It is by now a familiar routine. Positive news from industry analysts showing that we're just about to turn a corner. First it was 3Q 2001. Then we went to war, and plans for prosperity were put on temporary hold. Since then, the recovery has been steady, but somehow not enough to spark optimism among operators.
Now, the staff at Douglas-Westwood have come out with a report showing that they expect as much as a 50% upswing in business over the next five years.
While this is nice to hear, it's not unexpected. All the industry news lately has been positive. Even as the economy stalls and sputters, major projects continue to be announced.
The reports that come across our desks from various analysts show future growth at almost every level. Contractors are blue in the face from holding their breaths waiting for the boom to crank up, but where is it?
Douglas-Westwood sees a promising five years for virtually every sector of deepwater offshore, and the long-range outlook is even rosier. In areas including deepwater offshore Brazil, West Africa, and the Gulf of Mexico, growth is predicted to peak at around the 50% mark. Well over 2,000 new offshore fields are under consideration for development, according to Douglas-Westwood, which would require upwards of 1,500 fixed platforms and 232 floating production systems.
Of course, Douglas-Westwood points out the obvious caveat to this prediction: "The leading question is just how many of these prospects will be converted into actual development projects and over what timescale."
The four key areas of technology – pipelines, umbilicals, subsea, and floating production – are all mentioned as most likely to grow. Of course, deepwater will remain a key area of growth, with predictions that expenditures in this area may double over the next five years.
So, if predictions say the industry will lay 138,000 km of new pipelines and 30,000 km of umbilicals, then add over 1,800 new offshore platforms, why isn't business booming? What is the missing ingredient?
In the same report, John Westwood himself cautions the industry that it is drawing down its onshore and shallow-water oil reserves, indicating an increased reliance on deepwater fields. That makes sense, and it is certainly not the first we've heard of it, but still there are no champagne corks popping.
Visiting with equipment and service providers also proves perplexing. Backlogs are building, large contracts are being let, but no one is smiling. There is a clear attitude of uncertainty out there. People are of the mind that while things are good now, they are not so good that they can afford to ignore the future. And, all evidence to the contrary, there is no one out there right now who isn't just a little uncertain about what the future may hold.
To their credit, Douglas-Westwood does address a number of long-term concerns. These include the price of oil, which they predict will rise as cheaper sources are exhausted. While good for the industry's pricing models, this increase, once it makes its way to the consumer, would have a negative impact on the overall economy. Looking at a flat stock market, the possibility of a US war with Iraq, and other broader political and economic concerns, it is possible to understand why companies are being cautious.
Another, more immediate factor to consider is the economics of the projects being announced. In some cases the winning bids from contractors are so low that it would seem the only thing worse than not getting the contract is getting it. This may just be a carry-over from the lean times in the late '90s, but if companies get locked into major deals that tie up their resources but don't turn a strong profit, that could explain why no one is celebrating the upturn.