Two recently published reports point to a speedy recovery for offshore E&P. The deepwater sector of the oil & gas business should recover quickly from the economic downturn and resume the growth the sector enjoyed before the recession, suggests a new report from Douglas-Westwood.
According to the analysts’ World Deepwater Market Report 2010-2014, annual expenditure on deepwater projects will reach $35 billion in 2014 and global capex will total $167 billion over the five years.
In Houston last month, Douglas-Westwood’s Steven Kopits predicted the deepwater spend would account for 12% of E&P expenditures by 2015, with much of the activity focused on international markets. Oil companies were preparing budgets assuming a future oil price of about $70/bbl, he said.
While energy demand in the US is expected to remain soft, Kopits said growing demand in China will put the country on a par with US consumption levels by 2018 and continue to grow. The trend will drive continued deepwater exploration, but ‘at a price’, he said, as IOCs exert more influence over national oil policy in developing countries and technology costs rise.
Following sharp declines last year due to flagging energy demand, the offshore drilling industry will stabilize this year but is unlikely to pick up steam until 2011, according to research by consultant Michael Smith for business analyst Datamonitor.
His report, Drilling for Offshore Oil and Gas, envisages a 12% increase in global drilling activity in 2010-14 with the number of offshore wells drilled reaching 20,000 compared with 18,000 over the previous five years. The total 2010-14 spend is forecast to rise 33% to $387 billion due to inflation and increasing well complexity.
‘The forecast for 2010-14 is a surge in 2011 and 2012 followed by a return to previous levels of growth but with a small dropoff in 2014,’ explains Smith. Over the five-year period, the Middle East offshore drilling spend and number of wells drilled are projected to rise by 63% and 40%, respectively, while Africa will see increases of 55% and 29%. The Gulf of Mexico is expected to drive a 30% increase in the North American spend, with Asia’s spend forecast to rise 24%. Western Europe, by contrast, will see just 5% increased spending and an 8% decrease in the number of wells. OE