Well Management and Intervention Could Boost Energy Supply
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Well Management and Intervention Could Boost Energy Supply

Well management and well intervention services, as well as the entire service supply chain of the oil and gas industry, are set to benefit from an uptick in upstream investments as legacy producing countries aim to replace maturing supplies while oil majors explore for oil and gas opportunities in new areas such as Guyana, Namibia, and Cote d’Ivoire.

Even as the world now invests almost twice as much in clean energy as it does in fossil fuels, upstream investment is now estimated to have rebounded to 2017 levels, according to the International Energy Agency (IEA).

Upstream Investment Rising

Upstream oil and gas investment increased globally by 9 percent in 2023 and looks set for a 7 percent rise in 2024, with most increases coming from the national oil companies (NOCs) in the Middle East and Asia, the IEA said in its World Energy Investment 2024 report.

Upstream oil and gas investment is expected to have reached $570 billion in 2024, following a 9-percent rise in 2023. This is being led by Middle East and Asian NOCs, which have increased their investments in oil and gas by more than 50 percent since 2017, and which account for almost the entire rise in spending for the 2023-2024 period, the IEA said.

There is also a significant wave of new investment is expected in LNG in the coming years as new liquefaction plants are built, primarily in the United States and Qatar.

Rising demand for oil and gas means that global upstream oil and gas investment needs to increase by 22 percent annually by the end of this decade, to ensure adequate supplies due to growing demand and cost inflation, a report by the International Energy Forum (IEF) and S&P Global Commodity Insights showed in June 2024.

The report found that annual upstream investment will need to increase by $135 billion to a total of $738 billion by 2030 to ensure adequate supplies, up by 15 percent compared to the assessment a year ago, due primarily to rising costs and a stronger demand outlook.

In 2024, upstream investment is expected to have more than doubled from 2020’s low of $300 billion and be well above 2015-2019 levels of about $425 billion, the IEF and S&P Global Commodity Insights said.

“A cumulative $4.3 trillion will be needed between 2025 and 2030, even as demand growth slows toward a plateau,” the authors of the report wrote.

Joseph McMonigle, Secretary General of the IEF, commented, “Well-supplied and stable energy markets are critical to making progress on climate, because the alternative is high prices and volatility, which undermines public support for the transition as we have seen in the past two years.”

Exploration Revived

High-impact oil and gas exploration is also critical for companies to rejuvenate their resource portfolio, analysts at Wood Mackenzie say.

“What can be said is that successful exploration cuts carbon intensity, lowers the cost of oil and gas to consumers, and adds value for both resource holders and explorers,” Andrew Latham, Senior Vice President, Energy Research, at WoodMac said in a report why high-impact exploration is still needed.

“As demand is proving resilient, investment in new supply is needed to displace dirtier alternatives.”

According to WoodMac’s report, deepwater will offer most new opportunities for exploration as most of the world’s deepwater basins, in waters from 400 metres to over 3,000 metres, are barely drilled.

International oil and gas majors have recently boosted their efforts at deepwater exploration, looking to unlock the next frontier, Latham says.

The NOCs are also keen to explore deepwater areas.

“Increasingly, national oil companies are following suit, as government mandates to increase production and ensure domestic energy security prevail,” Latham notes.

Oilfield Services Firms Optimistic about Long-Term Industry Growth

All these encouraging signs in upstream spending and offshore exploration would benefit the oilfield services supply chain and companies working in well management and well intervention.

SLB, the world’s largest oilfield services provider, said on its Q3 earnings call that despite weaker demand in China and softer economic growth rates in some developed economies in 2024, the company continues to believe in the upcycle of the oil and gas industry.

“Despite these evolving market conditions, we believe the long-term fundamentals for oil and gas remain in place,” SLB chief executive officer Olivier Le Peuch said.

“Demand for energy is increasing and energy security remains a global priority, as witnessed by recent commodity prices fluctuations tied to geopolitical tensions in the Middle East,” the executive added.

“Internationally, gas investment remains strong, particularly in Asia, the Middle East, and the North Sea, and is expected to grow regardless of OPEC+ decisions on oil production,” Le Peuch noted.

Short-cycle oil investments have been more challenged, but long-cycle deepwater projects globally and most capacity expansion projects in the Middle East remain economically and strategically favourable, according to SLB.

The company expects “a sustained level of global upstream investment in the years to come, with the secular trends of digital and industry decarbonization extending the investment horizon,” Le Peuch said.

Well Intervention in UK North Sea Could be Massive Opportunity

In the UK North Sea, well intervention is a huge opportunity to access resources in a more timely, clean, and cost-effective way and support the UK’s supply chain, the North Sea Transition Authority (NSTA) said in its annual 2024 Wells Insight Report.

Currently, well intervention is able to provide hydrocarbon production at a cost of less than £12 per barrel of oil equivalent (boe), which is a very attractive option at today’s oil and gas prices, the NSTA said in its report.

Moreover, well intervention requires fewer operational days, less construction material, minimal waste disposal, and lower fuel burn than drilling a new well, and therefore produces lower emissions.

UK North Sea operators should strive to boost their well intervention activity to extend the production lifespan of their wells, and to provide a stable flow of work for the UK’s world-class supply chain, the authority said.

Well intervention activity outside of restoring shut-in wells remained low with just 85 optimization jobs completed in 2023 and a decline in safeguarding jobs from 208 in 2022 to 152 in 2023, the NSTA’s report found.

The authority has already held one-to-one sessions with leading North Sea operators to encourage more well interventions. It has also completed a detailed study of the 795 shut-in wells to understand what percentage could be brought back into production, the NSTA said.

“Well intervention work can and does produce impressive results, boosting efficiency and providing cleaner and cost-effective production,” said Carlo Procaccini, NSTA Chief Technical Officer.

“We expect that bringing together operators with the supply chain will highlight significant opportunities for everyone.”

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