Eldon Ball • Houston
Global spend in the deepwater sector will exceed $200 billion over the next five years, according to the latest "The World Deepwater Report" forecasts from energy analysts Douglas-Westwood.
Brazil will comprise 34% of that amount as exploitation of Petrobras' huge presalt play begins firing up an international scramble to contract the top performing deepwater assets ranging from pipelay vessels and floating production systems to drilling rigs, the report says.
"In the Gulf of Mexico, activity is resuming following theDeepwater Horizon tragedy, and in the Norwegian arctic Barents Sea, Statoil is making new discoveries," Douglas-Westwood says.
In the period to 2016, over $72 billion will be spent on drilling development wells in deepwater fields, the report states.
In 2011, the report notes, worldwide orders for newbuild offshore mobile drilling rigs totaled 81, the highest number recorded since 1980.
Brazil's presalt play has been estimated to hold 10-20 Bbbl and, as every geology student knows, South America and Africa were once the same continent, so it came as no great surprise when both Maersk and Cobalt Energy announced West African presalt discoveries in 2012, they note.
The analysts also see a vast Arctic hydrocarbon resource, with the USGS expecting the region to hold 13% of the world's undiscovered oil and 30% of the gas, and some 80% of these amounts likely to be offshore. The report forecasts more than $30 billion to be spent in Alaska, partly driven by the growing need to refill the Trans-Alaska pipeline. LNG plants in Alaska and Canada continue to be discussed.
The annual construction market for newbuild floating production systems (FPSOs, FPSSs, spars, and TLPs) bottomed out in 2010 at about $6 billion but is now set to grow strongly with 2012-16 capex on 134 installations to total $68 billion – and there is more to come, Douglas-Westwood says.
"Our databases already show a further 200 installation prospects beyond 2016, illustrating the huge opportunity for both re-deployments and newbuild units."
Vessel utilization remains an important issue and Douglas-Westwood is tracking 19 vessels that are presently without contract. However, overall FPS utilization is at 93% which remains little changed over the past nine months, they say.
The forecast sees opportunity for subsea equipment, with some 4,000 subsea wells completed to date and the drive into deeper waters expected to greatly increase numbers.
"Together with the associated flowlines, control lines, templates, and manifolds, these create a business opportunity for hardware suppliers probably exceeding $150 billion over the next five years," the report says. "Also, considerable numbers of additional vessels will be required to install, inspect and maintain all this subsea hardware, and $20 billion will need to be spent in subsea inspection repair and maintenance."
Furthermore, new technologies such as subsea processing are emerging into commercial reality – E&P companies are likely to spend $2.6 billion on subsea processing hardware, they report.
"Equipment contractors have seen backlogs building again throughout 2011, and toward the end of the year it was interesting to note that one of the major subsea vendors was reporting in its 3Q update that engineering resource/capacity was an operational issue. Capacity constraints in this industry are fundamentally related to people – the industry has addressed many of the ‘hardware'-related issues in the last up-cycle but the availability of skilled and experienced engineers and project managers is not a problem that can be solved overnight."
The firm's recent "North Sea Offshore Decommissioning Market Report" shows that across the North Sea region more than 478 offshore platforms and 7,888 wells will require decommissioning in the period to 2041. This involves the removal of some 4 million tons of steel and other materials. In addition, it is anticipated that several hundred subsea wells will need to be plugged and abandoned; and manifolds, flowlines, pipelines, and umbilicals to be emptied of hydrocarbons before being disposed of onshore.
This is without a doubt a major opportunity for vessel operators, well service companies, and dedicated yards. The next 30 years will see enormous demand for the services of such supply chain players, which will generate a large number of much-needed jobs in Denmark, the Netherlands, Norway, Ireland, and the UK, the report notes.
"Our lowest cost estimate for this decommissioning of $65 billion assumes a step change in offshore lifting technology and the development of Super Heavy Lift Vessels (SLVs) that are capable of lifting upwards of 15,000 tons," the report says. "Using existing methodology of offshore deconstruction and smaller lift vessels would result in a higher cost, some $76 billion."
"We are now well into the next E&P up-cycle and shortages of major exploration and construction assets, specialized hardware manufacturing capacity, and skilled human resources are continuing to push prices higher, almost a repeat of the effects of the last oil price boom," says Douglas-Westwood. "Offshore contracting, manufacturing, and services companies are seeing a surge of new business and could again financially out-perform their E&P company client base…"
So what could go wrong? "It is external factors that impact on oil and gas consumption and consequently the whole E&P sector and its supply chain," the analysts observe. "However, unless we have complete financial meltdown in Europe, 2012 should be another great year for the offshore contracting industry."
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