Depending on the severity of conditions--wind, waves, currents, 

 tides, storms, earthquakes, temperatures, and ice--the cost of offshore 

 development can escalate to almost five times the cost incurred under 

 ideal conditions (few storms, light winds, mild tides, no ice) as found 

 in the Persian Gulf and Mediterranean Sea. Ice imposes the most severe 

 limitations, and thus the greatest increase in cost. Transport through 

 sea ice is nearly impossible; the shearing and crushing effects of sheet 

 ice on fixed structures impose severe design criteria on platforms; and 

 it may be nearly impossible to construct a pipeline to shore that will 

 not be ruptured by moving ice floe pressure ridges. 



A third factor affecting development is the geological character of 

 the ocean bottom which must support the production platform. Areas of 

 difficulty are soft sediments, mud slumps, sand waves, rock outcrops, 

 steep slopes, and faults. If technical solutions are not available, 

 development is precluded on such OCS areas. 



A fourth factor is water depth. The difficulty of either exploration 

 or production is compounded by deep water. This is reflected in the 

 complexity of drill rigs required for deeper water (semi-submersibles) 

 as opposed to those required for shallower (less than 350 feet) waters 

 (jack-up rigs). Development costs are as heavily dependent upon water 

 depth as exploration costs or more so. For example, standard platforms 

 ("fixed" type) increase in cost as a function of the square of water 

 depth. In order to maintain a stable base-to-height ratio in deeper 

 waters, platforms increase exponentially in size and in number of joints. 

 Therefore, the amount of material and labor required also increases 

 exponentially. 



Table 8A compares drilling expenses for a base case of the Gulf of 

 Mexico with other combinations of conditions of depth, climate, and 

 seismicity. Although construction costs have risen sharply in the past 

 two years due to inflationary pressures (25 to 35 percent) the 

 relationships expressed by the index are valid. As shown in Table 8B 

 development and production expenditures would likewise increase with 

 increased depth and more severe climatic conditions. 



Except for the areas north of the Alaskan Peninsula, industry 

 engineers believe they have the technical know-how and the exploration 

 production equipment, expertise, and experience to undertake development 

 on most of the U.S. Outer Continental Shelf. However, severe storms and 

 seismic risks pose a grave threat to offshore development in Alaskan 

 Artie waters and engineering design improvements of current equipment 

 and consideration of new systems will undoubtedly be required. 



Jack-up rigs will probably be used on the east coast offshore up 

 to depths of 300 to 350 feet. Semi-submersibles will be used for 

 exploratory drilling beyond that to a depth of 1,500 feet. 



Projected water depth drilling and production capabilities for the 

 various areas to be leased are shown in Table 9. 



54 



