For the offshore oil and gas industry, the sun is breaking through the clouds.
That’s the consensus of the panel of forecasters who contributed to our annual Forecast issue this year.
The market is growing, they say, and will continue to do so, particularly in certain technology sectors and geographic regions. Technology sectors include deepwater and subsea development equipment. Geographic areas encompass West Africa, the Middle East, and the Former Soviet Union.
To prepare this year’s forecast, we sought out three prominent analysts firms with strong track records to tell us what to expect.
We askedIHS Energy what to expect next year in natural gas exploration and development worldwide. Their answer was direct and succinct: There is little doubt that the global natural gas industry is poised to dominate the world’s upstream development stage in the next decade.
“Major gas discoveries made during the last several decades that were once considered ‘stranded’ are now at the forefront of development strategies as operators look to monetize gas in an increasingly attractive global market,” they say.
While the field sizes of the Middle East dominate the reserve picture, the CIS has the largest number of potential gas developments, in their analysis, including the Phase III of Karachaganak in Kazakhstan, Shtokmanovskoye in the deepwater offshore northeast Russia, and the continued development of the Sakhalin Island projects. Full details of IHS’s natural gas forecast begin onpage 26.
Next, we askedJason Nunn of PFC Energy to look specifically at deepwater spending. His analysis calls for the total worldwide deepwater market (excluding drilling) for 2005 to exceed $8.7 billion, which is up 10% on 2004. He quickly notes that this doesn’t mean all regions will experience a 10% growth. Some will actually decline - as in Gulf of Mexico field development spending. But he expects deepwater expenditures in Brazil, for example, to more than double, rebounding from $0.5 billion in 2004 to $1.25 billion next year.
Engineering, hull and topside fabrication, and riser manufacture are the key growth areas in this market to 2007,” Nunn says.
Meanwhile, the development of the Nigerian sector is driving deepwater spending growth off West Africa. “If the Nigerian deepwater projects that have been delayed for so long finally go ahead, spending in Nigeria could double from current levels of approximately $1 billion annually to $2 billion in 2007,” Nunn says. His forecast begins onpage 33.
Finally, we called onJohn Westwood of Douglas-Westwood Ltd. to talk about production optimization in the near future. Opportunities abound, he says, beginning with the GoM, where “growth is mainly based on an anticipated surge of activity in the province’s deepwater areas.”
The North Sea is another example. There are 250 undeveloped discoveries offshore the UK alone, of which 150 are within 10 km of existing infrastructure and of which few are more than 50 km away, Westwood says.
The North Sea has stripped away much of its ‘gold plated’ approach to field development and operations and has imported low-cost minimum facilities field development approaches from the GoM that are well suited to the many small prospects that remain,” he says. “We now expect to see a stream of small-field developments forming the basis of future activity in the UKCS.” Westwood’s analysis begins onpage 30.
These sentiments were echoed in varying tones and nuances recently at the Deloitte 2004 Oil & Gas Conference in Houston. Heavy hitters such as Matt Simmons of Simmons & Co., Pierre-René Bauquis of IFP, and Sarah Emerson of Harvard agreed (within limits) on several concepts:
- Prices of oil and gas will continue to be higher (pick a number between $35 and $45/bbl)
- The higher prices will have a stimulating effect on the search for supply
- Demand is growing and doesn’t show signs of declining in any timeframe meaningful for short-term planning.
Things can change, of course, and forecasts are never 100% right, but it is accurate to say that the outlook for next year is much brighter than it was at this time last year.
