Deepwater expenditure is expected to increase by 69 per cent, compared to the preceding five-year period, totalling $210 billion from 2015 to 2019, a report said.

As production from mature basins onshore and in shallow water declines, development of deepwater reserves has become increasingly vital, particularly to the world’s oil majors, explained the World Deepwater Market Forecast 2015-2019 published by Douglas-Westwood (DW), a leading provider of market research and consulting services to the energy industry.

However, the recent oil price decline has intensified pressure on operators’ budgets, the report said, noting that numerous operators have deferred sanctioning of capital intensive developments.

Africa, Latin America and North America will continue to dominate deepwater capital expenditure (capex), with $173 billion set to be spent over the next five years with Africa forecast to experience the greatest growth.

The development of East African natural gas basins has not been aided by the plunge in Asian gas prices; however, the development of these gas basins is inevitable, according to Douglas-Westwood.

The expected recovery of oil prices will spark a revival in LNG-related activities in the region towards the end of the forecast period. Latin America will, however, remain the largest market and North America is expected to experience the least growth.

In addition to the low oil price environment, building oversupply and the lack of rig demand will impact capex growth over the forecast period. In recent years, record deepwater rig demand has resulted in unprecedented levels of rig orders.

DW has identified a trough in global expenditure in 2015 and 2016 primarily driven by delays to delivery of FPS units in Latin America in the latest report.

The new report covers key commercial themes relevant to players across the value chain in the deepwater sector:

•    Supply chain – detailing the financing of deepwater developments, contractors, equipment and installations. Includes analysis of contracting strategies (e.g. frame agreements), dayrates, key players and capabilities of each sector within the deepwater market (drilling, FPS and subsea hardware).

•    Key drivers – discussion of factors encouraging deepwater activity – including robust oil & gas prices, deepwater production to offset declining production from onshore and shallow water basins, E&P spend of international operators and Petrobras’ activity in Brazil.

•    Regional forecasts – forecast capex within each region, including examples of notable projects and operators within the region and countries with most activity.

•    Component forecasts – drilling and completion (subsea and surface completed wells), subsea production hardware, SURF and trunklines.

•    Focus areas – examination of deepwater provinces, including recent discoveries in East Africa.

•    Procurement – factors affecting the decisions facing FPS operators, whether to lease or own vessels and details of major leasing contractors.

•    List of deepwater prospects – includes information on all identified prospects coming onstream from 2015 to 2019 by operator, location, water depth, number of trees and status category. – TradeArabia News Service