Expenditures in the global deepwater oil and gas sector are set to double by 2004, possibly exceeding $20 billion/year.
That's the finding of a new joint study released by Douglas-Westwood Associates and offshore industry data specialists Infield Systems Ltd., both of the UK.
The forecast acceleration in deepwater activity, the report says, is likely to require:
- The drilling and completion of more than 1,400 wells.
- The supply of more than 1,000 subsea christmas trees, 300 templates and manifolds, 10,000 km of subsea control lines, 12,000 km of flowlines and risers, and 100 floating and fixed platforms.
All told, spending for deepwater activities is expected to reach about $76 billion over the next 5 years (see chart).
In addition, global deepwater activities will center on three principal regions, with the bulk of the activity to be conducted by just a handful of the major oil firms. Also, further technological advances will play a vital role in this increase in deepwater activity.
Core areas, key players
"Most future activity," said the analysts, "is sited in the 'golden triangle' of Brazil, West Africa, and the Gulf of Mexico," with some of the most promising prospects lying off West Africa.
"Over the next 5 years, [we] expect West African deepwater expenditures to accelerate from about $800 million in 2000 to nearly $5.5 billion in 2004, possibly even eclipsing Brazil to become the world's largest deepwater market," the report said. "The growth of activity in areas such as West Africa brings new challenges as host countries demand more local content in projects-which is not easily reconcilable in countries that lack the basic industrial infrastructure."
The analysts went on to stress that the importance of deepwater exploration will not be lessened by efforts to explore in other areas, such as the Middle East and Russia. "But we are confident that deepwater expenditures will grow as oil companies seek to balance the greater costs of deep water with the greater political risks of oil from other sources," said John Westwood, editor of the report.
Money is the main driver behind the increased deepwater activity, say the analysts. The latest deepwater discoveries-many of which measure 1 billion boe or greater-are being made at a lower per-barrel cost compared with shallower-water finds, such as those being made in the North Sea, says Roger Knight, the team's field analyst.
"Our analysis of all offshore field developments proposed for 2000-04 shows that, in areas like the Gulf of Mexico, up to 90% of all new reserves come from water depths beyond 300 m," he said.
In the report, 220 global deepwater fields are identified by the analysts. These properties hold 20 billion boe in reserves. And, holding 77% of these reserves, say the analysts, are seven major oil companies: BP Amoco PLC, Chevron Corp., TotalFinaElf SA, ExxonMobil Corp., Petroleo Brasileiro SA, Royal Dutch/Shell Group, and Texaco Inc.
Technology's role
According to the report, until 1960, oil and gas was produced from water only as deep as 60 m. By the 1990s, however, the production water depth record had surpassed 600 m. And, by 2004, the analysts predict that a production depth record of 2,156 m will be achieved.
"This is the leading edge of technological achievement in an industry where the mean water depths of offshore fields are currently little more than 100 m," the report said. Advanced technology, however, will not be the sole demand placed on future deepwater field development projects. The report notes, "ellipseIt often requires a step-change in approaches to organization of human resources on a global scale, together with considerable financial courage to go where no one has commercially ventured before."
Technology will allow for numerous opportunities to reduce overall costs, the report states, especially in upstream activities. These would include advanced drilling technology, increased well productivity, and advances in major platforms and flowlines. By "interlinking" these elements, says the report, optimal results can be attained.
The report also cited concerns regarding the use of human resources. It said, "We believe that the industry is slowly losing its ultimate resource-its people-and is not attracting new graduates in sufficient numbers. The oil industry still seems unable to describe to the public at large the remarkable achievement that is the quest to win deepwater oil and gas, the huge challenges and great opportunities it offers the next generation."