The collapse in upstream investment has wreaked havoc on the deepwater market, leading to rationalization and consolidation. Many of the operators and rig/vessel owners left have been clinging on by their fingertips. The number of rigs operating under contract is still at slump levels of less than 200, down by ±30% from the heyday.
Prophets of doom have argued that there will be no cyclical upturn this time, that conventional offshore oil and gas developments, with the odd exception, have been squeezed out of the cost curve by the rise of tight oil. Yet there are signs of recovery that might breathe life back into the sector.
Deepwater is the only segment expected to grow above 5% next year, spelling a positive uplift for the industry in general.
On a regional level, only Africa, Russia, and South America are expected to see growth or flat development in investments next year, with key players such as Mozambique, Libya, and Mauritania pushing the largest continent’s growth to the highest worldwide at greater than 10%. Unsurprisingly, Brazil, thanks to the Marlim and Mero projects, likely will prop South America up to a predicted almost 6% of growth next year.
However, development of deepwater projects presents a series of challenges, even for the most experienced players. While the industry has gone through a long learning curve and technology advancements, which have helped drive down the costs of deepwater production, players still face a myriad of challenges resulting in lengthy development times for deepwater projects. Therefore, the associated offshore-project risks are expected to hinder the growth of the market studied. The other third of offshore wells drilled are exploration.
There are signs that the rig market will tighten. More brand-new high-spec Generation VI and VII rigs are coming onto the market, but these are replacing retirals or forcing lower-spec rigs into cold stack; net available supply looks set to stay flat. Usage rates for Generation VI and VII rigs could climb from 70% currently to greater than 90% inside 4 years.
Finally, pricing power is set for a return. Rates for new contracts are languishing near the lows reached in 2017.
This Month's Technical Papers
A Look at the Aasta Hansteen Norwegian Deepwater Spar FPSO
Hybrid Ultradeepwater-Riser Configuration Saves Costs, Pushes Depths
Machine-Learning Approach Improves Deepwater Facility Uptime
Recommended Additional Reading
OTC 29265 Deepwater Opportunities for Extra-Long Oil-Tieback Developments by Michael Gassert, Eni, et al.
SPE 195704 Shortfalls Reduction From Optimized Preservation in Ultra-Deepwater—Kaombo Field Real Case Application by Julien Rolland, Total, et al.
OTC 29675 Coming to Americas by Erik Oswald, ExxonMobil, et al.
| Morten Iversen, SPE, graduated from the University of Stavanger in 1981 and has worked throughout the world for different operators and for several service companies. Iversen holds several patents, including a patent for a tubing-conveyed perforating-shot detection system and a deepwater blowout-preventer system for riserless light well intervention (RLWI). He has worked on implementing the RLWI technology from its infancy in the late 1980s and later as a global subsea adviser for Welltec, optimizing the use of RLWI technology to increase well recovery in subsea wells. Iversen serves on the JPT Editorial Committee and can be reached at morten.iversen@shell.com. |
