Topics In Demand
Notification
New

No notification found.

Subsea Oil & Gas Industry- What lies ahead?  Part-2
Subsea Oil & Gas Industry- What lies ahead? Part-2

April 27, 2022

240

2

 

Latin America to see most of the offshore oil and gas growth during 2021-25 

Latin America will be the most promising region for offshore oil and gas development by 2025. The lower breakeven prices in the region make the offshore projects in the area more resilient to fluctuating oil prices. The part expects greenfield investment of over $50 Bn to sanction around 30 projects in Brazil and Guyana by 2025. 

The US is likely to increase focus on shale resulting in the decline in offshore investments during 2021-25 vs. 2016-20. In Asia, China represents about 45% of offshore oil investments between 2019 and 2024. In Africa, regulatory and geopolitical factors threaten the viability of projects across the Gulf of Guinea and East Africa. 

 

 

Source: Rystad database 

EPCI investment will also increase 

The global offshore EPCI investment is likely to exceed $60 Bn in 2021, including spending associated with subsea equipment, floating and fixed platforms, and pipelines. 

Key EPCI projects awarded as of Aug '21 include- Bacalhau offshore Brazil (Equinor); Buzios 6-8 (Petrobras); North Field Sustainability project (Qatar Petroleum); Barossa offshore Australia (Santos); and Farzad offshore Iran (NIOC)- accounting for over 62% of total EPCI value.  

Other anticipated awards for this year include Mero 4 offshore Brazil (Petrobras); North Field Expansion (Qatar Petroleum); Scarborough (Woodside) and Crux (Shell); and Al-Shaheen/Gallaf III offshore Qatar (North Oil Company), among others.  

The average annual EPCI awarded value is expected to be $53.5 bn/year from 2022-25 if oil prices remain above the $60/bbl mark by 2025. 

The substantial offshore impact of COP26 is unlikely to be seen by 2025 

Recently held COP26 witnessed some stern actions taken against the oil and gas industry. The most noticeable one is- a newly formed Beyond Oil and Gas Alliance (BOGA) that includes Denmark, France, Ireland, and other countries committed to ending future oil and gas production within their borders. However, not a single big oil-producing nation has joined the forces. 

Last year, Denmark, one of the core members of BOGA, announced to ban new exploration and end its oil and gas production from the North Sea by 2050 to become carbon neutral. The country has also canceled its 8th planned offshore licensing round. On the other hand, New Zealand has also committed to putting an end to granting new permits for all offshore oil and gas exploration as it aims for a carbon-neutral future. In New Zealand, the last of the existing offshore license will expire in 2030. 

The seriousness of COP26 among top producing nations can be questioned, as just after the end of COP26, the US announced the country's largest federal offshore drilling auction.  The expected production from the area is 1.12 billion barrels of oil and 4.2 tcf (trillion cubic feet) of natural gas over the next five decades. 

All in all, the road till 2025 for the offshore sector is promising 

The growth in energy consumption and declining offshore production cost per barrel are likely catalysts in offshore development. 

The pandemic has caused the energy demand erosion, which is now starting to recover. Renewable pose a threat to the oil and gas industry, but it would require massive investment to capture oil and gas share in the energy mix- which is unlikely to happen by 2025. Furthermore, it would take decades to replace existing internal combustion engines with electric vehicles and hydrogen. Petrochemicals, which accounted for 16% of oil demand in 2020, will continue to grow due to the increasing population. Therefore, it is expected that oil and gas share in global energy consumption will remain solid in the coming years. 

Offshore, which currently accounts for 30% of the overall production, will play a pivotal role in meeting the global energy thirst. The breakeven price, which is now standing at $50/bbl for deepwater production, has seen a substantial decline over the last few years. The extraction is now considered one of the cheapest sources of producing per barrel of crude. The brent price in the range of $70-80/bbl mark makes offshore a viable production source in the coming years. 

When it comes to strategies adopted by European and American supermajors, both have taken a different approach. European supermajors such as BP, Shell, Equinor, ENI, TotalEnergies have slashed their offshore Capex for 2021-25 vs. 2016-20 as they look out for increased investment in renewables to meet the net-zero emissions target by 2050. On the other hand, American supermajors are focusing on carbon reduction from their operations. They are cashing in on their oil and gas assets and have increased their Capex allocation for offshore development in 2021-25 vs. 2016-20. Latin America is the only region that is likely to surpass the 2016-20 Capex in 2021-25. Brazil and Guyana are the countries to look for, as they provide low breakeven and significant offshore potential. 

In this promising journey, the operators are keeping a close eye on their sustainability and environmental impact, which in turn exert pressure on the oil field service companies to up their game and provide services that can keep the carbon emission in control while keeping the environment safe.  

 

Sources: Rystad database, Oil Companies Websites, Fitch, Offshore Technology, IEA, Offshore Mag, Offshore Energy, NY Times, and other secondary publications. 

Disclaimer: Market trends up to December 2021 are appended in this article. The analysis does not take into account some factors, such as the impact of the Russian-Ukraine conflict which led to high crude prices and pull-outs of international oil companies from Russia, etc. 

 


That the contents of third-party articles/blogs published here on the website, and the interpretation of all information in the article/blogs such as data, maps, numbers, opinions etc. displayed in the article/blogs and views or the opinions expressed within the content are solely of the author's; and do not reflect the opinions and beliefs of NASSCOM or its affiliates in any manner. NASSCOM does not take any liability w.r.t. content in any manner and will not be liable in any manner whatsoever for any kind of liability arising out of any act, error or omission. The contents of third-party article/blogs published, are provided solely as convenience; and the presence of these articles/blogs should not, under any circumstances, be considered as an endorsement of the contents by NASSCOM in any manner; and if you chose to access these articles/blogs , you do so at your own risk.


Oceaneering is a market leader in engineered services and products, including robotic solutions deployed on land, underwater, and in space. With over 50 years’ experience in underwater and harsh environments, Oceaneering’s advanced technologies are designed to meet high standards for safety and reliability. We apply our core capabilities to the offshore energy, defense, aerospace, manufacturing, logistics, healthcare, science and research, and entertainment industries.

© Copyright nasscom. All Rights Reserved.