US shale oil production will not be a threat to deepwater oil and gas development, an analyst has said today.
Steven Kopits, working with Douglas-Westwood in New York, says many investment banks and government agencies have forecast that US shale oil production could swamp the market and threaten deepwater developments.
“The evidence, however, suggests differently,” he says.
Kopits’ analysis comes as France’s Technip announced two new ultra-deepwater contracts from Petrobras. The contracts are to supply about 100km of flexible pipes for oil production, gas lift and gas injection, on the Sapinhoá Norte field and I5 at Lula field (former Tupi field), in the Santos Basin pre-salt area, Brazil, in up to 2500m water depth.
The contract also includes related equipment for the pre-salt area, to be installed on the floating production storage and offloading (FPSO) units, Cidade de Angra dos Reis and Cidade de Ilhabela.
Kopits says: “We have contended that the world is short of oil, and this shortage, rather than changes in habits or demographics, is driving decreasing oil consumption in the advanced countries. If the oil supply increases, then any overhang will be quickly absorbed. And that’s what the record shows: US product supplied (effectively, US oil demand) reached 20MM bbl/d in the last four weeks, up a whopping 1MM bbl/d (5.3%) from the same period last year. High oil prices have been aggressively suppressing demand in the advanced economies (and, to be fair, in the emerging economies as well). But if prices drop—as gasoline prices did in the US through much of November—demand comes roaring back to life.
“But will it be enough to offset supply growth? Consider: US shales posted a blow-out year to November 2013, rising by 1.3MM bbl/d (three month average). The Canadians added nearly another 0.7MM bbl/d, according to the EIA, for North American production growth of an astounding 1.9MM bbl/d. And Brent oil prices have recently increased by a few dollars to $111 / barrel. In the coming twelve months, substantial production growth is expected. Part of this is fuelled by continued North American unconventionals growth of 1.3MM bbl/d.
“Should we worry? There may be soft patches in the year ahead, but expect any excess supply to rapidly find a home, with prices returning to recent levels in a few months. Shales are no threat to deepwater.”
Details about Technip’s latest contract:
The contract with Petrobras will use gas injection top risers designed for high internal pressure, using the Teta profile developed by Technip’s R&D team in its Flexi France plant in Le Trait (France).
The gas injection top riser, together with the majority of the scope above, will be manufactured in Flexibras Açu, starting production in the Q1 2014, in line with previously announced plans.
The remaining scope will be manufactured in Flexibras Vitória. Technip’s operating center in Rio de Janeiro (Brazil) will perform the engineering and project management.
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