Global offshore drilling spend to reach $80 billion by 2012
Over the next 5-year period to 2012, high oil prices will continue to drive oil and gas industry spending on offshore drilling to a total of $380 billion. This is an increase of nearly 60% compared with the $240 billion spent in the previous 5 years, according to a forecast released by Douglas-Westwood Ltd. and Energyfiles.
The latest edition of the “World Offshore Drilling Spend Forecast 2008-12,” released Apr. 14 by the two research firms, forecasts that by 2012 the global drilling market will be worth an estimated $80 billion, more than doubling since 2003.
Based on data derived from Energyfiles’ global database, nearly 18,000 offshore wells were drilled over the last 5 years. “The forecast for the next 5 years is generally stable but with a peak in 2010 and a slight dip in 2011, ultimately equaling a little over 20,000 for the period, and representing a rise of 13%,” the forecast said.
Currently, Asia is seeing the highest activity, followed by North America and then Western Europe, the forecast said. “These areas are expected to continue to see higher drilling levels although average numbers will decline significantly offshore Western Europe,” said Michael R. Smith, report author with Energyfiles.
“With oil prices more than quadrupling over the past 5 years,” said Steve Robertson with Douglas-Westwood, “drilling rig utilization has reached close to 100% and maximum day rates have soared from $225,000 to more than $520,000, with a future contract agreed at $637,000 for a latest generation deepwater rig.”
Deep waters rising
Substantial growth, the forecast said, is taking place in deep water. In 2007 it is estimated that nearly $50 billion was spent on shallow-water drilling compared with $18 billion in the deep water. However, by 2012, deepwater spending is expected to rise by more than 40%, while spending on shallow-water drilling is expected to increase by just 6%.
“Despite today’s political environment there are still lots of offshore opportunities,” Smith said. Even within the Organization of Petroleum Exporting Countries, Smith said, “activity is now increasing.” For example, Nigeria, Indonesia, and Angolathe three OPEC countries with deepwater potentialare promoting outside investment into their deepwater basins, Smith said, adding, “And countries around the Persian Gulf are drilling many more shallow-water wells, as well as encouraging foreign companies to develop their huge gas reserves.”
Smith said shallow-water development spending in the near future “will be generally flat although will show modest gains after 2010.” Some areas, however are seeing increases, he said, such as the Persian Gulf and in Russia and Azerbaijan, “where unexploited areas are being developed in massive, long-term schemes.”
Increasing more rapidly still, deepwater development drilling is increasing rapidly “in all regions,” Smith said, “where fields have been discovered, supported by the many ultradeepwater projects now proceeding, especially in West Africa, Brazil, and the Gulf of Mexico.”
Smith concluded, “Though rigs have increased their relative share of drilling spend, the money is not just being spent there. In 2007 it is estimated that 37% of expenditure was billed by the rig contractors, just over a fifth was earmarked for support, 6% went towards geoscience, and the remainder went towards well engineering.
“But as the industry probes more complex geology, spending on anything related to longer and more tortuous well paths is expected to grow disproportionately to other technologies,” he said.
