With political tensions and diminishing onshore reserves around the world, the deepwater is “virtually the only place” where giant oil and natural gas fields will be found in the future, the managing director of UK-based Douglas-Westwood told a Houston audience Thursday.
Speaking to the Society of Underwater Technology, John Westwood said his consultancy estimates that operators, mostly driven by a push by the majors to make new discoveries, will make capital investments in deepwater exploration and production (E&P) of nearly $25 billion a year by 2012.
“The offshore oilfield services sector is facing unprecedented levels of business; some companies that might normally have a six-month backlog are now booking work for 2011,” said Westwood. “Recent $100 oil has only served to add to the already massive demand for the products and services of firms that supply the offshore oil and gas companies. Suppliers are virtually beating off the customers, but demand continues to grow.”
Douglas-Westwood expects world deepwater production to grow from 6 million boe/d in 2007 to 11 million boe/d in 2011.
“There are literally hundreds of small, undeveloped offshore fields worldwide, but big oil needs big fields,” he said. “The remaining easy oil and indeed, gas, is mostly in hard places” with strong competition from national oil companies (NOC) in China, India and Russia. He noted that Russia’s Gazprom had recently moved to gain access to Nigeria’s vast gas reserves. NOCs, said Westwood, control 80% of the world’s global reserves, the same share that international oil companies controlled in the 1970s.
According to research by Douglas-Westwood, the 2008-2012 growth projected for deepwater E&P spending will be 30% higher than the previous five years. The growth, said Westwood, will “drive demand for deepwater drilling rigs, floating production systems, subsea production hardware and more.”
Most of the deepwater projects scheduled to ramp up between now and 2012 are not in domestic waters; however, Westwood said nine projects are expected to ramp up in the deepwater Gulf of Mexico over that period: Tahiti, Shenzie, Thunder Hawk, the Atwater Valley Hub, Gotcha, Jack, Claymore, Baha and Big Foot.
Another area to watch that could affect domestic production is in the Arctic region, a “potentially rich” but difficult work environment, he said (see Daily GPI, Aug. 13, 2007).
“Another ‘hard place’ is Arctic waters where the prospects of massive reserves…estimates range from 160-300 billion boe…have resulted in a ‘great subsea land claim’ being played out by Russia, Canada and the U.S., against a spring 2009 deadline imposed by the United Nations Convention on Law of the Sea.”
Said Westwood, “Times are due to get even more interesting…for some years Douglas-Westwood has been publishing forecasts suggesting that oil production could peak within the next few years, a view recently supported by the International Energy Agency. In my view, big oil now needs a new business model and nothing demonstrates that more than oil company stock buybacks. This is paramount to saying investors can find a better return for the money than oil companies can. So the key question that remains, where can big oil profitably re-invest?”
Offshore energy provides more growth prospects than only those for oil and gas, he said.
“Although presently focused on oil and gas, the developing new sector of offshore renewable energy is now set for strong growth,” he noted. In the past five years Douglas-Westwood estimates that a total of $2 billion has been spent installing offshore wind turbines. Between 2008-2012, $16 billion is expected to be spent to install more than 1,300 turbines with a power output of 4.5 GW.
“The real issue the offshore supply chain companies face is trying to keep pace with ever-increasing demand,” he said.
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