Drilling activity and spend will significantly increase in global deepwater markets over the next decade according to new analysis by Wood Mackenzie. The Future of Global Deepwater Markets study indicates well spend is expected to grow from US$43 billion in 2012 to US$114 billion in 2022 challenging the industry to keep up with this unprecedented growth.
Considering the deepwater sector has eclipsed that of onshore and shallow water in the last decade with respect to both discovered volumes (41 percent) and value created ($351 billion), this increase is not as surprising as previously thought. In addition, Wood Mackenzie saw a 39 percent growth in deepwater and Arctic net acreage licensed by the 20 leading deepwater players in 2012.
"Deepwater has accounted for most of the discovered volumes during this time, but this has not been without increasing technical and commercial challenges," said Malcolm Forbes-Cable, Senior Management Consultant at Wood Mackenzie and author of the study.
The study indicates global drilling activity returned to pre-Macondo highs in 2012 and forecasts bullish growth in deepwater, maintaining an overall compound annual growth rate of nine percent over the next decade. Arctic drilling will also start to pick up by the end of the decade however it will only represent three percent of the wells drilled out to 2022.
Wood Mackenzie believes the number of exploration, appraisal and development wells will increase by 150 percent – rising from 500 to 1,250 wells per year.
"To meet the forecasted well demand the fleet will require 95 additional deepwater rigs to be constructed between 2016 and 2022, representing US$65 billion of investment," explained Forbes–Cable. "This will require the longest period of deepwater rig construction to date, representing a change for the deepwater sector from cyclical to sustained growth."
Existing rig orders and new-builds required to meet demand suggest that the rig contractors will need an additional 37,000 workers over the next decade to operate the fleet. According to Wood Mackenzie, this simply cannot be met with existing personnel and the historical rate of recruitment.
This tightness in the deepwater rig market has been driven by an accelerated shift to newbuild rigs by operators in the wake of Macondo, which has set in motion increased regulation and heightened the focus on risk mitigation by the operators.
Corporate Landscape
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While the corporate landscape in deepwater and Arctic areas is becoming increasingly diverse it remains dominated by the incumbent International Oil Companies (IOC's) and a few National Oil Companies (NOC's). Growing deepwater positions underpin their growth strategies, however, the pace of development must also be balanced by a number of internal factors such as exposure to technical risk, capital allocation and budget constraints, human resources and technological capabilities.
"It's evident that major external and internal constraints must be addressed in order to deliver deepwater and Arctic sector demand," concluded Forbes–Cable. He also added that the deepwater frontier is increasingly viewed as the key driver for growth among international operators, oilfield service companies, and rig contractors.
The report touches on a number of areas it believes the industry should focus on, among them, increasingly strategic alliances between IOC’s and NOC’s, increased collaboration and partnering between the supply chain and operating companies and closer integration in training of personnel, design and development of technologies, and project implementation.
