Future offshore spending driven by drilling, analyst says

Jan. 16, 2006
Over the next 5 years drilling activities will draw a major share of offshore expenditures, according to international UK research firm Douglas-Westwood Ltd.

By OGJ editors
HOUSTON, Jan. 16 -- Over the next 5 years drilling activities will draw a major share of offshore expenditures, according to international UK research firm Douglas-Westwood Ltd.

Through 2006-10 more than $195 billion will be spent on shallow-water drilling with deepwater drilling expenditures nearly doubling to $65 billion, according to the firm's recent report, World Offshore Drilling Spend Forecast 2006-10.

The above drilling expenditures compare to an estimated $160 billion spent on shallow-water drilling and $33 billion spent on deepwater drilling over the past 5 years.

The report said that while shallow waters are seeing increased expenditures almost solely because of rising prices and rising unit well costs, deepwater expenditures reflect a real increase in activity, especially after 2007. From a mere 2% of global expenditures in 1991, almost completely in Brazil, the deepwater share had increased to 19% by 2001 and is forecast to reach nearly 30% by 2010.

Total offshore development drilling, being fuelled by rapid growth in deepwater drilling, especially in West Africa and the Gulf of Mexico, saw almost unbroken growth through 1991-99 before beginning to decline as new field development opportunities in many of the shallow-water areas of the world dwindled. With surging oil prices, shallow-water development drilling stabilized through to 2005 but further declines are now forecast.

Michael R. Smith, chief executive of Energyfiles, a Douglas-Westwood research partner, said, "Due to lack of opportunity, exploratory drilling has been on a declining trend since 1997 and this trend is forecast to continue through to 2010 albeit with a modest oil price-led resurgence in later years." He added that deepwater exploratory drilling, which grew rapidly up to 2001, has been rather flat due to a shortage of new areas to exploit. However it is forecast to pick up in later years as ultradeep waters become commercially more attractive.

Within the offshore drilling sector, 42% of expenditure is directed towards engineering services, 25% is earmarked for support, and 7% goes towards geoscience.