• NOV Downhole

 

Offshore production and spending market

Over the last year or two, strategies have been abandoned in the face of global financial turmoil. Offshore spending activity, which is usually planned with long lead-in times in mind, is bound to be volatile. But for how long will the volatility last and how deep will the decline be? Detailed quantitative analysis is available in two reports; the just published, ‘World Offshore Oil and Gas Production and Spend Forecast 2009 - 2013’ and the recently published, ‘World Offshore Drilling and Spend Forecast 2009 - 2013’.

Production rising

Offshore oil production continues to rise slowly, even with the upheavals of late 2008. At 27 mm bpd, including NGLs, it now makes up 34% of global production having risen from 26% in 1990 and 33% five years ago. Meanwhile, offshore gas production has risen more rapidly to the equivalent of 15.5 mm bpd in 2008. It was only 17.5% of total gas production in 1990 but had reached 26% five years ago and now stands at 29%.

Global drilling is forecast to rise 6% over the period 2009 - 2013 compared with 2004 - 2008, despite a sharp decline in 2009. Approximately 18 300 offshore wells were drilled over the last five years. Numbers picked up in 2004 as the oil price rose, reaching a peak in 2007, before dropping slightly in 2008. The forecast is of a decline in 2009, followed by consistently rising numbers including a sharp jump in 2011, to total nearly 20 000 over the period.

OPEX rapidly increasing

Global offshore operating expenditure (OPEX) has been increasing rapidly at between 10% and 15% each year due to the combined effect of additional production volumes and inflation. It had reached an estimated US$ 95 billion by 2008. However a slight drop in expenditure is forecast for this year followed by a modest increase next year. After 2010, OPEX is expected to escalate, achieving year-on-year growth rates to match those seen before the 2008 upheaval in the market.

Global offshore capital expenditure (CAPEX) increased rapidly in all regions up to 2007 but slowed in 2008, having reached around US$ 150 billion in that year. A steep decline of 8% is forecast for 2009 with a more modest decline in 2010, driven by both reduced activity and deflation. Growth is expected to recover in 2011, averaging between 10% and 15% per year up to 2013. However growth rates will not match those seen from 2004 to 2007, which averaged 20% to 25%, largely due to mushrooming inflation.

Last year’s spike

The 2008 oil price spike had a huge effect on oil demand in countries where oil prices are not fixed or subsidised. Supply, including shut-in supply in Saudi Arabia, Nigeria and elsewhere is now well above demand. Meanwhile, gas supplies are also ample, although regional imbalances remain with some markets in Europe, North America and Asia, poorly connected to sources in Central Asia, the Middle East and North Africa. Major new gas projects, from being certain money earners, have become commercially risky.

There have been severe repercussions in prices for offshore services. In early 2008, high oil prices and a global shortage of drilling and development opportunities had ensured that even the most expensive projects went ahead. However, costs had increased dramatically and in 2009 we have across-the-board deflation in prices and delays in both shallow and deepwater projects. Historically, global economic recessions have led to declining energy demand, but the resultant lower prices have soon led to a recovery in demand and then prices, especially as OPEC has acted to rein in output to tighten supply. For the offshore industry the numbers point to a return to stability in 2010 and, in 2011, a return to growth is forecast.

Going to extremes

With or without the downturn there remains a global shortage of good prospects to drill and develop except in extreme environments. New offshore oil supplies outside deepwaters and the Persian Gulf are scarce whilst output is declining from almost all the older producing regions. The industry must explore and spend in every far-flung part of the world. Decisions on where to go and what equipment to invest in are as critical as ever.

Author: Dr Michael R. Smith, Chief Executive, Energyfiles

For more information or to order a report visit www.dw-1.com/products email publications@dw-1.com or call +44 (0)1227 780999.

Published on 01/10/2009


Oilfield Technology

Would you like a FREE issue of Oilfield Technology magazine?

With 12 issues per year containing strong technical editorial and exciting case studies, you’ll easily stay up-to-date on the technologies, solutions and services that see global upstream oil and gas operations flow smoothly and successfully.

Get your FREE magazine now »

No credit card required

 
 

Write your own comments

*
*
*

Recommend magazines

  Oilfield Technology