FAVERSHAM, UK – Despite the worst downturn for the offshore industry for more than a decade, there is light at the end of the tunnel, according to analyst Douglas-Westwood (DW). But it might take a while to reach it.
Offshore rig markets face more pain before the eventual recovery, DW says, due to significant oversupply. Many of the newer rigs were ordered in the previous up-cycle, but demand for drilling has tailed off.
The number of offshore oil and gas discoveries made in 2015 was down by 60% and 45%, compared to 2013 and 2014, DW says. Due to oversupply, rig rates look unlikely to recover in the short term and owners will therefore continue to defer the delivery of new units and consider scrapping of others in their fleets.
Offshore West Africa, installers have also been kept busy by new deepwater projects such as Total’s Egina field and Shell’s continued development of the Bonga field, while Petrobras remains committed to deepwater production.
However, only a few new projects have been sanctioned anywhere this year, the analyst cautions. Higher-profile examples include Statoil’s Johan Sverdrup, Shell’s Appomattox field, and BP’s Shah Deniz Phase 2 subsea development.
Although subsea installation activity is yet to bottom out, DW expects a decline of at least 15% in global subsea tree installations next year.
Most industry observers expect the supply overhang to continue well into 2016. However, there are signs that the supply/demand gap may start to narrow toward the end of next year, DW says. The latest IEA Oil Market Report forecasts an increase in oil demand of 1.2 MMb/d in 2016 while DW’s most recent drilling and production analysis highlights net additions of only 250,000 b/d.
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