Global offshore expenditure on field developments and operational expenditure is set to continue its overall growth, according to John Westwood of energy analysts Douglas-Westwood.
This will be particularly focused on deepwater; with an increasing spend on subsea production and floating production, Westwood said in his opening address to the East of England Energy Group conference in Norwich, England.
Westwood pointed out that the Douglas-Westwood reportThe World Floating Production Report forecasts 120 additional installations by 2008.
Growth in demand for natural gas is outstripping that of oil, and depletion of reserves in countries such as the UK and the US means that activity is focused on long-distance subsea pipelines. This coupled with the increasing activity in deepwater means that top-of-the-market pipeline installation vessels will be in high demand, he said. However, much gas is economically stranded and at present liquefaction offers the only real solution.
Investment in LNG plants, LNG tankers, and import terminals is set to boom, Westwood predicts. He cited figures from the Douglas-Westwood reportThe World LNG Report that indicate a 40% growth in spend for LNG development over the next few years to exceed $10 billion per year.
In the mature shallow-water offshore areas of the world, such as the UK and soon Norway, total expenditure is falling. Westwood said. He also pointed out that during the recent period of high oil and gas prices, oil company profits have soared while contractors' profits have fallen, which causes the reserve situation to be unsustainable.
Westwood called for an increase in exploration to boost reserves and future production prospects.
"Over the past few years the world's oil majors were focused on gaining reserves by exploration on Wall Street rather than exploration offshore, with the result that depleting reserves are not being replaced," he said.
Meanwhile, governments of consuming nations must make adjustments to their energy needs to reduce reliance on oil and develop other energy sources, especially renewable supplies, Westwood said. "The changing situation in energy supplies has major implications for governments worldwide," he said. "The present reliance on oil must be reduced; natural gas and renewables will have to be used to fill the forthcoming energy gap, a massive energy conservation drive is needed, and it is becoming increasingly likely that nuclear energy will have to be resurrected."
Referring to the Douglas-Westwood analysis inThe World Oil Supply Report, Westwood noted that "oil demand from the developing economies has more than doubled over the past decade and supply restrictions are evident. Analysis shows that it is increasingly likely that oil supplies will peak, possibly within a decade and governments must acknowledge this scenario as the economic consequences are considerable. It is therefore essential that governments recognize the need for energy diversity as present high oil prices are merely a foretaste of things to come."
Westwood also said that the UK needs a plan for addressing the major changes to come in the energy sector. This should include:
• Fully exploiting the UK's remaining oil and gas reserves by attracting new small oil and gas companies to develop some of the many tiny fields and to take over the mature assets of the departing oil majors
• Government support to increase energy from renewable sources and development of a UK supply chain
• Greatly increasing energy conservation will require the UK to shift to a low-energy input economy.