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Deepwater Exploration & Production (E&P) activity is driven by a variety of supply-side and demand-side factors:
* The potential for world-class (multibillion barrel) discoveries;
* The lack of new opportunities onshore or in shallow waters and the need to offset decline from existing reservoirs;
* New technological advances that improve technical and economic feasibility of deepwater developments.
In recent years, the world has witnessed oil price shocks driven by situations where supplies have become very tight as spare capacity is absorbed by growing demand for energy across the world. Future projections of oil supply and demand suggest that this situation is likely to be repeated again.
Energy is becoming more expensive as the resources we extract become more technically demanding and intensive to access. Ultimately, a future peak in world oil supply is inevitable; the only question remaining is the date that this will happen. The implication of this supply scenario for the global energy markets is that we will expect to see a sustained increase in oil prices as supplies tighten in the run-up to the peak year. This will impact on deepwater developments to the extent that they will become more economically viable as the oil price rises. Developments that were marginal at $60/bbl will undoubtedly be more vigorously pursued in an environment where the long-term expectations of oil price are $80/bbl and upwards.
For oil companies the overall outlook for 2011 is positive, with Barclays Capital estimating that worldwide E&P budgets will increase by 11%. The longer-term outlook indicates that subsea - predominately deepwater - developments will continue to play a major part in the portfolios of the majors 10Cs (such as Total, Shell, BP and Exxon) and some NOCs (such as Petrobras and Statoil).
REGIONAL UPDATES: AFRICA
One of the key regions of the deepwater "Golden triangle," Africa is currently the largest center of deepwater capital expenditure. Most of the major deepwater developments in this region are located off Angola and Nigeria. Notable exceptions include NEMED (Egypt), Jubilee (Ghana) and Aseng (Equatorial Guinea).
Angola - The country has, in recent years, had a reputation as a "deepwater tiger," with its output at 1.8 million bpd in 2010. Major projects that have recently come onstream in Angola include Camelia and Greater Plutonio,...