Offshore subsea sub 50$/bbl : Rystad Energy: High stakes in store for subsea markets if oil falls to $50/bbl

[ceo_energemsier + 1,818]

Rystad Energy: High stakes in store for subsea markets if oil falls to $50/bbl

The subsea market in 2019 will experience year-on-year growth for the first time since 2014, but the positive outlook is vulnerable to any substantial decline in oil prices over the next few years.

 

 

The subsea market in 2019 will experience year-on-year growth for the first time since 2014, but the positive outlook is vulnerable to any substantial decline in oil prices over the next few years.

“We expect the subsea market to thrive during the coming years, but market growth will be at risk if the oil price falls to $50/bbl,” says Henning Bjorvik, an analyst on Rystad Energy’s oil field service team.

Development this year is essentially locked in with brownfield opportunities and already sanctioned projects—but the oil price will dictate growth moving forward.

In a $60-70/bbl oil environment, the subsea market is poised to increase about 7%/year up to 2025. But a large portion of this activity is at risk if the price of Brent crude falls to $50/bbl. The consulting firm believes prices at that level would still be enough to support 5%/year growth in the subsea market through 2022, but after that the growth rate could fall to zero.

“Although we expect the subsea market to have one of the highest growth rates within oil field services, the segment is also more vulnerable to an oil price drop than the oil field services market in general. We see significant risks in terms of subsea spending as well as growth,” Bjorvik noted.

Segments with especially high exposure to greenfield activity, such as the subsea equipment and SURF (subsea umbilicals, risers, and flowlines) segments, are at risk of having growth slashed by almost 5%/year. This stands in stark contrast to the oil field services market, which exhibits around 3%/year growth at risk over the same timeframe.

This trend is echoed when looking at spending at risk from 2019 through 2025—close to 20% of spending in the subsea equipment and SURF segments is at risk, while about 10% of general oil field services market spending is at risk should the oil price fall from our base case estimate to $50/bbl.

Spending at risk is largely dominated by floater projects globally, but in Norway is manifested in subsea tie-back projects. No fewer than 16 projects with subsea expenditure between 2019 and 2025 are at risk on the Norwegian continental shelf, 14 of which are subsea tie-back projects.

 

“It is worth mentioning that operators have had a remarkable ability to cut costs during downturns, much helped by the oil field service industry,” Bjorvik said. “Should a lower price environment again become reality, we can be assured that the industry has a proven track record of survival and ingenuity.”

[SKEP + 229]

19 hours ago, ceo_energemsier said:

Rystad Energy: High stakes in store for subsea markets if oil falls to $50/bbl

The subsea market in 2019 will experience year-on-year growth for the first time since 2014, but the positive outlook is vulnerable to any substantial decline in oil prices over the next few years.

 

 

The subsea market in 2019 will experience year-on-year growth for the first time since 2014, but the positive outlook is vulnerable to any substantial decline in oil prices over the next few years.

“We expect the subsea market to thrive during the coming years, but market growth will be at risk if the oil price falls to $50/bbl,” says Henning Bjorvik, an analyst on Rystad Energy’s oil field service team.

Development this year is essentially locked in with brownfield opportunities and already sanctioned projects—but the oil price will dictate growth moving forward.

In a $60-70/bbl oil environment, the subsea market is poised to increase about 7%/year up to 2025. But a large portion of this activity is at risk if the price of Brent crude falls to $50/bbl. The consulting firm believes prices at that level would still be enough to support 5%/year growth in the subsea market through 2022, but after that the growth rate could fall to zero.

“Although we expect the subsea market to have one of the highest growth rates within oil field services, the segment is also more vulnerable to an oil price drop than the oil field services market in general. We see significant risks in terms of subsea spending as well as growth,” Bjorvik noted.

Segments with especially high exposure to greenfield activity, such as the subsea equipment and SURF (subsea umbilicals, risers, and flowlines) segments, are at risk of having growth slashed by almost 5%/year. This stands in stark contrast to the oil field services market, which exhibits around 3%/year growth at risk over the same timeframe.

This trend is echoed when looking at spending at risk from 2019 through 2025—close to 20% of spending in the subsea equipment and SURF segments is at risk, while about 10% of general oil field services market spending is at risk should the oil price fall from our base case estimate to $50/bbl.

Spending at risk is largely dominated by floater projects globally, but in Norway is manifested in subsea tie-back projects. No fewer than 16 projects with subsea expenditure between 2019 and 2025 are at risk on the Norwegian continental shelf, 14 of which are subsea tie-back projects.

 

“It is worth mentioning that operators have had a remarkable ability to cut costs during downturns, much helped by the oil field service industry,” Bjorvik said. “Should a lower price environment again become reality, we can be assured that the industry has a proven track record of survival and ingenuity.”

Rystad needs to update their data.  Sub $50 oil would hurt producers profits as the present breakdown of the current wells in place is about $50 bbl.

 But according to Shell, Chevron, others new technology and advanced processes have reduced breakeven for offshore to sub $30 bbl. 

So investment and use of capital decisions will be based on this $30 number going forward.  

The world is entering a period of plentiful low cost energy.  

For those that don't know the Argentina Shale basin Vaca Muerta is  bigger potential than the U.S. Permian. Its just 3 to 4 years behind development of infrastructure and logistics and investment.

Notice many of the largest Permian producers are opting to invest capital in Argentina over other international opportunities. 

A large subsea well can produce for 20 years.  You have to ask yourself what will the demand for crude be in 20 years ?

 

Edited August 23, 2019 by SKEP

[Gerry Maddoux + 3,627]

Your point is a very good one: The big deep water wells are grand. It's pretty amazing what those tracts are bringing in the Gulf of Mexico. It is amusing that California is so adamant against drilling off the coast of Santa Barbara where those giant drilling platforms are. I realize fully that they had a bad spill a number of years ago, but now MBARI reports that there is a major crude oil seep in close proximity to the drilling platforms. At first, everyone said, "Uh huh! See! The damn thing is leaking again!" But this time there was zero evidence that the oil "leak" was actually a leak from a well. Instead, it was a "seep" from the ocean floor, mainly because pressure has once again built up--presumably due to subduction out in the ocean somewhere--and the over-pressurized subsea lake of oil is seeping to the surface. They say there is enough oil--easy to claim--right there to wipe out any problems that California might have with their debt, or municipalities, for some time. The only way to fix the seep? Drill another few wells to release the buildup in pressure. 

[ceo_energemsier + 1,818]

4 minutes ago, Gerry Maddoux said:

Your point is a very good one: The big deep water wells are grand. It's pretty amazing what those tracts are bringing in the Gulf of Mexico. It is amusing that California is so adamant against drilling off the coast of Santa Barbara where those giant drilling platforms are. I realize fully that they had a bad spill a number of years ago, but now MBARI reports that there is a major crude oil seep in close proximity to the drilling platforms. At first, everyone said, "Uh huh! See! The damn thing is leaking again!" But this time there was zero evidence that the oil "leak" was actually a leak from a well. Instead, it was a "seep" from the ocean floor, mainly because pressure has once again built up--presumably due to subduction out in the ocean somewhere--and the over-pressurized subsea lake of oil is seeping to the surface. They say there is enough oil--easy to claim--right there to wipe out any problems that California might have with their debt, or municipalities, for some time. The only way to fix the seep? Drill another few wells to release the buildup in pressure. 

The CA Santa Barbara oil seep has been going on for decades pre dating the platform/drilling/production activities. Tar balls used to wash ashore on the beaches.

[Douglas Buckland + 6,308]

23 hours ago, SKEP said:

Rystad needs to update their data.  Sub $50 oil would hurt producers profits as the present breakdown of the current wells in place is about $50 bbl.

 But according to Shell, Chevron, others new technology and advanced processes have reduced breakeven for offshore to sub $30 bbl. 

So investment and use of capital decisions will be based on this $30 number going forward.  

The world is entering a period of plentiful low cost energy.  

For those that don't know the Argentina Shale basin Vaca Muerta is  bigger potential than the U.S. Permian. Its just 3 to 4 years behind development of infrastructure and logistics and investment.

Notice many of the largest Permian producers are opting to invest capital in Argentina over other international opportunities. 

A large subsea well can produce for 20 years.  You have to ask yourself what will the demand for crude be in 20 years ?

 

You keep mentioning "new technology" and "advanced processes" but you never define or describe these items!

Could you please identify these 'new' processes and technologies?

[James Regan + 1,776]

43 minutes ago, Douglas Buckland said:

You keep mentioning "new technology" and "advanced processes" but you never define or describe these items!

Could you please identify these 'new' processes and technologies?

The new technology is they have managed to screw the drilling contractor out of breakeven day rates and the manufacturers of subsea trees etc, due to the USA flooding the market, simple economics.

No googling required...