Operators are expected to commit to developing a record number of offshore oil and gas projects over the next five years, with deepwater projects set for the most impressive growth, Rystad Energy said in a new report this week.
The energy research firm has defined in its analysis a project as ‘committed’ when more than 25 percent of its overall greenfield capital expenditure (capex) is awarded through contracts.
Offshore oil and gas development is not only set to recover from the pandemic shock to prices and demand, which forced operators to slash development expenditures and delay projects. It is set for a new record in project commitments in the five-year period to 2025, according to Rystad Energy.
Offshore oil has already started to show signs of emerging from last year’s crisis, as costs have been slashed since the previous downturn of 2015-2016. Deepwater oil breakevens have dropped to below those of U.S. shale supply, making deepwater one of the cheapest new sources of oil supply globally, Rystad Energy said last year.
In its new report this week, the energy research firm expects 592 offshore project commitments between 2021 and 2025, up from 355 projects in the 2016-2020 period and up from the 478 project commitments in the period 2011 to 2015.
Over the next five years, deepwater is set to show the most impressive growth in the number of commitments, with the number of projects rising to 181 from 106 in 2016-2020 and 115 in the five years before that, Rystad Energy has estimated.
“The search for large new fields in deep and remote waters became much more economically viable after dayrates for drilling rigs and offshore supply vessels fell in the wake of the oil price crash in 2014 and 2015. This offers significant support for companies interested in deepwater,” said Rajiv Chandrasekhar, energy service analyst at Rystad Energy.