical sense, Inspiration is the newest, most modern, most powerful drilling ship ever constructed. She just put to sea in late 2009, fresh from her builders at the Daewoo Yards in South Korea. She’s already had her shakedown cruise.

Now Inspiration is at work, under long-term contract with Chevron, drilling holes in the bottom of the sea to test the deepest oil prospects that the geologists can dream up.

The New Deep Gold Rush

There’s a new deep-sea gold rush going on, except the prize is oil. Inspiration is among the vanguard of a new class of technology. The designers have been building ‘em bigger, stronger, and more powerful. The ships can lift more, string longer drill systems, go farther down, and find the really hard stuff.

Inspiration is among the largest drilling vessels ever to hit the water, and oh what a career is laid out for her. In case you missed it, the future is now.

How Deep? How Strong? How Much More?

Inspiration is designed to drill the deepest of wells, in the deepest of oil-prospective waters. In fact she’s rated to drill in up to 12,000 feet of water, or about as deep as the wreckage of the Titanic.

How can you drill in water as deep as where the Titanic came to rest? It’s hard, and expensive. And that’s the nature of things in a world where there’s such a concept as Hubbert’s Curve. Better get used to it. Better yet, invest in it.

Inspiration carries 12,000 feet of “riser” units – large-diameter, thick-cased pipe that connects the ship to the seafloor. Inside the risers, the drill pipe goes down – through a large hole in the bottom of the ship, by the way, called a “moon pool.” Eventually, it all connects together down on the seafloor, to make a hole. And the drilling mud comes back up, to be processed onboard the ship.

How deep can Inspiration drill? Down to 40,000 feet – just shy of eight miles – or some combination of water depth and rock depth that adds up to 40,000. It’s deep.

It takes a very big ship to do such things. Thus is Transocean Discoverer Inspiration just a hair over 835 feet long and 125 feet wide. She displaces over 100,000 tons. Her draft is 62 feet, fully loaded. That is, Inspiration’s keel is almost as deep down as the first oil well that Col. Drake drilled at Titusville in 1859.

Just the hull of Inspiration is larger than that of a World War II-era aircraft carrier. And updating things to modern times, Inspiration’s hull is almost as large as that of a modern aircraft carrier as well. There are few ships larger on any ocean, outside of the large crude oil carriers. But big, bigger, biggest is what it takes to drill deep holes in deep water.

Speaking of that, look at the derrick, in the middle of the ship. It’s 80 feet square at the deck, and rises up 226 feet. So the total height, from keel to the top of the derrick is well over 300 feet, or taller than a 30-storey building. The way the derrick is configured, Inspiration can actually drill TWO wells at once, which is a boon to efficiency – considering that a day at sea runs an operator near $1 million.

Power and Positioning

How much power does it take to run this ship? The generators can put out 40 Megawatts, which is enough electricity to light up a city of 40,000. It translates into about 53,000 horsepower. That’s the equivalent horsepower of about eight modern railway locomotives.

Inspiration is not designed for speed. She moves along at a stately 12 knots, transiting from drill site to drill site. But what Inspiration lacks in hull form and speed, she makes up in her ability to remain exactly above a single spot in the ocean. That is, when you’re drilling a well at the bottom of the sea, the drill ship can’t drift more than a few feet in any direction at the surface. The risers are super-strong, but not THAT strong.

So Inspiration has a remarkable array of systems that allow for “dynamic positioning.” It’s based on sonar signals from the seafloor. There’s also satellite positioning. The ship’s navigation system knows where the moon pool and derrick are located, relative to the action at the seafloor. And the ship remains in place via a series of powerful thrusters that push water opposite the drift due to wind and current. Piece of cake, right?

I’m Out Here to Feel the Energy, and Learn More

So I was 200 miles out at sea, learning about this remarkable ship and what it’s doing to find the world’s oil. I’m not part of the crew, nor am I technical staff. I’m a guest, and I assure you it’s quite rare for a vessel owner or lease operator to allow visitors. Still, in my mind, I’m a representative out here for those who subscribe to Outstanding Investments and it’s my job to find unique opportunities and ways to inform them.

My hosts are Transocean, Ltd., and Chevron Corp. Still, guest or no, I have full editorial freedom to observe, ask questions and write up what I learn. If you’re wondering, Agora Financial paid my way to get to New Orleans. Chevron is providing the helo rides, and arranged for the mandatory safety training.

Really, I need to emphasize that this is no casual visit. I had to go through two days of safety training, including helicopter evacuation and water survival. It was similar to my old Navy training, but still a good refresher. I also went through something called “Safe Gulf” training, which instructs you on how many ways you can get seriously injured or killed on an oil drilling facility. No nodding off in that class… not with the occasional gruesome photos to keep you focused.

A drill ship like Inspiration is a complex industrial facility. It’s full of all sorts of stored energy that can severely injure you, if not kill you. You have to be ultra-cautious and totally safe. There’s the usual fuel and chemicals that you find on a large ship. There’s also hydraulics, pneumatics, electrical power, mechanical energy (springs, coiled cables and such), and good old gravity – with big stuff hanging over your head.

It’s a lot like being in the Navy. All those years on active duty and in the Reserve have taught me quite a bit. But this is more than that. It’s different, in a very industrial way.

Simply, this is a massive drilling ship. It’s not “power projection” like in the Navy, where the gray boys shoot missiles and launch jets. No, this is power projection straight down, eight miles into the crust of the earth. It’s all about extracting energy. It’s all about obtaining the oil that this world needs. It’s all about how technology and capital investment are evolving to exploit the deep oceans of the world. There’s a lot here to provoke serious thought – including investment angles – and I’m doing a lot of thinking on this topic.

Until we meet again,
Byron King
Whiskey & Gunpowder

April 7, 2010

The Daily Reckoning