Sam Fletcher
OGJ Online
HOUSTON, Apr. 12 -- The convergence of strong fundamentals for US oil, natural gas, and electric power markets will boost offshore exploration and development over the next few years, if the industry can find enough people and equipment to do the work, a group of business executives said Thursday.
�Our industry is going to be called upon to step up to the line again� by developing new offshore oil and natural gas resources and the infrastructure necessary to bring them to markets, said Thomas A. Fry III, president of the National Ocean Industries Association, Washington, DC, at the International Offshore Industry Outlook Conference in Houston. That conference is cosponsored by NOIA and Texas A&M University�s Sea Grant program, College Station, Tex.
The �underlying fundamentals� for oil and gas exploration and development are �super strong,� said W. Allan Parks, with CIBC World Markets, the investment banking arm of the Canadian Imperial Bank of Commerce, the eighth largest bank in North America.
By 2010, CIBC projects a 62.9% jump in US demand for electricity; 34.4% growth in the US natural gas market; and at least a 10.5% increase in US demand for oil, he said.
Producers can now hedge their oil production for the next 2 years �in the low $20/bbl range,� said Parks. �We�ve seen a fundamental shift in (US) average gas prices from $2/Mcf to the $5/Mcf range.�
But even with those higher prices, Parks said, the expected increase in US demand for gas to 28-30 tcf will require greater imports of liquefied natural gas.
�We�re at the point of a significant macro change in this industry where business is going to be good a lot more than it�s going to be bad,� at least for the next few years, said J. Michael Talbert, president and CEO of Transocean Sedco Forex Inc., Houston, the world�s largest offshore drilling contractor.
With the general surge in offshore drilling, he said, daily rates are going up for all categories of mobile marine rigs in all world markets, although more in some categories and markets than others.
Demand for the few deepwater rigs capable of working in water depths beyond 5,000 ft is rising in most markets ---�not so much in Southeast Asia, but that�s a small deepwater market,� said Talbert.
The main deepwater markets are in the Gulf of Mexico, where companies are expected to spend $12 billion on exploration and development through 2005; offshore Brazil, with $14 billion in expenditures projected; and offshore West Africa, where $23 billion is budgeted for deepwater operations in the same period, said Peter D. Kinnear, vice-president and general manager for FMC Corp. in Houston and chairman of the Petroleum Equipment Suppliers Association.
�Deep water is the growth opportunity for our industry,� said Owen Kratz, chairman and CEO of Cal Dive International Inc., also based in Houston, who reported a total $76 billion budgeted by the industry for deepwater projects around the globe through 2004.
But lack of skilled workers is the greatest restriction now facing the oil and gas industry, with 60% of previous staffs laid off during years of restructuring, downsizing, and mergers, and 40%-50% of the survivors now approaching retirement age. �That�s the one problem we can�t sidestep,� Kratz said.
The offshore oil and gas industry also faces problems with its aging fleets of mobile rigs and helicopters.
�I�ve never seen such a shortage of people and equipment as we have now,� said George M. Small, president of Offshore Logistics Inc., based in Lafayette, La., which provides offshore helicopter services in the major oil and gas markets around the globe.
�We�re already near maximum deployment in most markets, especially the Gulf of Mexico. And the hurricane season hasn�t even started yet,� he said.
Many of the helicopter pilots currently flying offshore learned their trade with the military during the era of the Vietnam War. But the US military has sharply reduced its helicopter training in recent years, and the available pool of experienced pilots and aircraft mechanics is drying up, said Small.
The average age of helicopters used for crew changes in the Gulf of Mexico is 22 years. Yet few additional used helicopters can be bought to help meet growing demand, while prices for new helicopters are �significantly higher, without much gain in productivity,� Small said. New models of helicopters under production will take 2-3 years before delivery, he said.
There already are not enough reliable shipyards capable of building mobile marine rigs to replace the current aging fleet. �And if contractors don�t start ordering some new rigs soon, there will be even fewer,� warned Paul Geiger Jr., president of Friede Goldman Halter Inc., based in Gulfport, Miss.
Only six manufacturers have built new semisubmersible or jack up rigs in the last 4 years. They and a few other ship-builders may have the potential to handle a modest annual growth of 12-15 new semis and 20-30 new jack up rigs, but they would be swamped by any aggressive push for new rigs, Geiger said.
Even a modest rig-building program would probably be constrained by the lack of key equipment, such as mooring systems for semis and jacking systems for jack ups. There currently are only four manufacturers of mooring systems and five producers of jacking systems, Geiger said.
Contact Sam Fletcher at [email protected]
