Deepwater field development worldwide is forecast to continue its strong growth through 2007, and in 2003, the most — $5.29 billion — will be spent in the U.S. Gulf of Mexico, according to global analysts Douglas-Westwood Ltd. Worldwide, development in the next five years likely will double, provided there are enough trained workers and enough profit for contractors.

In its fourth edition of The World Deepwater Report 2003-2007, the UK-based analyst firm forecast nearly $58 billion will be spent in the deepwater worldwide through 2007, with about 38% of the investment in West Africa, and the Gulf of Mexico following closely with 32% of the funding. The area around Brazil will see about 23% of the amount, the analysts said.

Using an infield systems database of worldwide exploration, analysts tracked the industry, and found that oil and gas companies are now considering more than 140 deepwater field developments over the next five years.

“Some are tiny single-well tiebacks and of course, not all will go ahead, so the analysis takes a conservative view of the prospects,” said Roger Knight, the data manager. “Nevertheless, the outcome is that we expect at least 32 billion boe deepwater reserves to come on stream, compared with the 10 billion boe brought on stream over the previous five years.”

Lead analyst Dominic Harbinson said that over the same period, about $21 billion will be spent worldwide on deepwater floating production systems; $18 billion on drilling and completion of subsea wells; and $11 billion on flowlines and control lines. Another $8 billion will go toward subsea hardware and surface completed wells.

In the Gulf of Mexico, deepwater expenses are expected to reach about $2.992 billion this year. In 2003, expenses will almost double, to $5.29 billion. After 2003, Douglas-Westwood forecasts a slowdown: in 2004, $3.842 billion; in 2005, $3.791 billion; in 2006, $2.064 billion; and up more than 50% in 2007 to $3.477 billion.

John Westwood, managing director of the firm, said the investment could be derailed mostly because of two factors: limited human resources and contractors’ low profitability. “Although everyone in the industry is aware of the problems of an aging workforce and low levels of graduate attention, in reality, far more still needs to be done to address the problem, perhaps by finding cleverer ways of using the huge potential skill pools of the developing world.”

Westwood said that “risk and reward for the contractor community has got out of balance. It is now obvious that the present contracting system has pushed too much risk onto contractors and new working methods must be developed.” He noted that “lump-sum contracts are fine for commodity products. I don’t think they are appropriate for the leading edge of such a demanding industry. In the final analysis, the deepwater oil and gas industry is dependent upon the existence of profitable contractors.”

The report by Douglas-Westwood is available on the Internet at www.dw-1.com.

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