Growth in deepwater sector expected in double within 5 years

Jan. 13, 2003
Robust growth is expected in the deepwater sector within 5 years because 148 deepwater fields have onstream dates in the 2003-07 period.

By OGJ editors

HOUSTON, Jan. 13 -- Robust growth is expected in the deepwater sector within 5 years because 148 deepwater fields have onstream dates in the 2003-07 period—more than twice the number developed during the previous 5 years, said energy analysts Douglas-Westwood Ltd. and offshore data specialist Infield Systems Ltd.

Records show 66 deepwater fields were brought into production during 1998-2002. These fields were off the US, Brazil, Angola, Equatorial Guinea, Italy, and the Philippines.

Infield Systems data show that by 2007 an additional 13 counties are expected to achieve production from fields in water depths of more than 500 m. The anticipated countries include Nigeria, Norway, Egypt, Israel, Australia, Malaysia and the Ivory Coast.

Almost 70% of the 148 future deepwater development prospects will be developed through stand-alone floating production facilities or as subsea tiebacks to production facilities, said a report entitled "The World Deepwater Report 2003-2007."

The reserve base targeted by these prospects worldwide amounts to 32.8 billion boe, almost triple the 10.6 billion boe targeted by the 66 deepwater projects brought onstream during the previous 5-year period.

Regional distribution
West Africa is expected to be the leading regional market. Together, West Africa and the Gulf of Mexico account for 67% of the deepwater reserves identified for development during the 2003-07 period. The figure rises to 79% by counting prospects off Brazil.

Deepwater reserves identified for future development in the Asia-Pacific region account for 1.4 billion boe; the Mediterranean 2.2 billion boe; northwestern Europe 3.1 billion boe; the Gulf of Mexico 8.2 billion boe; and West Africa 13.8 billion boe.

Brazil is the only country showing fewer deepwater reserves identified for future development than it had in the past 5 years. For 2003-07, Brazil's deepwater reserves are listed at 4 billion boe compared with 4.9 billion boe for the period 1998-2002.

"We have not attempted to reflect the fact that ongoing exploration and appraisal activity will almost certainly reveal new prospects for development during the 2003-07 period by 'inventing' development prospects. We believe, therefore, that activity in the deepwater sector may actually exceed the levels presented in our forecasts," said John Westwood, Douglas-Westwood director.

Capital expenditures
For the 2003-07 period, analysts forecast worldwide capital expenditures of $57.9 billion on deepwater developments compared with an estimated $25.6 billion for the 1998-2002 period. In the last 5 years, the Gulf of Mexico and Brazil dominated deepwater development, accounting for 83% of the money spent.

A series of multi-billion-dollar development projects are progressing off West Africa, which will propel it into the forefront of the deepwater arena, the report said. Meanwhile, activity levels are expected to remain strong off Brazil and in the Gulf of Mexico.

"We foresee steady, if not spectacular growth in the Brazilian deep water over the next 5 years driven by new development projects. . .and by the ongoing development. . . . Regional capex is forecast at $13.4 billion for the period, up 45% on the estimated 1998-2002 exspenditure of $9.2 billion," the report said.

Drilling expenditures and floating production platforms will dominate the US forecast deepwater outlay of $18.3 billion , with 22 platforms forecast for installation over the 2003-07 period.

"It should be noted that, due to the highly dynamic nature of the regional market, we believe there is potentially significant upside to our forecasts (for the Gulf of Mexico), the report said.

The Asia-Pacific and Mediterranean regions will see some regionally significant deepwater development within 5 years. Total capital expenditures for the Asia-Pacific region is forecast at $2.5 billion, including $1.1 billion on seven deepwater platforms. Five of those are slated for off Indonesia, and one each for off Australia and the Philippines.

Total capital expenditures for the Mediterranean is forecast at just over $1 billion, while regional capital expenditures off northwestern Europe are forecast at $617 million, the report said.

Deepwater market
The 64 deepwater platforms forecast for installation during 2003-07 account for 36% of total expenditures, or $20.9 billion. Drilling and completion of more than 1,000 development wells—both surface and subsurface—account for 35%, or $20.2 billion.

Pipelines and control lines represent $11.4 billion or 20% of the market, with subsea hardware making up 9%, or $5.4 billion, the report said.

"Although the number of wells we forecast for the 2003-07 period would appear to be well within the capabilities of the existing deepwater drilling fleet, the demand for the service of deepwater rigs for exploration, appraisal, and intervention work could well create a tightness in the rig market, forcing rig day rates up in the medium-term future," the report said.