Offshore project commitments are expected to reach a new record of almost 600 projects in the period to 2025, according to new research from Rystad Energy that will be music to the ears of struggling seismic and oilfield contractors.
Offshore project commitments are expected to reach a new record of almost 600 projects in the period to 2025, according to new research from Rystad Energy that will be music to the ears of struggling seismic and oilfield contractors.
Deepwater commitments will enjoy the largest growth as their cost has now become much more competitive against greenfield continental shelf reserves.
Total offshore project commitments (25% of overall capex awarded through contracts) declined in the period 2016- 2020 to 355 projects, from 478 in 2011- 2015. From the beginning of 2021 to the end of 2025, Rystad has forecasted 592 commitments, with growth across all water depth levels.
Although shallow water commitments will take the largest share of the total offshore project pie, rising to 356 from just 206 in the last five years, the increase is more modest, about 10%, compared to the 2011-2015 count of 323 projects. The most impressive growth is that of deepwater commitments with the number of projects rising to 181 from 106 in 2016-2020 and 115 in the five years before that, said Rystad.
Ultra-deepwater commitments will also tick up but not by similar margins, as costs still bite. Rystad is expecting about 55 projects from this year until 2025, up from 43 in the previous five years.
‘The search for large new fields in deep and remote waters became much more economically viable after day rates for drilling rigs and offshore supply vessels fell in the wake of the oil price crash in 2014 and 2015. This offers significant support for companies interested in deepwater,’ said Rajiv Chandrasekhar, energy service analyst at Rystad Energy.
Rystad Energy’s latest Offshore Cost Benchmarking Report shows that the difference in the cost of greenfield shelf reserves compared to deepwater has fallen dramatically from the highs seen in 2014 – from more than $5 per barrel of oil equivalent to only around $1/boe in 2020.
In terms of greenfield expenditure, Rystad expects offshore project commitments in 2021-25 to be worth more than $480 billion, eclipsing the 2016-20 tally of around $320 billion by 50%. However, this is still well below $673 billion worth of commitments made in 2011-15.
‘We expect ultra-deepwater activity to be primarily concentrated in South America, with over 50% of the total committed value, while the Middle East is likely to lead shelf developments with 40% of the total value,’ said Rystad. ‘Deepwater investments are forecast to be less dependent on any particular region, with a quarter of greenfield expenditure expected in Europe.’
Meanwhile, Rystad research has shown that the number of offshore wildcat wells will rise over the next two years despite the fact that in 2020 the success rate of wildcat wells plummeted to an all-time-low of 10.6%, marking an annual decline for a fourth year in a row.
During the first half of the last decade, operators enjoyed high success rates in their wildcat drilling campaigns, of 40-60% for onshore and 30-40% for offshore.
The 2020 score ended at 24.8%, down from 28.6% in 2019 but slightly higher than the 24.1% score recorded in 2018.
‘The lack of availability of easily exploitable prospects, combined with dying exploration activity in once rich onshore areas such as the Middle East, has led to the decline in the onshore success ratio. Most of the easily mappable structural prospects with shallow reservoirs have already been thoroughly explored, leaving wildcatters to struggle primarily with technically challenging prospects,’ said Palzor Shenga, vice-president at Rystad Energy’s upstream team.
Rystad Energy said that it does not foresee a significant improvement in the onshore success ratio soon and much more activity will be focused on offshore areas. ‘Deep and ultra-deepwater areas have delivered decent success over the past couple of years,’ it said.
Although new volumes found in 2020 exceeded 10 billion barrels, only 12% of the wildcats had a volume potential greater than 250 million barrels of oil equivalent (boe). Of these, 66% targeted reservoirs in deep and ultra-deep waters, 20% were in onshore basins and the remaining 14% were in shallow waters, said Rystad.
‘In 2021, Rystad expects around 70% of the high-impact wildcats to target deepwater and ultra-deepwater plays, while 17% will be in offshore shelf areas and the remaining 13% onshore.
From about 474 onshore wildcats in 2020, Rystad Energy projects the number to fall to 253 in 2021 and rise slightly to 270 in 2022, never exceeding 300 wells per year through to 2025. The number of offshore wildcats, however, is forecast to increase to 217 in 2021 and 300 in 2022, from about 180 last year.
