Volume: 2 | Issue: 4

Subsea Hardware Spend Forecast To Double From 2013 to 2017


Courtesy of √ėyvind Hagen / Statoil
Peregrino A platform

Deepwater activity is booming in the Golden Triangle (Brazil, west Africa, and the Gulf of Mexico), which is forecast to account for 44% of total subsea hardware expenditure. The downturn in offshore installation activity between 2009 and 2011 is being followed by strong recovery and this is expected to continue to 2017. Trunkline projects are of particular significance with major deepwater connections planned for, and extending beyond, the forecast period.

Douglas-Westwood’s Subsea Hardware Market Forecast analyses the market to 2017, examining hardware activity trends to provide detailed insight for major players and new entrants alike.

Drivers of Subsea Hardware Installation Activity

Subsea hardware installation activity is driven by a variety of supply and demand-side factors:

It is vital that declining production from maturing basins is replaced, and with demand for oil and gas increasing in developing regions, there is added pressure to explore and produce in deeper waters. High oil prices have enabled investment in deepwater developments and technology, with previously unviable or marginal projects able to be developed in these high capital expenditure (Capex) situations. The continuation of high oil prices has also led to exploration of ultradeep basins. The world’s deepest platform installation is currently BW Offshore’s floating, production, storage, and offloading (FPSO) vessel, BW Pioneer, in the Gulf of Mexico, at a water depth of 2600 m (operational since February 2012).

Large reserves have been discovered in deepwater offshore Brazil. African basins have recently provided discoveries that have ignited excitement throughout the industry where arbitrage opportunity in Asian gas prices is evident.

Fluctuation in oil price is not expected to significantly affect large deepwater developments; instead, projects may be delayed as longer term views are taken by international and national operators. The outlook for oil companies is positive. Barclays Capital Survey estimated that global exploration and production budgets will increase by 7% in 2013. The top 15 international companies, including Petrobras, Shell, Exxon, and Total, are increasing their expenditure compared with last year.

The type of production facility design is related to the installation of particular pieces of hardware. For example, subsea completion of wells with a floating production unit, which is more common in African and Latin American deepwater developments, directly drives more installations of larger riser bundles. Douglas-Westwood’s project-by-project data and analysis allow for these inferences to be made.

Project Delays

Despite the largest downturn and the most severe recession in decades, the impact on the subsea sector has been relatively small. The bottoming of oil prices delayed subsea hardware orders, which resulted in long delays to planned deepwater projects. However, projects were not canceled. Major projects that were already under way were not greatly affected. The significant effects in project delivery and scheduling came from geopolitical issues and local content and supply chain problems, particularly in Brazil and parts of west Africa.

The increase in Capex during the 2013–2017 period (Fig. 1) will be driven by deepwater field developments, predominately off Brazil, which accounts for 14% of the forecast subsea Capex. Project execution is a major issue for Petrobras with 70% local content requirements and engineer shortages placing pressure on the supply chain, inflating costs (up to 55% has been reported), and delaying delivery of production systems (predominantly FPSOs). Such delays could affect the timing of subsea hardware installations and the forecast spend profiles. However, the government may relax local content requirements and also Petrobras’ drive to train more personnel.

Fig. 1—Global subsea hardware Capex, 2008–2017.


Delays in capital-intensive floating production system (FPS) projects, most notably in Brazil—Espadarte, Franco, and Carioca—have affected the forecast for associated subsea hardware. Slippage of projects affects forecast expenditure, and the nature of the industry is such that delays and cancellations are common.

Major trunkline projects contribute a large proportion of deepwater spend, particularly for regions such as eastern Europe and former Soviet Union (FSU). Geopolitical issues can arise, causing long delays as trunklines require the cooperation of governments of both transit and consumer countries. This leads to cyclical forecasts with major peaks and troughs.

Market Forecast


Africa is forecast to be the largest region of subsea hardware installation and activity with an expected spend of USD 20 billion in the next 5 years. A growing subsea completion trend is due to a large number of deepwater projects, which are expected to contribute 84% of forecast Capex.

Planned projects such as Bonga South-West and Egina are some of the drivers of a total forecast of USD 11 billion for subsea production hardware, while associated flowlines are expected to contribute USD 3.5 billion between 2013 and 2017. A strong Capex annual growth rate of 35% between 2013 and 2017 enhances the high expectations for Africa’s subsea hardware market, demonstrating the importance of the region both during and beyond the forecast period.

North America

In 2009–2010, the North American oil and gas industry faced significant downturn in activity because of the global economic recession and the effects of a deepwater drilling moratorium following the Macondo incident in April 2010.

Increasing drilling rig numbers and subsea hardware forecasts (approximately USD 17.5 billion spend between 2013 and 2017) signal a recovery in the offshore oil and gas market almost to pre-Macondo levels. The majority of expected activity is in the Gulf of Mexico, where subsea completions in deep water make up the majority of North American projects. Total subsea hardware installations in deep water are expected to total 84% of forecast expenditure.

Latin America

Latin America is expected to hold a strong third position in global subsea hardware expenditure to 2017 with USD 17.4 billion forecast. Major project delays have caused a reduction in near-term installation activity; however, development of the pre-salt basins off Brazil by Petrobras should see this region rival or surpass African subsea hardware expenditure post-2017. Notable developments off Brazil include Lara, Guara, Baleia Azul, Marlim Sul, and Lula North East.

More than 40 deepwater prospects have been identified off Brazil since 2003, and Petrobras holds the controlling operator position as the national oil company. Large deepwater prospects in this region are expected to have floating production units, with subsea hardware installation activity driven by tieback options and plans for infield and export pipelines. With more than 60% of Brazilian offshore fields in deep or very deep water, subsea-completed wells and associated hardware are expected to drive high levels of expenditure.


The region is expected to see significant growth over the next 5 years, a 53% increase compared with the previous 5-year period. Total subsea hardware spend in 2013–2017 is forecast to reach almost USD 16 billion. The trend toward deepwater development is increasing, contributing 48% of future subsea hardware installations. Trunklines contribute 46% of forecast subsea hardware spend to 2017, with the latter part of the forecast boosted by the Trans-ASEAN (Association of Southeast Asian Nations) gas pipeline, which will connect Indonesia’s East Natuna gas field to Thailand’s Erawan pipeline.

Eastern Europe and FSU

Trunklines represent 93% of the USD 13.7 billion forecast subsea hardware expenditure with major projects, such as the South Stream pipeline, contributing significantly. The majority of subsea hardware installation (88%) is expected in waters more than 500 m deep.

Western Europe

Western European shallow-water oil and gas fields have been facing declining production, particularly in the North Sea. Despite this, the region expects almost USD 14.6 billion of expenditure over the next 5 years. In Norway and the UK, the majority of subsea hardware activity is in water depths of less than 500 m. Trunklines drive this spend as large projects, such as the Laggan-Tormore pipeline, which ties these deepwater gas fields back to shore, are implemented.

Component Forecast

The subsea hardware market, excluding installation spend, can be broken down into the following sectors:

Production hardware includes subsea trees, controls, templates and manifolds, flying leads, and jumpers. Subsea production hardware spend is driven by drilling and completions activity; however, it tends to contribute a smaller proportion of total regional subsea hardware expenditure compared with subsea umbilicals, risers, and flowlines (SURF) and trunklines. Forecast expenditure on subsea production hardware is expected to be up by USD 16 billion (75%) on the previous 5-year period; USD 38 billion is expected to be spent between 2013 and 2017.

SURF hardware figures are derived on a kilometer installed basis and include subsea umbilicals (steel and thermoplastic), risers, and flowlines (rigid and flexible). SURF hardware spend is driven by the number of wells drilled and usage of floating production units. The forecast USD 43 billion expenditure (35% of the total market) is boosted in ultradeepwater drilling regions where floating units are a preferred production method, for example, offshore Brazil, Africa, and Asia where longer riser bundles are required. Low project numbers in 2015 for FPS installation, due to project delays, has affected the expected riser installations.

Pipeline data is derived from kilometers of trunklines. Approximately USD 43 billion in subsea hardware expenditure is expected on trunklines in the next 5 years. Regions benefitting from this include eastern Europe and FSU, Asia, Australasia, and the Middle East. These regions total 77% of forecast trunkline expenditure to 2017. In the previous 5-year period, USD 32 billion was spent on subsea pipelines with a peak expenditure of USD 8.5 billion last year. In 2010, this dipped to USD 4.7 billion with a number of large projects slipping.


Subsea developments will continue to account for an increasing share of global offshore activity. The technologies deployed are unlocking reserves that would previously have been difficult or impossible to access, and the study shows the sector has become a sizable opportunity for the oilfield service and equipment industry. The outlook for the subsea hardware market shows long-term growth potential, particularly in Africa, Asia-Pacific, and Brazil. New markets are developing in the eastern Mediterranean and east Africa regions.

Angela MacCormack, a Douglas-Westwood analyst, works on oil and gas topics ranging from supply chain studies and global downstream facilities data to North Sea decommissioning. She holds an honors degree in politics and international relations from the University of Kent.