Over the next two years, led by the Middle East and South America, a resurgent offshore sector is poised to reach its highest level of activity in more than a decade.
That’s right: the Middle East.
With so much happening around the world, the energy industry will need to play catch-up to prepare for future growth.
This year’s Offshore Technology Conference, May 1-4 in Houston, reflects the swell of increased commitments. The OTC program includes several sessions on new and emerging offshore areas and a look at the revival of – and potential future of – deepwater exploration and production.
“One of the leading global drivers is the sizable expansion of offshore activities in the Middle East. For the first time, offshore upstream spending in the region will surpass all others, lifted by mammoth projects in Saudi Arabia, Qatar and the UAE,” energy research and intelligence firm Rystad Energy reported in March.
Rystad projected that offshore E&P spending in the region will climb from U.S. $33 billion this year to $41 billion in 2025. By comparison, it forecast Brazilian upstream spending to approach $23 billion this year and Norwegian investments to total $21.4 billion.
Overall, $214 billion of new offshore project investments are already lined up and annual greenfield capital expenditure will exceed $100 billion in both 2023 and in 2024, Rystad reported.
Major Projects
A natural gas-targeted drilling push offshore Lebanon led by TotalEnergies will be one of the most closely watched upcoming efforts. Licenses in the area were approved in 2017 but a maritime border dispute with Israel delayed activity on two blocks, until a deal was worked out last year.
Along with venture partner Eni, TotalEnergies completed the transfer of a 30-percent interest in exploration Blocks 4 and 9 to QatarEnergy in January.
“The recent delineation of Lebanon’s maritime border with Israel has created a new momentum for the exploration of its hydrocarbon potential. Along with our partners, we are committed to drilling as soon as possible in 2023 an exploration well in Block 9,” said Patrick Pouyanné, TotalEnergies CEO.
Logistical Implications and Challenges
Global growth of offshore work plus a significant build-out of offshore wind infrastructure will stress parts of the supply chain, said Audun Martinsen, head of supply chain research for Rystad.
“Labor is already a challenge and finding skilled labor towards 2025 will be increasingly difficult. Here we expect a massive jump in salaries due to inflation and general tightness for energy trades,” Martinsen said.
“On top of that, we do see that we are already close to max utilization for drilling rigs, SURF (subsea umbilicals/risers/flowlines) lines, and certain installation vessels, which means we need to invest in new capacity before we can grow much more,” he added.
In the Middle East, “the challenge will be to secure enough capacity for installation work for the offshore projects, but also enough OCTG (oil country tubular goods) and linepipe for the offshore and onshore developments. The sour-field development of Hail and Ghasha (offshore Abu Dhabi) is vacuuming the global market for spare capacity for specialized alloys,” Martinsen noted.
Deepwater Developments
The OTC session “Delivering Deepwater Solutions to Meet the World’s Energy Needs” on May 1 will be moderated by Sandeep Khurana, head adviser-vice president for Ryder Scott Company. Session speaker is J. Hunter Farris, senior vice president of deepwater for ExxonMobil Upstream.
“Deepwater is a story of technical challenges industry took willingly to serve the world’s energy needs. It is daunting, but the quest to serve and given ‘failure is not an option’ makes this journey remarkable,” Khurana said.
“The industry leader, ExxonMobil, took this journey over decades and has adhered to the commitment to serve energy needs,” he observed.
Khurana noted that ExxonMobil has progressed from now-established deepwater development in West African countries to its latest fast-paced Guyana discoveries.
“And needless to say, behind ExxonMobil is commitment of their people, who went to these countries working closely with local governments, bringing new technology and, eventually, energy freedom. It is not over, as commitment to making it sustainable continues,” he said.
“Deepwater’s Role in the Energy Transition Journey,” a May 3 OTC session, will be moderated by Huyen Bui, senior geophysicist for Shell, and Kerry Fellers, director of business development at Petrolern LLC.
“The panelists will share their company vision on the role of deepwater in energy transition, collocation of oil and gas and energy. They’ll also share their view of painting the supplying-demand picture to support deepwater and how to bring out people from poverty,” Bui said.
In addition, panel members will discuss “technology to support deepwater and to lower emissions in deepwater business, CCUS and renewables,” he said.
Future deepwater drilling includes Equinor’s Argerich project offshore Argentina, another well drawing close industry scrutiny. The prospect lies about 300 kilometers off the coast of Mar del Plata in the Argentine Basin.
Conjugate margin geology here is thought to be an analogue to Namibia’s offshore Orange Basin, where Shell (Graff-1) and TotalEnergies (Venus 1-X) recoded separate successful wells last year. Partners Shell, QatarEnergy and Namibian state-owned oil company NAMCOR reported a third oil find in March with the deepwater Jonker-1X.
Offshore Projects Dominate E&P Budgets
The May 2 morning OTC session “The Evolving Offshore Frontiers” will offer a broader view of offshore potential around the world. Session moderator is Kenneth Medlock III, senior director of the Center for Energy Studies at Rice University.
“The general idea is to elevate the conversation about the offshore E&P opportunity. As such, the discussion will highlight new and emerging opportunities, with a particular focus on Latin America,” Medlock said.
“The opportunities in Brazil and Guyana, for example, are providing each region with new importance in the global supply portfolio as well as tremendous wealth-creation opportunities,” he noted.
Based on initial discussions, Medlock said, the session will likely highlight the advantages of offshore production in terms of scale, capital efficiency and low carbon intensity, “and these points will be leveraged to speak about both existing and potential new opportunities.”
Offshore activity will account for 68 percent of the industry’s sanctioned conventional E&P budget in 2023 and 2024, up from 40 percent between 2015-18, according to Rystad Energy. Offshore makes up about half of planned upstream projects – but because it’s more capital intensive, it represents more than two-thirds of spending.
S&P Global’s list of offshore wells to watch in 2023 covers a staggering number of potential high-impact wells. Those include the Walker prospect offshore Suriname and Lukoil’s already drilling Zhenis well off Kazakhstan.
“Offshore oil and gas production isn’t going anywhere, and the sector matters now possibly more than ever,” said Martinsen.
“As one of the lower carbon-intensive methods of extracting hydrocarbons, offshore operators and service companies should expect a windfall in the coming years as global superpowers try to reduce their carbon footprint while advancing the energy transition,” he said.