Douglas-Westwood (DW) forecasts deepwater expenditure to total US$137 billion between 2016 and 2020. This represents a 35% decline compared to DW’s previous edition of the deepwater forecast issued March 2015.
The prolonged low oil price has impacted the deepwater market, with operators considering alternative development options and delaying the sanctioning of new projects, whilst trying to protect returns on their existing investments in the sector. However, projects already under construction are unlikely to be affected. The largest proportion (38%) of the total spend will be attributed to drilling and completion. Subsea production equipment, SURF (subsea umbilicals, risers and flowlines), pipelines and trunklines will represent 34% of total expenditure combined; whilst floating production units will account for 28% of spend over the forecast period.
Expenditure will predominantly be driven by Africa and the Americas, which will account for a combined 87% of total deepwater Capex. Though all regions will be adversely affected by low oil prices, projects that were sanctioned before the oil price downturn will help sustain activity levels in these regions and in addition we expect to see the development of East African gas basins towards the end of the forecast period.
Record levels of backlog established over the 2011-2014 period have somewhat insulated subsea hardware manufacturers from the oil price downturn. However, DW expects a further decline in subsea hardware installations in 2017 and 2018 with backlog falling rapidly and new orders trickling in at very low levels. We expect that the subsea OEM’s will feel the full impact of the downturn in 2016/2017 and will face strong competition for the lower volume of projects. In total, it is forecast that the number of deepwater wells to be drilled over the next five years will decline by 3% compared to the preceding five-year period.
From a supply-chain perspective, this point in the cycle is an opportunity to bring through new approaches and technology for deepwater developments to improve efficiency and lower cost. In the long run, we remain of the view that deepwater will be a cost competitive source of world-class hydrocarbon reserves.
DW’s 14th edition of the World Deepwater Market Forecast covers all key commercial themes relevant to players across the value chain in the deepwater sector:
Key drivers– discussion of factors affecting deepwater activity, including: sustained low oil & gas prices; deepwater production to offset declining production from onshore and shallow water basins; E&P spend of international operators; and Petrobras’ activity in Brazil.
Supply chain– detailing the financing of deepwater developments and local content issues. Includes analysis of contracting strategies (e.g. frame agreements), the deepwater drilling rig fleet and day rates, key players and capabilities of each sector within the deepwater market (drilling, FPS and subsea hardware).
Procurement– factors affecting the decisions facing FPS operators, whether to lease or own vessels and details of major leasing contractors.
Regional forecasts– forecast Capex within each region, including examples of notable projects and operators within the region and countries with most activity.
Component forecasts– drilling and completion (subsea and surface completed wells), subsea production hardware, SURF, pipelines and trunklines and floating production.
List of deepwater prospects– includes information on all identified prospects coming onstream from 2016 to 2020 by operator, location, water depth, number of trees, status category and onstream year.
To access the full forecast, please click here.
Adapted from a press release by David Bizley
Read the article online at: https://www.oilfieldtechnology.com/drilling-and-production/09032016/douglas-westwood-deepwater-market-forecast/