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Most Global Offshore Spending to Target North America

Spending for global offshore operations and maintenance over the next five years is forecast to be more than $330 billion, with most of the money targeting North America's offshore, energy analysts with Douglas-Westwood said in a report issued last week.

Douglas-Westwood detailed its outlook for offshore spending in the "Offshore Operations and Maintenance Management Report 2010-2014."

"With 22% of the global offshore well stock and a highly fragmented and commercialized exploration and production sector, the North American market will account for 30% of forecast expenditure over the next five years," said Douglas-Westwood's Thom Payne, the report's lead analyst.

"Another key driver is the maturity and lack of prospects within the shallow water North American market, with many smaller operators seeing workover and intervention activity as a more viable cost alternative to drilling new wells with day rates for rigs at all time highs," Payne told NGI.

According to the report, North American offshore spending in 2010 is forecast to be $12.08 million, and by 2011 it will increase to around $12.97 million. By 2012 spending in the North American offshore will jump to $13.74 million, and by 2013 it will grow to an estimated $14.68 million. Offshore spending in 2014 is forecast to be an estimated $15.72 million.

"The research...highlights that the subsea inspection, repair and maintenance market will outgrow all other sectors with a compound growth of more than 10% between 2010 and 2015," said Payne. "This is because the stock of subsea completed wells and pipelines [is] expected to grow substantially over the next five years, and all this equipment will require significant levels of ongoing inspection, repair and maintenance work."

Production services "will dominate the operations and maintenance market," said Payne, "and the inevitable maturation of offshore fields will drive compound growth of close to 10% as operators struggle to come to terms with decreasing downhole pressure and increasing water cuts."

The UK-based firm reviewed the outlook for platform drilling, asset integrity, well stimulation, produced water management and production logging. The report details historic and future market activity in Africa, the Asia-Pacific region, Eastern Europe and the Former Soviet Republic, Latin America, Middle East and North America. The offshore outlook for the United Kingdom, Norway and the rest of Western Europe also are analyzed. Additional information is available at www.douglas-westwood.com.

The report comes as Congress debates sweeping energy legislation that would expand drilling in the eastern Gulf of Mexico (GOM) (see related story). Some huge finds have been made in the deepwater of the GOM in recent years, including BP plc's Tiber well in the Lower Tertiary trend near the Kaskida discovery, which was announced just months ago (see NGI, Sept. 7). Kaskida, discovered in 2006, is estimated to hold 3 billion boe in place, but Tiber may be bigger. BP called it a "giant."

On Friday Transocean Ltd. said its newbuild ultra-deepwater semisubmersible rig Development Driller III ramped up operations in the Gulf for a subsidiary of BP under a seven-year drilling contract. The rig is equipped for drilling in water depths up to 7,500 feet, upgradeable to 10,000 feet, and equipped for drilling wells up to 35,000 feet total depth, upgradeable to 37,500 feet.

The latest deepwater successes fuels enthusiasm -- and money -- in the GOM. Last year the Minerals Management Service (MMS) said the deepwater GOM -- defined as waters at least 1,000 feet deep -- was responsible for producing 72% of the total offshore oil and 38% of the total offshore natural gas (see NGI, May 12, 2008).

The deepwater GOM "is and will continue to be one of the most important areas for the production picture" in the United States, according to MMS. In 2007 54% of all GOM leases were located in waters 1,000 feet deep or more. In July 2007 there were a record 15 rigs drilling in GOM waters 5,000 feet or deeper. By comparison, there was one well drilled in water 7,500 deep in 1998, and in 2000, there were nine wells drilled in waters 7,500 feet deep or more.

The GOM is the go-to destination for producers unable to tap resources in the Middle East and Russia, Wood Mackenzie Ltd. analysts reported earlier this year.

"If you are looking for another opportunity of that scale...the Santos Basin of Brazil is the only other one in the world," according to Wood Mackenzie. Producers also pay the United States less in taxes and royalties to drill in the GOM compared with other governments, said the analyst. The Tiber discovery "is definitely good news for the Gulf...When a supermajor like BP uses a term like 'giant' to describe a discovery, people sit up and take notice."

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