Offshore staff
(Houston)-The subsea market is in no danger of slowing down, and in the opinion of Infield Systems Ltd., it "has no where to go but up." In fact, the independent database and analytical services firm forecasts a value in excess of $16 billion per year for the subsea market within the next five years.
The updated forecast is highlighted in the third edition of Infield'sGlobal Perspectives Subsea Market Update, in which the firm is projecting this upward growth of the subsea market based on the value of the market between 2001 and 2010.
This total of $16 billion includes the value of drilling and well completion equipment and associated pipelines umbilicals. Infield provides a caveat to this value, namely that if the rising costs are permanent rather than a temporary shock, the value may well be exceeded by the end of the period. With prices increasing with almost every negotiated contract, there is certainly potential for this to escalate.
Like other sectors of the offshore market, current subsea market fundamentals are extremely healthy for contractors, but less so for operators. Infield states that operators are facing scheduling bottlenecks and risks as they attempt to secure the correct equipment and suffer the cost premiums associated with securing this equipment before their rivals. As winners and losers emerge from this race, Infield speculates that M&A activity will be fueled in the sector.
Regional subsea outlook
The report states that subsea production is currently used in 47 countries worldwide, which will soon be joined by a further 12 countries.
Infield reports that there are various subsea completion projects in various stages of development around the world, with over 40 countries experiencing some subsea development in their offshore waters. The West Africa market is experiencing the most sustained momentum of the subsea growth, due largely to the increasing activity of FPSO operations off the coast.
The subsea-to-shore market is also riding the wave of growing numbers of LNG plants being built in the Asia/Australia region.
In the Gulf of Mexico, the market for subsea installation has recovered after the devastating hurricane season of 2005. However, Infield expresses concern that in the longer term, once the major hubs have been fully developed, there is some question over where the new growth is expected to come.
Infield expects that the GoM will avail of new and emerging technologies in the near term to drive further subsea progress. For example, tieback satellite wells continue to enjoy a healthy market in the GoM, with independents having a particular impact in this arena.
Another interesting trend the firm points to is the impact of new enabling technologies such as HIPPS (High Integrity Pipeline Protection System) on the market. Although HIPPS debuted 17 years ago in the North Sea, it is likely that that over the next two years it will see its first use in the GoM. Another important technology driver within the subsea market is artificial lift to increase recovery in deepwater.
Offshore Europe has a smaller number of large subsea developments compared to other regions, but there are a large number of smaller tie-back projects that will help keep the subsea market buoyant.
Infield reports that these smaller projects have engendered a major structural change in operator type in Europe since 2001. At that time, Infield projected that during the time period 2005-2009, 93% of all future subsea wells would be operated under IOC (Intergovernmental Oceanographic Commission) control.
Infield has changed that estimate to reflect a current view closer to 49%; they attribute this to the changing nature of the developments, which are smaller and more challenging, thus opening the arena to smaller innovative companies with lower costs and margins.
5/1/2006
