Marine and Lifting Set To Thrive as Offshore Oil and Gas Rebounds
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Marine and Lifting Set To Thrive as Offshore Oil and Gas Rebounds

Marine and lifting services providers and operations are set to benefit from increased offshore activity in the energy sector as deepwater investment and drilling rises, demand for natural gas continues to be strong, and operators plan offshore wind developments.

Offshore and Subsea Investment Rising

Rystad Energy has estimated that total offshore investments will reach nearly $250 billion in 2025, amid a shift in global oil and gas industry dynamics from US shale to international offshore.

US tight oil investments are expected to decline by about 10 percent in 2024 compared to last year, Espen Erlingsen, Head of Upstream Research at Rystad Energy, wrote in a report in August.

As a result, US production is only forecast to grow by around 400,000 barrels per day (bpd) this year and next – the lowest level of growth for the sector since the Covid-19 pandemic-affected years of 2020 and 2021.

At the same time, investments in the offshore sector are rising and are expected to grow by around 5 percent both this year and next, Erlingsen added.

The offshore sector will most likely be the source that will drive the growth in oil production for the rest of this decade, according to Rystad Energy.

Offshore, the deepwater sector in particular, was heavily affected by the growth of US tight oil in the last decade. Total upstream offshore investments fell from $340 billion in 2014 to $140 billion in 2021.

But after 2021, upstream offshore investments have been rising again, thanks to the combination of high oil prices, improved economics for offshore projects, and lower tight oil growth, Rystad Energy said.

The subsea market, which includes players involved in production and processing systems such as subsea umbilical risers and flowlines (SURF), trees, wellheads, manifolds and other components, is poised to experience a significant influx of capital, Rystad Energy analysts noted in a separate report in August.

Driven by rising operator expenditure on equipment and installation services, Rystad Energy projects a 10-percent annual compound growth rate (CAGR) from 2024 to 2027, with total spending anticipated to exceed $42 billion by the end of this period.

Investment activity has been particularly robust in the South American and European regions, where major projects are making significant progress and attracting new investment.

Brazil remains a key investment destination due to its vast pre-salt reserves, driving strong demand for subsea equipment and SURF. In Europe, Norway is experiencing a resurgence in activity, fuelled by favourable market conditions and technological advancements such as Subsea Hydraulic Power Unit which is cost-efficient and replaces 100 tons of deck equipment, and SWIFT™, a remotely operated tubing hanger tool which enables umbilical-less operations, reducing the need for heavy topside equipment, Rystad Energy said.

“Looking ahead, we anticipate steady growth in the subsea sector, fueled by advancements in deepwater exploration and carbon capture and storage (CCS). This recovery highlights the industry’s resilience and suggests a promising trajectory of consistent progress,” said Sanwari Mahajan, Analyst, Supply Chain Research, at Rystad Energy.

Offshore drilling and project developments will be the growth engine of the oil and gas industry going forward, SLB’s chief executive officer Olivier Le Peuch said on the earnings call for SLB’s third-quarter results in October.

The executive expects total offshore final investment decisions (FID) to approach $100 billion this year. SLB also projects that this rate of $100 billion FID for offshore will remain at that level or higher for the next two or three years. As a result, the cumulative 2023-2026 offshore FID will exceed $500 billion, Le Peuch said.

“And that’s a sign that this project will execute beyond ’25, beyond ’26, and will be a growth engine for the industry going forward,” SLB’s top executive added.

Services Demand Hotspots

New exploration hotpots have emerged in recent years and they are expected to drive an increase in demand for offshore equipment and services providers. One of these is Namibia in southwest Africa, where the Orange Basin has become an exciting new oil province, Westwood Global Energy Group said in an August report. Subsequently, Namibia could become a provider of significant new demand and future demand potential for deepwater drilling rigs.

“The market for deepwater rigs in this new province since 2022 has been increasing off the back of giant new discoveries. Despite no rigs currently working offshore, Westwood expects to see a few begin new programmes in the coming months, while the long-term outlook is very promising,” Teresa Wilkie, Director of RigLogix at Westwood, wrote.

Shell, TotalEnergies, Galp Energia, and Rhino Resources have recently contracted rigs to drill offshore Namibia, Westwood’s RigLogix service showed.

Well Intervention A Huge Opportunity for UK Supply Chain

In legacy production provinces such as the UK North Sea, there is a huge opportunity to access resources in a more timely, clean, and cost-effective way, and support the UK’s supply chain, the 2024 Wells Insight Report by the North Sea Transition Authority (NSTA) revealed in September.

Currently, well intervention could provide hydrocarbon production at a cost of less than £12 per barrel of oil equivalent (boe), a very attractive option at today’s oil and gas prices, the authority said.

The report found that well interventions increased in the Northern North Sea (NNS) to 102 wells in 2023 from 82 in 2022. There was an increase West of Shetland (WoS) where nine wells benefited from intervention work in 2023 up from two in 2022. However, Central North Sea (CNS), Southern North Sea (SNS), and the East Irish Sea (EIS) saw a decrease in activity.

Separately, the report also showed that industry only achieved 70 percent of planned well decommissioning activities last year as operators continued to defer work. The NSTA has recently opened investigations into missed deadlines as part of its approach to boosting compliance and tackling the backlog of wells awaiting plugging and abandonment.

“As with well interventions, well decommissioning should provide a sustainable and lucrative source of income for the supply chain,” the NSTA said.

Supply Chain for Offshore Wind

The offshore equipment and services providers will have another large new market in the coming years: offshore wind, analysts say.

The offshore energy supply chain is also diversifying into offshore wind as companies traditionally focused on the oil and gas (O&G) sector have existing synergies between what they offer and what offshore wind projects require, Westwood said in a report in September.

Diversified and O&G supply chain companies have seen their market share of the offshore wind supply chain grow in recent years, compared to firms strictly focused on offshore wind, according to Westwood.

The consultancy expects that total offshore wind EPCI CAPEX will be 45 percent higher than offshore EPCI CAPEX on oil and gas, which includes subsea equipment and platforms, over the next five years.

“Even though offshore wind opportunities for the supply chain may have recently slowed down, there is still a much larger amount available over the coming years in comparison to the offshore O&G sector,” wrote Bahzad Ayoub, Senior Analyst – Offshore Wind at Westwood.

In addition, supply chain companies working in the O&G sector can play a key role in helping the floating wind market grow, particularly companies that are already working on floating platforms, according to Westwood.

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