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Rebound Seen for Global Offshore Market

The global offshore drilling industry will stabilize this year but likely won't return to growth before 2011, research analyst Datamonitor reported last week.

Following a sharp decline in 2009 because of flagging energy demand, global drilling is predicted to rise 12% in 2010-2014 compared with the previous five years. Global spending is forecast to rise 33% over the period, which would translate into total spending of $387 billion, Datamonitor analysts said.

"Around $291 billion was spent over the last five years on offshore drilling," said Michael Smith, a Datamonitor consultant who wrote the report. "Spend surged in 2005 to 2007 but rose only slightly in 2008 and declined in 2009. The forecast for 2010-2014 is a surge in 2011 and 2012 followed by a return to previous levels of growth but with a small drop-off in 2014."

The global economic recession and its destabilizing effect on oil and gas demand had severe repercussions in the offshore drilling industry, the report noted. Last year saw across-the-board deflation in prices and delays in both shallow water and deepwater projects. However, in early 2009 the supply/demand balance for oil had stabilized, and by the end of the year service rates had stopped falling. Parts of the industry remained vulnerable, however, especially the low-end rig sector.

Nearly 18,000 offshore wells were drilled over the last five years, with numbers peaking in 2007. The forecast is of a recovery in 2010, followed by "consistently rising numbers" up to 2013 to total more than 20,000 wells over the five-year period.

Since 2005, when it overtook North America for the first time, Asia has attracted the highest volume of drilling spending, with 60% spent in Southeast Asia and the rest split between North Asia (primarily China) and South Asia (mainly India). Datamonitor said spending in Asia is forecast to rise 24% over the next five years; well numbers over that period could increase by 9%.

North America "will attract the second highest volume of spending over the next five years, the majority directed at the Gulf of Mexico," said Datamonitor. "A rise in spending of 30% is forecast over the period 2010-2014. Well numbers will jump by 7% after exceptional lows last year."

In a report issued late last year, Douglas-Westwood's figures for global offshore spending came close to the latest news from Datamonitor. Douglas-Westwood said spending for global offshore operations and maintenance over the next five years would be more than $330 million, with most of the money targeting North America's offshore (see NGI, Nov. 30, 2009).

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