As operators face the dual challenge of sustaining their production levels in mature regions and effectively exploiting the uncapped reserves in growth areas, such as, West Africa, US Gulf of Mexico and Brazil, the potential for subsea capital expenditure throughout the forecast period has increased dramatically.
In order to leverage against declining production, Operators are being forced to venture into remote and harsher locations. These projects require top tier equipment that can cost significantly more than the standard equivalent. Infield Systems estimate that ultra-deep installations will account for almost 25% of the annual tree market by 2016.
As anticipated, the oil companies that lead the market are heavily involved in the booming Latin American and West African prospects. Petrobras is leading the board with an expected capital expenditure of US$18.9 billion over the 2012-2016 period. Important developments include the pilot projects in Iara and Guara fields and a series of EWTs in Iara, Libra, Franco and Iguazu fields.
Prospects for manufacturers are also looking positive. The market outlook shows a well-supplied market with a total capacity of 690 trees. Towards the end of the forecast period, Infield Systems expects higher utilisation rates and the start of a saturated market, driven mostly by the increasing demand for subsea trees in main phases in Brazil and West Africa. Global subsea tree manufacturers’ utilisation rates are expected to increase to an average of 75% in the next 3 years, up from 49% in the 2009-2011 period.
Advances in technology are increasingly being tested and deployed in response to the offshore industry’s demand for solutions to challenges, such as: deeper and harsher waters, sustaining production rates in mature developments, boosting flow rates in low pressure reservoirs, accommodating a larger number of fields tied back to host facilities and ensuring the energy and cost efficiency of a project. Possible projects that could benefit from the use of advanced seabed technologies include: the mature fields of the North Sea and the US GoM, where a large number of small developments are expected to be tied back to existing platforms in order to be commercially viable. Infield Systems also expects that West Africa will be one of the key regions for implementing subsea processing because of its already extensive deepwater production, significant oil reserves and most importantly the geographical distribution of its fields that require multiple wells being tied-back to one central processing facility.
In Africa, oil companies such as Total, BP, ExxonMobil, Chevron and Eni will try to take advantage of the area’s ample resources to leverage against the declining reserves from other mature areas. Total is leading the subsea bill with a projected US$8 billion of expenditure within the forecast period.
Asia is also becoming an increasingly important part of the world for the global oil and gas market as it is the fastest growing region in terms of energy demand, and the hub of the global LNG sector. The unfortunate events of 2011 in Fukushima, Japan, have also served to increase the region’s dependency on natural gas.
Australia is emerging as a major player in the global natural gas market due to the development of offshore natural gas and (onshore) coal bed methane (CBM) projects. Post 2013, a significant backlog of major projects is predicted to provide a boost to the market. More than 50% of the forecast subsea market is expected to relate to subsea tiebacks to a fixed, a floating or a terminal facility.
The European energy market is one of the largest in the world yet it is also a region facing oil and gas production decline. The declining production in this mature region dictates the need for additional expenditure on infrastructure, EOR technologies and exploration campaigns in order to sustain or enhance existing levels.
Latin America, particularly Brazil, has the potential to emerge as a major offshore energy frontier in the global oil market. Petrobras has begun to reveal reserve estimates for its pre-salt finds that stand to significantly increase Brazil’s total estimated level of reserves. 38% of the projected subsea Capex will be needed to develop the pre-salt projects.
Finally, the North American market finds itself in a challenging period; global recession followed by the Deep-water Horizon disaster, the last two years have seen a change in the regulatory environment governing operator activities across the region. Any future subsea equipment and infrastructure will need to comply with these regulations and have higher safety specifications, something that will lead to greater capital expenditure per development. In addition, the rise of the local Shale Gas market threatens to mix up the offshore market dynamics by diverting the operators’ attention onshore.
Source: Infield Systems, February 9, 2012