Global Offshore Industry Capex – Key Sectors ($ million)

source: Douglas-Westwood Ltd & Infield Systems Ltd The offshore industry should enjoy steady growth over the next five years and the longer-term prospects are looking even better as the potential for higher oil prices grows. Addressing delegates at a special meeting of the Society of Underwater Technology at London’s Imperial College today speakers from leading energy analysts Douglas-Westwood and offshore industry data specialists Infield systems painted a picture of long-term growth. However, the growth was mainly seen to be outside the North Sea where the reserve sizes of new field developments are now very small. “The oil majors have already voted with their dollars and shifted their attention to the deepwater areas of Brazil, West Africa and the Gulf of Mexico” said John Westwood, Douglas-Westwood’s MD. “However, the upside is that there are hundreds of small North Sea prospects remaining for the new breed of small operators.” Considering global offshore prospects, Quentin Whitfield, MD of Infield Systems stated that there were “a total 2,384 fields under consideration for future development worldwide, which could involve 1,587 fixed platforms, 232 floating production systems, 138,000 km of pipelines and 30,000 km of umbilical cables”. The leading question is just how many of these prospects will be converted into actual development projects and over what timescale. Considering the next five years, Dominic Harbinson, Douglas-Westwood’s principal offshore analyst stated that he expected to see continuing growth in capital expenditure in four key sectors. “Offshore pipelines – due to the increased uptake of subsea technology, the industry’s move into deep waters and the growth in long-distance gas transmission projects, some 45,000 km are forecast to be laid at a total capital cost of $54 billion – a growth of 44% over the previous 5-year period” “Subsea Production – 1,620 subsea wells are forecast to come onstream over the next five years. Including the associated flowlines, templates & manifolds, control systems and umbilicals, expenditure is likely to total almost $48 billion – a growth of 50%.” “Floating Production –134 floaters are likely to be installed (including newbuilds, conversions and upgrades) at a capital cost of $32 billion – a growth of more than 50%.” “Deepwater – this is likely to continue its strong growth with operators such as BP making statements of their intent to invest $15 billion in the deepwater Gulf of Mexico alone over the next decade. Although our next analysis of this sector is still underway, preliminary indications are that global deepwater activity could double over the next five years,” said Harbinson. Moving on to consider the long-term, John Westwood stated that with depleting onshore and shallow-water reserves, more and more oil must come from deepwater. He particularly voiced concerns over global depletion rates. Quoting his firm’s recently-published study ‘The World Oil Supply Report’ he stated, “The world is drawing down its oil reserves at an unprecedented rate and even assuming no growth in demand it is likely that that by 2010 oil supply will be constrained by global production capacity and oil will permanently cease to be abundant. The result will be major oil price increases, which bodes well for the offshore industry but has serious implications for the world economy.” “The next major drive will be to fully utilize gas reserves, much of which are currently ‘stranded’ in offshore locations devoid of pipeline infrastructure and/or viable regional markets. There are good prospects for the development of floating LNG (liquid natural gas) and floating GTL (gas-to-liquids) plants.” “Overall, the long-term prospects for the offshore industry are good. However, the present way of working is far from satisfactory. To maximize the benefits for all, governments, operators and suppliers need to find better ways of working together.” “The real long-term play is offshore renewable energy which is in its very early stages of development.” Westwood revealed that research currently underway in his firm indicates that in excess of $4.3 billion will be spent on offshore renewable energy installations this decade, but it could be considerable greater if more of the very large numbers of proposals reach realization. “The great need is to mobilize the political will which varies significantly from country to country.” Westwood particularly cited the personal commitment of U.K. Energy Minister Brian Wilson and the work being done by his ‘ Renewables U.K. team.