Award-winning publication

Recognition from your peers always carries the most significance. That’s why we were particularly pleased whenOffshore was announced as the Best of Show winner in the category of “Magazines: External - Print” at the Houston chapter of the Business Marketing Association (BMA) awards banquet recently. The panels that judge BMA entries are made up of professionals from the publishing, marketing, and advertising communities. It is their business to know a top quality publication when they see one. Knowing that makes this award especially significant for Offshore, and we take this opportunity to thank the BMA and its members for this special recognition.

Deepwater spending

Deepwater drilling will continue to grow significantly, translating into a robust market for deepwater technology and services, according to analysts withDouglas-Westwood, writing for this year’s Review and Forecast. Over the next five years, some $28 billion is likely to be spent on deepwater floating production systems, $40 billion on drilling and completing subsea wells, and $14 billion on flowlines and control lines, while subsea hardware and surface completed wells could account for a further $10 billion.

The deepwater “shopping list” for the forecast period includes over 1,300 subsea trees, 283 templates and manifolds, 71 platforms, and some 13,000 km of pipelines. Annual expenditure in the deepwater business is expected to reach $20 billion by 2010, with the overall spend for the 2006-2010 period totaling $94 billion.

Looking at deepwater drilling, the authors note that over the last five years, an estimated $160 billion was spent on shallow-water drilling, representing 83% of all drilling expenditure. Meanwhile, $33 billion was spent on deepwater drilling. Over the next five years, it is forecast that $197 billion will be spent on shallow-water drilling while $65 billion will be spent on deepwater drilling.

Within the deepwater sector, the analysts say, 37% of expenditure is directed toward engineering services, 25% is earmarked for support, and 5% goes toward geoscience. But it is surprising to many, they note, that rigs comprise only 33% of total well costs, even in deep waters.

The Douglas-Westwood analysts -Steve Robertson, Georgie MacFarlan, and Dr. Michael Smith - give their projections for deepwater offshore activity in 2006 with a report beginning on page 28.

The future for majors

The future of major international oil companies lies in persuading host governments that they need the majors for E&P ventures beyond the capabilities of the government’s national oil company. That’s one of the conclusions of analystsWood Mackenzie in their analysis beginning on page 24. Serving the LNG market will also open opportunities, the WoodMac analysts say.

“Some of the most geologically promising plays are in areas which are closed to international oil companies, and persuading governments that only the international companies have the ability to find and develop reserves is increasing difficult as technologies become commoditized.” Wood Mackenzie notes.

Thus, many conventional opportunities in the Middle East, Mexico, and Venezuela will likely remain outside the reach of the majors for the current time.

“Therefore, the majors will need to provide other incentives to host governments. This will come in the form of newer technologies, particularly those associated with deepwater development and heavy oil production, and also the ability to develop and market gas discoveries in areas remote to the major gas markets of North America and Europe.”

Recently, Wood Mackenzie says, a number of majors have announced strategic partnerships with national oil companies based around LNG and deepwater developments.

“This is a strategy that may become more common as the need to improve the value proposition to governments increases,” they say. “Without unlimited access to emerging geographies, the majors will have to look to new technologies to unlock areas with large potential. In practice this will mean exploring in ultra-deepwater, exceptionally deeply buried plays and in arctic latitudes.”

The forecasts bode well for 2006 and beyond, particularly for deepwater operations. We’ll bring you more specific details in future issues and in our monthly and weekly eNewsletters.