Special Report: Editor’s Letter: Offshore sector on the rise again
Rising prices and smarter strategies are the key, writes Jonathan Sheikh-Miller
Talk to an industry executive, especially those allied to sectors that depend on the exploration and production operators for their business lifeblood, such as EPC outfits or oilfield services players, and they will tell you the rise in the oil price over the past six months has helped bring forth some genuine greens shoots of recovery.
Final investment decisions are now being signed off and the entire sentiment is moving from one of constraint to a scenario where headroom exists for projects to be taken back off the shelf. Indeed, column inches are now being written as an obituary to the “lower for longer” mantra that arose post 2014.
Hydrocarbon consultancy firm Rystad Energy has predicted that around 100 new offshore projects will be sanctioned in 2018, more than double the number in 2016, and worth around $100bn in capital investment.
But encouraging oil prices are only half the story. Offshore operators, like those in other segments, are finding gains through advanced technology, the streamlining they undertook during the downturn and the adoption of standardised approaches when embarking on new projects, as solutions to mitigating risk and keeping a firm hand on the tiller with regard to costs.
The combined effect of disruptive technology that can reduce downtime and increase efficiency, as well as accelerate the progress to first oil, alongside cost cutting and a competitive services market have had a major impact on projected breakeven prices.
Rystad Energy has estimated the breakeven price for shallow water oilfields is now around $30 a barrel, while for deeper offshore it is $45 - both significantly more viable in a future price dip than the current global game-changer US tight oil.
In the Middle East, with large international players paying big numbers for chunks of the Abu Dhabi National Oil Company’s offshore concessions, and headline-making finds in the waters off Egypt, Cyprus and Bahrain, this increasingly competitive sector is surely set to grow substantially.
So this month we thank energy services provider Proserv, multinational automation technology leader ABB and oil and gas solutions expert Frames for their contributions to a report, which has particular regional relevance. Integral issues like life of asset extension and the latest automated solutions are featured.
Finally, we would also like to thank EPC leader McDermott for its support of this report – including our vivid cover image.