Hefty growth seen for world offshore activity

What Lies Ahead for World Offshore Activity [28288 bytes]

Petroleum analysts see strong growth ahead for offshore oil and gas production and exploration beyond 2000, with the Asia-Pacific region taking over from the North Sea as the leading offshore theater.

Mackay Consultants Ltd., Inverness, U.K., expects world offshore oil production to increase 22.6% to 1.195 billion metric tons in 1999, equal to about 25 million b/d.

Mackay said, "This is an annual growth of about 4.5%, which is well above the 2% annual growth expected for the oil industry as a whole. However, North Sea oil production is expected to peak in 1998, then decline."

Mackay expects growth in offshore gas production to grow faster than oil: a 32.7% rise to 605.9 billion cu m in 1999, equal to a growth rate of 6.5%/ year.

Ocean Shipping Consultants Ltd. (OSC), Chertsey, U.K., forecasts offshore oil production will rise from the current 20 million b/d to about 23 million b/d by 2000 and 24.4 million b/d by 2005.

"Total forward expansion thus ap- proximates 22%," OSC said, "against an increase of just 9.2% for all world oil production."

North Sea peak

Mackay data show world oil production has increased almost 11% since 1987, while the offshore contribution has increased almost 44%.

In 1995, offshore oil production amounted to 31.2% of world oil production, its highest contribution.

Similarly, world gas production increased 15% during 1987-95, when the contribution of offshore gas increased 39%.

"Most of this growth in offshore oil and gas production has occurred in the North Sea," Mackay said, "particularly in the U.K. and Norwegian sectors."

The North Sea dominates the world's offshore industry now, accounting for 30.5% of total expenditures in 1994, but this situation is expected to change.

"We expect Asia-Pacific to overtake the North Sea as the highest spending region in 1999," Mackay said.

"The main reason is development of large gas projects, such as the Natuna LNG project off Indonesia. Total North Sea expenditure is also forecast to decline in 1998 and 1999."

Drilling outlook

OSC expects the total number of offshore wells drilled to be 2,600-2,700/year until 2005, having amounted to a little less than 2,600 last year.

In the near term, this is expected to lead to an increase in active offshore rigs, with a total 355 expected to be in service in 2000.

OSC said, "While 1995-2000 thus involves an increase of around 45 rigs, it is important to remember that the previous half decade saw a decline of 56 rigs."

There is a small number of idle rigs that could reenter the market, mainly old units that have been stacked for a long time. They will need extensive refurbishment before a return to operations.

"In the near term," OSC said, "continuance of high newbuilding prices will deter speculative rig orders until charter rates approach levels required for capital repayment.

"Nevertheless, the scale and pace of recent expansions in average day rates suggest that further significant increases could see the recent upturn in newbuilding inquiries translate into firm orders."

FPSO prospects

OSC figures show there are 38 floating production storage and offloading (FPSO) vessels in use around the world, of which nine are purpose built newbuilds.

Of 24 FPSOs currently under construction or planned, 16 are destined for use in the North Sea. Twelve are newbuildings and four are large tanker conversions.

Current plans suggest Brazil will account for 14.5% of the future world fleet of FPSOs, with a similar portion likely for West and North Africa.

Asia is expected to account for 22.5% of the planned FPSO fleet, with Australia and New Zealand accounting for a further 11%.

"Further FPSO utilization is likely in the North Sea," OSC said, "with the drive toward deeper water developments likely to fund further FPSO demand off West Africa.

"Similarly, in South America the move toward more remote deepwater fields and the experience of FPSO systems are likely to fund greater demand off Brazil.

"In the Gulf of Mexico, FPSO systems have so far not been adopted, but with new technology allowing fewer workovers of subsea wells, FPSO utilization could be witnessed in the deeper areas of the gulf within the study period."