P.2 ~ Offshore industry expected to see modest capex growth in 20155

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Offshore North America is expected to see an 11% fall in expenditure in 2015, caused by a decline in operator spending in the US Gulf of Mexico (US GoM). This decline is due to a number of projects that will require less expenditure as they progress through their construction phases, such as Anadarko's Lucius field, LLOG's Delta House field, and Chevron's Big Foot, Jack and St Malo fields. The US GoM, along with West Africa and Brazil, forms a deepwater locus, and as production declines from the shallow-water fields, operators have the opportunity to explore deeper waters. With the US GoM projected to account for 86% of the North American region's offshore capex demand, almost 80% of this expenditure is likely to be focused on developments situated in water depths of more than 1,000 m (3,280 ft). Examples of projects contributing towards deepwater capex demand in the US GoM throughout 2015 include Shell's Stones field, the first phase of the ExxonMobil-operated Julia field, and Anadarko's Heidelberg field. Although there are deepwater opportunities in the US GoM, the current low oil price is likely to have an adverse effect on the economic viability of deep or ultra-deepwater developments, which require higher levels of expenditure compared to shallow water developments.

In terms of North American operator capex demand, ExxonMobil is expected to account for the largest share, with the IOC's Hebron oil field offshore Canada comprising the largest proportion of the company's 2015 offshore investment. Hebron will consist of a gravity platform which will be installed in water depths of around 93 m (305 ft). The platform is designed to withstand sea ice, icebergs, and harsh meteorological and oceanographic conditions. The gravity platform will store around 1.2 MMbbl of oil. The field is expected to come onstream in 2017.

The forecast for the Middle East and Caspian Sea market shows an increase in offshore expenditure (11%) during the year, with Azerbaijan forecast to see a massive increase in expenditure caused by the second phase of BP's Shah Deniz field. The largest proportion of offshore expenditure for the field development will be focused towards the three 90-km (145-mi) export lines from the field to the onshore Sangachal terminal which is currently undergoing major modifications. Besides Azerbaijan, Qatar is also likely to see stronger levels of offshore investment in 2015. The main driver of capex demand in Qatar will be the Bul Hanine oil field operated by Qatar Petroleum. The field has produced since the early 1970s but requires redevelopment to continue production. The redevelopment will require a new offshore central production facility and a new onshore gas liquids processing facility at Mesaieed.

Australasia has the lowest offshore capex demand forecast in 2015, with the majority of the region's expenditure likely to be focused on projects offshore Northwest Australia, which has emerged as the regional hub of offshore oil and gas activity in recent years. Australia is becoming an increasingly important LNG exporter and could one day rival Qatar. The country is expected to continue to capitalize on FLNG throughout the year with the country projected to account for almost 55% of global FLNG capex demand, with Shell's Prelude FLNG FPSO remaining the primary driver of the country's projected FLNG expenditure during the period. INPEX is likely to dominate investment in the region during the period, with its Ichthys development expected to form 100% of the operator's expenditure in the region. Chevron is also expected to invest heavily during 2015, and like INPEX, is forecast to focus all of its Australasian offshore expenditure in Australia. Collectively, field developments in the Greater Gorgon area are projected to account for the largest proportion of the company's offshore expenditure during the year, with the offshore section of its Wheatstone LNG project also likely to require significant investment.

Overall, Infield Systems expects capex demand to continue to increase during 2015, albeit at a lower rate compared to the previous year. Although 2015 will be a year of growth, uncertainties surrounding energy prices could affect the progression of some projects, especially those in challenging and risky environments. The fragile global economy and the political issues surrounding the Ukraine crisis could also impact the global offshore oil and gas industry during 2015, ultimately affecting offshore capex demand.

The author

George Griffiths is Senior Energy Researcher for Infield Systems Ltd.

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