Deepwater: A robust market in a climate of uncertainty?
A new study published today by energy business analysts Douglas-Westwood, ‘The World Deepwater Market Report 2009-2013’ forecasts that the deepwater oil & gas sector will spend $162 billion over the period 2009 to 2013. Steve Robertson, Douglas-Westwood’s Oil & Gas Manager, commented, “Overall, despite more moderate levels of expenditure during 2009 and 2010 relative to 2008, the deepwater sector is forecast to continue its growth trend, with annual expenditure reaching over $35 billion by 2013. The bulk of deepwater developments are being led by major oil companies and well-placed NOCs that we believe will not be hit by the economic downturn and turmoil in the debt markets to the same extent as most smaller players. We accept, however, some impact on the sector may be felt through those deepwater operators that are reliant on external project finance. The result is that some delays to projects are inevitable until the financial markets become more settled. Oil prices appear to be less of an issue at present – our survey of deepwater operators indicates that most are planning against conservative assumptions and expect oil prices to recover to $50-70/bbl in the medium-term.”
Analyst Thom Payne added, “The ‘golden triangle’ of deepwater, namely Africa, the Gulf of Mexico and Brazil, will account for nearly 75% of global expenditure. For Africa, a large number of world-class developments are underway or planned for the forecast period and valued at $60 billion. North America, which in deepwater terms means the US Gulf of Mexico, is set for substantial spend with $29.3 billion forecast for the 2009-2013 period. Latin American activity (also $29 billion) is dominated by Brazil and, given the potential of the country’s presalt reserves, this is likely to remain the case for some time. The emergence of Asia as a significant region should not be overlooked, with expenditure over the 2009-2013 period increasing by 90% when compared to 2004-2008 and accounting for 9% of forecast global spend.
“Three main elements dominate spend over the forecast period, namely: pipelines, the drilling and completion of development wells, and platforms. Pipelines and control lines will continue to play a vital role in providing the necessary infrastructure for deepwater developments. The opening up of reserves further from the coast and the incorporation of satellite fields into deepwater hubs will drive expenditure with a total forecast spend of $57.7 billion. Expenditure on the drilling and completion of subsea development wells will amount to $53.8 billion. These two components of activity account for nearly 70% of all expenditure. The number and cost of deepwater floating production platforms is also set for major growth, with a total of 86 units forecast at a cost of $38.2 billion.
“Overall, we retain a positive outlook on the deepwater sector – ultimately this is where the majors need to play to secure significant reserve replacement and incremental production and there are simply not enough world-class opportunities elsewhere. We believe those that are currently active in this sector are most sheltered from the financial and economic turmoil and that as a result the sector will continue to be a promising long-term business area throughout the oil sector value chain.”
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