The oil-price downturn has dominated the news cycle during the past 18 months and is expected to dictate the fate of many deepwater developments. In addition, the prices have challenged the economic viability of many future deepwater projects, resulting in cancellations and deferred sanctioning.
Optimism about a possible recovery of oil prices has picked up recently in the offshore energy industry, but I believe that 2017 and 2018 are going to be complicated and that this optimism may be premature.
Despite near-term concerns, the long-term fundamentals for deepwater activity remain strong.
The need to offset declining production from mature basins, as well as the ability of international oil companies to access larger reserves with the use of new exploration-and-production technology, will continue to drive deepwater expenditure.
Deepwater exploration-and-production activities are driven by a variety of supply- and demand-side factors:
Despite the prolonged low oil prices, there are some fast-track development plans for large deepwater fields such as Eni’s Zohr gas discovery in the Mediterranean offshore Egypt and ExxonMobil’s Liza discovery off Guyana, which are capital-intensive but provide large potential returns on investment.
In line with this growing trend, Royal Dutch Shell has categorized deep water as one of its growth priorities for the next 5 years.
From now until 2020, growth in the deepwater market is expected to be constrained as low oil prices increase pressure on project economics. Operators, subsea manufacturers, and rig owners are likely to find the next few years to be difficult as project delays continue through the forecast period.
However, decreasing drilling and equipment costs may provide a limited upside for sanctioning.
OTC 27161 Floater and SURF Combined and Optimized Solutions by Blaise Seguin, Subsea 7, et al.
OTC 27260 Progress in the Development of Test Methods and Flexible Composite Risers for 3000-m Water Depths by T.A. Anderson, GE, et al.
SPE 179056 Deepwater Riserless Operations With Coiled Tubing in the Gulf of Mexico: An Innovative, Safe, and Efficient Plug-and-Abandonment Technique by Renny Ottolina, Coil Tubing Services, et al.
Morten Iversen, SPE, Well Integrity Section Head, Karachaganak Petroleum Operating
01 May 2017