Survey shows 390 fields worldwide
There are several explanations for the decrease. The key driver is the decrease in oil prices and perceived oil demand from last year at this time, which has affected the number of new fields proposed for development. With dwindling cash flow from low oil prices, producers have raised the reserve requirements and lowered cost hurdle rates for development, basicly trimming off 10-24% of their developable prospects.
Without the stable, higher oil price experienced at this time last year, many projects that seemed feasible at the time are now entirely unprofitable. That threshhold of minimal reserve requirements for development had been on the decline for many years before 1998.
At the same time, a large number of fields scheduled to go onstream in 1997 and 1998 have done so, and have been removed from the 1998 survey. In 1997 alone, a total of 235 fields were expected to start up.
Also explorationExploration levels are also down compared with last year. Companies have pulled the plug on many exploration programs, especially in the shallow water, and this has decreased worldwide discovery rates.
Deepwater exploration remains strong due to longer-term commitments for necessary resources, but discoveries still are not being churned out as fast as last year. And, when a discovery is made, depending on the size, companies are staying very conservative in development plans, and in most cases waiting to see what the market will do before committing to anything.
Therefore, discovery-to-development time is expected to rise again, after being on the decline for some years.
Avoiding higher riskAnother possible reason for the drop is that higher risk, and under-developed areas are not nearly as attractive as they once were. The risk involved with moving resources into politically unstable and underdeveloped regions of the world is not justifiable at a depressed oil price. This has resulted in operators sticking to what they know and continuing activities in stable, proven, and developed regions.
Unitization of fields may have also influenced the decrease as well. When prices begin to fall and costs begin to rise, operators tend to pull a number of smaller fields together under one development scheme to decrease overall costs and increase total production to justifiably producible levels.
If the production threshold has been raised, then unitizing these smaller fields is the only other avenue for an operator besides full abandonment or producing in a weak market. Tying these smaller fields to one field listing further decreases the world's total figures.
Survey dataThis year's survey includes 405 platforms, 72 floating production systems, and 180 subsea production systems, either planned, under bidding, under design, or under construction. Each listing includes the number and type of platform, floating production system and the number of subsea systems used. A majority of these development projects are in the construction stage (223), followed by under design (124), planned (110), and bidding (34).
The following information contained in this survey is compiled in Offshore Data Services' bimonthly publication Offshore Field Development International, which regularly tracks offshore construction projects from design through installation phases. The data was collected under specific criteria and reflects information available at the time. Recent changes may not have been included.
Copyright 1998 Oil & Gas Journal. All Rights Reserved.