Energy analysts Douglas-Westwood are forecasting that over the next five years, North America’s offshore will see more spending on wells than any other region worldwide. The London-based firm reported Friday that worldwide, there will be 14,626 offshore wells at a total cost of nearly $170 billion in the period.

Analysts said that of the total number of wells worldwide, there will be 10,231 development, 2,665 exploration, and 1,730 appraisal wells. Most of the wells will be deepwater, where analysts forecast a total of $40 billion to be spent on approximately 560 exploration, 330 appraisal and 1,465 development wells. The deepwater share of drilling expenditures, which stood at around 20% in 2002, will increase to around 31% by 2007, according to the report.

“The main drivers for this change appear to be an increasing shortage of shallow water prospects, combined with innovations in drilling technology allowing deepwater drilling in more extreme conditions,” said Michael Smith of Douglas-Westwood. “We estimate that total drilling and well completion expenditure in 2002 was $33.5 billion. Global spending levels are expected to be reasonably steady over the next five years, however, we expect significant changes in some regions.”

In North America, analysts expect 4,798 wells to be drilled, giving it the highest share of total spending, and increasing by $2.4 billion from the previous five-year period. “Growth of a similar magnitude is also expected in Africa, Latin America and the Middle East,” Smith said.

However, in Asia and Western Europe, the analyst said there would be a “significant” decline in spending. Asia is forecast to spend about $4.5 billion less than the five years preceding it, while in Western Europe, spending will be down $5.2 billion over the 1998-2002 level.

Water depths also will continue to “grow beyond the current drilling record of 2,965 meters,” according to the report. Deepwater wells also will be partially offset by declining activity in shallow water. The percentage of deepwater wells drilled reached about 12% in 2002 and is expected to increase to 19% by 2007, said Smith.

“A decline in shallow water activity is being driven by a global shortage of opportunities,” said Smith. “Some growth is possible in the Persian Gulf, but would depend on the controlling governments, primarily Iran and Saudi Arabia, encouraging investment to a much greater degree than now.”

The report also found that new expenditures on drilling rigs is expected to be “directed at upgrades at both jackups and floating rigs” to allow for faster and/or deeper water and deeper reservoir drilling.

“We expect steady, rather than dramatic improvements, to drilling equipment and services over the next five years, facilitating wells to be drilled in more extreme situations, in greater water depths and reservoir depths, at higher temperatures and pressures and in areas prone to greater hazards,” said Smith. “However, no radical new processes are expected to make a major impact on expenditure within the time-scale of our forecast.”

The “World Offshore Drilling Report 2003-2007” is part of a series of reports available from Douglas-Westwood Ltd. More information is available at www.dw-1.com.

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