Douglas-Westwood: Industry to spend $170 billion on offshore drilling within 5 years

March 12, 2003
During the next 5 years, 14,626 offshore wells will be drilled worldwide at a cost of $170 billion, forecast energy consultant Douglas-Westwood Ltd. in its recent "World Offshore Drilling Report."

By OGJ editors
HOUSTON, Mar. 11 -- During the next 5 years, 14,626 offshore wells will be drilled worldwide at a cost of $170 billion, forecast energy consultant Douglas-Westwood Ltd. in its recent "World Offshore Drilling Report."

Of these offshore wells, the Canterbury, England-based Douglas-Westwood estimated that 10,231 would be development wells, 2,665 exploration wells, and 1,730 appraisal wells.

Deepwater drilling expenditures are forecast to experience strong growth, with spending of $40 billion expected on 560 exploration, 330 appraisal, and 1,465 development wells over the next 5 years.

The deepwater share of total offshore drilling expenditures will increase to 31% by 2007 compared with 20% in 2002.

"The main drivers for this change appear to be an increasing shortage of shallow water prospects, combined with innovations in drilling technology allowing deepwater drilling in more extreme conditions," said analyst Michael Smith.

Douglas-Westwood estimates that the total drilling and well completion expenditures in 2002 were $33.5 billion.

Regional spending levels
"Global spending levels are expected to be reasonably steady over the next 5 years, however, we expect significant changes in some regions. North America—where we expect 4,798 wells—will have the highest share of the total spend, increasing (compared with the previous 5-year period) by $2.4 billion, and growth of a similar magnitude is also expected in Africa, Latin America, and the Middle East," Smith said.

But Asia and Western Europe both are expected to see a spending decline. Asia's forecast 5-year spending is $4.5 billion less than the previous period. Western Europe's forecast expenditure is over $5.2 billion less than the 1998-2002 level.

Smith forecast that water depth capabilities will continue to grow beyond the current drilling record of 2,965 m, and that deepwater wells partly will offset declining activity in shallow waters. The percentage of deepwater wells drilled is expected to increase to 19% in 2007 compared with 12% by 2002.

Shallow water
"A decline in shallow water activity is being driven by a global shortage of opportunities," he said. Some growth is possible in the (Persian) Gulf "but this would depend on the controlling governments, primarily Iran and Saudi Arabia, encouraging investment to a much greater extent than they do now."

Consequently, industry is expected to direct most of its new drilling rig expenditures on upgrades of both jack ups and floating rigs.

"We expect steady, rather than dramatic improvements, to drilling equipment and services over the next 5 years, facilitating wells to be drilled in more extreme situations, in greater water depths and reservoir depths, at higher temperatures and pressures, and in areas prone to greater hazards. However, no radical new processes are expected to make a major impact on expenditure within the timescale of our forecast," Smith said.