Offshore reserves are the obvious choice for energy supply over the next five years, John Westwood, managing director at Douglas Westwood Associates, said during the Harts E&P Global Offshore conference in Houston on March 18. He said the International Energy Association expects oil demand to grow 53% and gas demand to grow 86% by 2020. So where will the hydrocarbons come from? Onshore reserves are depleting, security of supply issues surround onshore sites, shallow water output is declining, and there's been an increase in deepwater, floating production, and subsea production, Westwood said.
"More and more (oil and gas) have to come from the offshore," he said.
And Douglas Westwood's forecast backs that belief, estimating a $169-billion spend in the offshore drilling market from 2003 to 2007.
Some will focus on deepwater, particularly in the Golden Triangle area of West Africa-Gulf of Mexico-Brazil.
Westwood expects deepwater capex to double from its current $6 billion spend by 2007. In that same time period, floating production is expected to go from $5 billion to $9 billion while subsea production will get quite a bit of investments, going from an $8 billion spend to $11 billion.
Oil is pulling in a hefty per-barrel price, and gas prices continue escalating, but risk aversion keeps the oil companies from spending more money, Westwood said. On the flip side, he said, is the question of whether contractors can deliver.
"We're seeing an imbalance between risk and reward," Westwood said about lump sum project contracts.
Jackie LaFontaine, Halliburton division vice president for completions, agreed with his risk vs. reward assessment. She said service companies cannot continue developing new technologies without more oil companies being willing to use new technologies first. She said partnerships with oil companies may be one way to ensure that investments in developing technologies are rewarded.
"I can't get management to give me money to invest," she said, if the oil companies fail to deploy new technologies. "No, we're not going to be able to develop technology like we have in the past 10 years without partners or something."
Westwood said the industry may be poised to move out of the age of oil.
"When will we see the beginnings of the end of the age of oil?" he asked, before adding the next era will likely be the age of gas with a boost from renewable offshore energy. "Big oil companies are going to change. They're going to become big energy companies."