By Georgina McCartney
HOUSTON (Reuters) – As oil majors return this week to the industry’s annual showcase for offshore energy projects and equipment in Houston, deepwater discoveries in Guyana, Namibia and the U.S. Gulf Coast will take center stage.
Offshore exploration declined after the US shale boom introduced new, cheaper oil supplies, and as previous offshore cost overruns pushed deepwater projects to the industry’s back burner.
The latest deepwater projects have the attributes oil and gas companies look for: long-term production, lower break-even costs, large resource potentials and lower carbon emissions, said Pablo Medina, head of new ventures at energy consultant Welligence.
“Deepwater is back in fashion,” Medina said.
Capital spending on new deepwater drilling is expected to reach a 12-year high next year, consultancy Rystad Energy predicts. Investment in greenfield and existing deepwater fields could reach $130.7 billion in 2027, a 30% jump from 2023, he said.
“The return of offshore and deepwater operations will be a big topic at OTC, and Namibia will be the talk of the show,” said James West, senior managing director at financial firm Evercore, referring to the recent string of oil discoveries . off the west African coast.
Faster payback periods
With crude oil prices above $70 per barrel, energy producers can expect a payback from their multibillion-dollar deepwater projects in six years, a relatively short period of time considering the longer well lives compared to shale. , explained Matt Hale, vice president of supply. chain research at Rystad at the Rystad Energy Forum in Houston last month.
Deepwater resources also offer lower carbon emissions intensity than shale and other tight oils, averaging 2 kg less carbon dioxide per barrel than shale, Hale said. This appeals to investors looking for safer bets as environmental regulations become stricter.
Enthusiasm for offshore has increased with discoveries and technological advances. Namibia’s Mopane is expected to hold up to 10 billion barrels of oil, Portuguese oil company Galp Energia said last month.
Chevron and TotalEnergies have made a breakthrough in ultra-high pressure environments with their Anchor project in the Gulf of Mexico, the world’s first to operate at once-unfathomable pressures of 20,000 pounds per square inch (psi). The Anchor platform is preparing to begin production off the coast of Louisiana and, at its peak, will produce up to 75,000 barrels per day (bpd) of crude oil and will operate for 30 years.
The Stabroek block, off the coast of Guyana, has demonstrated low-cost production potential that rivals the best deepwater fields elsewhere.
Over the next six years, more than half of its recoverable resources are expected to be pumped at a break-even price of less than $30 per barrel, according to Rystad. This is comparable to the break-even point of about 80% of recoverable resources in deep waters off Norway, Rystad estimates.
Renewed interest in deepwater has boosted demand and results for offshore drilling contractors. Rates for some ships have exceeded $500,000 per day and contract lengths are increasing as ship supply dwindles.
“We are reaching this crescendo in the next 18 months or so, when the (deepwater rig) market will stabilize,” said Leslie Cook, upstream supply chain analyst at consultancy Wood Mackenzie.
(Reporting by Georgina McCartney in Houston; Editing by Sam Holmes)
