CANTERBURY, UK – Douglas-Westwood forecasts global subsea hardware capex will total $145 billion between 2015 and 2019. This would be 27% above the preceding five-year period.
The 350 subsea tree installations in 2014 represent the highest volume of installed units on record, a trend expected to continue until 2018 when lower orders due to the current commercial environment will drive a decline in trees installed.
The crude oil price decline challenges operators of subsea developments. Subsea projects are typically among the most capital intensive and technologically challenging. As operators have focused on cash flow, the higher upfront costs of subsea developments have left them vulnerable to deferrals and cancellations. Tree orders in 2014 totaled 233, the lowest volume for a decade.
Despite these near-term concerns, the long-term fundamentals of the subsea hardware industry are strong and represent a growth story as they benefit from continued hydrocarbon demand growth, declining conventional reserves, and technological improvements, the report says.
Over the next five years, development activity in the established deepwater provinces, coupled with the start of field development in frontier areas such as the eastern Mediterranean and East Africa, will support expenditure.
Douglas-Westwood predicts subsea hardware spend will be the highest in Africa, Asia, and Latin America, with the three regions combining to form almost half of the global total. Expenditures will continue trending toward deeper waters, with around 42% of total spend in the next five years targeting projects in water depths greater than 1,000 m (3,281 ft).
Subsea production equipment, SURF, and pipelines each attract approximately one-third of all expenditures by component, with higher capacity and capability equipment a theme throughout the sector. The development of remote fields, the addition of new project phases and the tieback of satellite fields into subsea hubs continue to support SURF expenditure over the forecast period.