LONDON – Douglas-Westwood (DW) has issued the latest version of its quarterly World Drilling and Production (DWD&P) Market Forecast. The report projects that while oversupply is likely to increase again in 2017, there are several areas that will have stable activity in the medium-term.
Continued outages in Nigeria, a rumored OPEC production freeze as well as output reductions onshore US, due to bankruptcies and capital expenditure cuts amongst shale producers, have helped oil prices rally from record lows. As such, DW anticipates the first decline in onshore oil production since 2009. The oversupply is likely to increase once more in 2017 with a recovery in Nigerian production as well as large output additions from both OPEC and non-OPEC sources.
However, DW has identified several areas with stable activity in the medium-term. In Russia, demands for supply agreements with China and new LNG projects will lead to growth in gas-targeted drilling, offsetting decreases in oil-related activity. Western Europe will see offshore development drilling levels maintained due to a number of developments sanctioned before the oil price crash.
Unsurprisingly, the Middle East will see strong drilling growth, both onshore and offshore, as the region’s OPEC members continue with their strategy of defending market share. This will lead to over 21,000 development wells drilled over 2016-2022, up 28% on the preceding seven-year period.
The production gains in Western Europe are just one example of an offshore region increasing production in the medium-term as a result of the positive effects of the last upcycle. Over 2016-2018, combined offshore oil and gas output will increase in all eight of the regions covered in DWD&P as a result of developments sanctioned in the “boom years” of 2011-2014. DW cautions, however, that this poses a significant threat to oil price recovery over the next few years.