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Global Subsea Industry: 2019 Trends

Global Subsea Industry: 2019 Trends

 

The global subsea market benefited from the recovery in the offshore oil and gas industry in 2018. The offshore segment has been slower to react to the rise in oil prices in the first half of 2018. Yet, analysts expect offshore activity and drilling, as well as offshore project sanctioning, to grow in 2019 and combined global offshore investments to rise for the first time year-on-year since the oil price crash of 2014-2015.

Rising offshore activity supported a recovery of the subsea industry and the subsea market is expected to continue recovering in coming years.

Before the oil price slump in December 2018, Westwood Global Energy Group said that the subsea market recovery was evident because the optimistic sentiment that had emerged in 2017 continued into 2018. The number of greenfield projects which received final investment decisions (FIDs) in 2018 soared by 154 percent compared with the number of projects sanctioned in 2016, when the downturn was most severe, according to Westwood. At oil prices above $70 a barrel, West wood expected a rebound in offshore activity, and saw subsea vessel operations and hardware expenditure reaching $152billion between 2019 and 2023.

Subsea tree installation, a key indicator of subsea activity, would grow at a 6-percent compound annual growth rate (CAGR) between 2019 and 2023, thanks to investments in the Santos Basin offshore Brazil and to Equinor’s ongoing projects in the Barents Sea and North Sea, according to the energy intelligence firm. Services and equipment firms in the supply chain, however, continue to face challenging conditions, according to Westwood. Exploration and production operators continue their capital spending discipline and manage their exposure to volatile oil prices by phasing development projects and by standardising equipment and solutions where possible.

Inspection, Maintenance and Repair (IMR) activity is seen to rise significantly over 2019-2023, Westwood reckons, noting that it expects vessel-related IMR activity expenditure to reach $21 billion over the forecast period, up by 25 percent compared to 2014-2018.

In the floating production, storage, and offloading (FPSO) units market, data and analytics company GlobalData expects as many as 71 FPSOs to begin operations worldwide by 2025, with South America and Africa leading the planned FPSO deployments. South America will be the leader with 31 FPSO deployments, followed by Africa and Europe with 16 and 7 FPSO deployments, respectively. Brazil will continue to dominate the countries’ ranking for planned and announced FPSOs by 2025, with Australia, Angola, and Nigeria following. Among companies, Petrobras, Modec Inc, Premier Oil, and Equinor are seen as the key global operators for deployment of planned FPSOs by 2025, according to GlobalData.

The world’s subsea manifolds market is expected to grow by a nearly 6-percent CAGRbetween 2018 and 2022, a December market research report by Technavio showed.

“Apart from the recovery of crude oil prices, the global subsea manifolds market is expected to be positively influenced by the increase in offshore oil and gas investments, and the rise in a number of subsea wells during the forecast period,” according to Technavio. Offshore operators are about to put years of misery behind as the outlook for offshore in 2019 is strong, Rystad Energy said in December 2018. After four years in a row of declining revenues, offshore contractors can expect revenues to start rising again in 2019, according to the Oslo-based energy consultancy.

“The offshore service market is like a super tanker: It takes time to accelerate. The uptick in new projects in 2017, 2018 and now 2019 will be enough to turn revenue growth positive to mid-single digits as offshore capex is set to increase due to the recent years of capital commitments. And on top of that comes expected increase in operating expenses,” Audun Martinsen, head of oilfield service research at Rystad Energy, said.

Oil and gas firms worldwide are set to sanction at least 100 offshore projects in 2019, following more than 90 project approvals in 2018, according to Rystad. The consultancy expects $210 billion worth of expenditure on offshore oilfield services globally in 2019.

The subsea market posted the highest growth rates in the second and third quarter among oilfield services, Rystad said in a December 2018 note. For 2019, the consultancy sees offshore investments rising by 2 percent in a year which will finally see an increase in revenues for offshore-exposed service companies.

“We forecast that more than $200 billion worth of projects will be sanctioned next year, including as many as 100 offshore projects, thus setting the scene for higher service prices,” Rystad said. “Geographically, the greatest growth is anticipated in Africa, South America and the Middle East, as greenfield activity picks up in Mozambique, Brazil and Saudi Arabia,” the consultancy reckons.

The US Gulf of Mexico is set for a historic 2019, according to Wood Mackenzie. “We expect 2019 to be a strong year for the Gulf of Mexico. In addition to exciting new project sanctions, which could usher in more than US$10 billion of investment into the region, a couple of historic firsts set to occur next year could set the stage for years to come,” said William Turner, senior research analyst at Wood Mackenzie.

In the UK North Sea, more projects were approved in 2018 than in the previous three years combined, a sign that investment conditions have improved since the 2015 and 2016 lows.

Operators and suppliers in the UK Continental Shelf (UKCS) recognise that collaboration is integral to business performance, but many find it difficult to achieve it in practice, according to an annual survey published in December by Oil & Gas UK and Deloitte, which measures the effectiveness of companies as partners in collaboration.

“This year’s survey results should prompt the industry to redouble its efforts and build on the positive changes seen in the past three years. This would entail extending them across the basin and making them ‘business as usual’ so they add value in an upturn as well as a downturn,” said Graham Hollis, senior partner for Deloitte in Aberdeen.

 

By Tsvetana Paraskova

Published: 29-01-2019

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