Worldwide exploration and production expenditures should continue to ride on the wave of soaring oil prices to reach $135 billion in 2005, up from $114 billion in 2003. Global E&P outlays are expected to reach $125 billion this year.
These figures, which exclude the former Soviet Union and China, were reported Oct. 18 by Paris-based Institut Français du Pétrole (IFP) in its 2004 review of the world's oil services and equipment industry. The report contained a special focus on France's industry, which accounts for 10% of the world's E&P market.
IFP Pres. Olivier Appert was careful to point out, however, that while these figures seemed favorable for industry, oil companies' share of E&P investments is waning. "While over the 1995-2000 period, E&P investments [outside the FSU and China] accounted each year for 20% of oil revenues, since 2001 they only total 15-16% every year," he stated.
While diminishing costs might explain this drop, it is clear that outlays over the past 10 years have been concentrated on already producing fields or on the development of new fields discovered in the 1990s to the detriment of exploration.
Also, the scope for exploration was diminishing as oil-producing countries were reluctant to open up new areas for exploration, which could bring down oil prices, IFP said.
Increases expected
Excluding the FSU and China—where E&P investments should fall this year from $24 billion in 2003 to $23 billion—evenly split between both area—the rest of the world should see outlays post an increase of nearly 10%. This is double the 2003 increase over 2002.
Expenditures in the US should increase 5% on the back of more brisk activity in the Gulf of Mexico, while expenditures should fall 4% in Canada following a 20-30% increase in spending in 2003.
In the North Sea, investments are expected to rise 18% to $20 billion, pulled along by Norway and the UK as they attempt to push back their oil production peak and develop their gas supplies.
Elsewhere in the world, expenditures tripled in 2003, boosted by Venezuela's efforts in Latin America and India's Oil & Natural Gas Co.'s highly active domestic policy.
The various sectors within the oil services and equipment industry are not all taking advantage of high oil prices, however, IFP noted. The geophysics market, estimated to reach $4.8 billion this year, up 2% from 2003, is being pulled along by the equipment sector, although it hasn't yet recovered to its high pre-1999 levels and remains very competitive with tight margins. Current order books, however, show some hope for 2005, IFP said.
Spending in the drilling market should hover around $23 billion in 2004, implying an 8-9% increase over 2003. The increase is due largely to the onshore drilling segment, which is up 20% to more than $9.4 billion, while the offshore market should increase only slightly to $13.4 billion. In 2005, IFP's expectation is for the onshore drilling market to rise 5% and offshore, 3%.
The number of wells being drilled worldwide in 2004 should increase to more than 60,000 in 2004 from 54,000 in 2003, with a 12% increase in North America—mainly in the US—and an 8% increase in the rest of the world, mainly in Latin America and Venezuela.
Including the FSU and China, which account for 20% of the wells drilled worldwide, the world's number of wells being drilled should hover around 77,000, IFP stated.
Measured in terms of construction, the offshore equipment industry is posting a decrease in outlays during 2004 in all areas except the Middle East and India.
Fixed platforms are the most affected, with a 26% decline in spending, while construction of floating production facilities also is down 17%, mainly confined to the Gulf of Mexico.
IFP noted that the size and complexity of the projects explain the discrepancy between the number of installations being built and the actual volume of business for the industry.
Although the mid-2004 order books make it difficult to assess the 2005 trend, most actors mention an increase in bids that will be sorted out in the second half.
France's outlays
France's oil service and equipment industry should post a 3.7% increase in E&P spending this year to a 16.4 billion euro record. The country expects that trend to continue throughout 2005.
France holds a 10% share of the world's E&P activity and an 8% share of the refining sector.
The offshore sector, spending for which declined 5% in 2003 to 5.5 billion euros, should remain relatively stable this year, IFP stated.
With hardly any domestic market, the French E&P industry has always been geared to exports, where three quarters of its sales are carried out. This share has grown to 97% for the French majors.
In 2003, 27% of France's E&P spending was in Western Europe, 19% in Africa, 17% in the Middle East, 14% in North America, 4% in the FSU and Eastern Europe, and 9% in Asia.
France's E&P workforce of 61,000 in 2002 increased 1% in 2003 and should rise by 2.4% this year, IFP said, noting that the workforce size should remain stable in the offshore sector.
