Deepwater oil and gas production set to grow 60 percent by 2030 hitting 17 million BOE/D
Energize Weekly, December 7, 2022
Deepwater oil and gas production is set to increase more than 60 percent between 2022 and 2030, reaching 17 million barrels oil equivalent per day (BOE/D) – equal to 8 percent of all global production, according to a report by consultant Wood Mackenzie.
The growth will focus on new emerging regions and away from traditional offshore areas, such as the U.S. Gulf Coast and Angola.
“Deepwater is the fastest growing oil and gas resource theme,” Marcelo de Assis, director of upstream research for Wood Mackenzie, said in a statement. “Brazil, Guyana and Mozambique are the main growth drivers.”
“Developments are also getting deeper; production from water depths of over 1,500 meters will surpass that from 400 to 1,500 meters by 2024,” de Assis said.
In 1990, offshore production was just 300,000 BOE/D. This year, it is expected to reach 10.4 BOE/D, equal to 6 percent of all global production.
Brazil is the leading deepwater producer, providing about 30 percent of global capacity, and it is expected to continue to grow, Wood Mackenzie said.
The newest play off the coast of Guyana is currently being developed by ExxonMobil. It is projected to produce one million BOE/D in the next five years. In all, deepwater development is being conducted off the coasts of 14 countries.
“Despite the diversification of sources, and of corporate participants, control over major deepwater projects sits in the hands of relatively few companies,” Wood Mackenzie said. “Just eight companies account for 65 percent of deepwater production and 67 percent of the remaining project value.
Brazilian Petróleo Brasileiro, or Petrobras, and the seven international major oil producers are operating 22 of the 25 deepwater assets, with Petrobras dominating.
Petrobras’ deepwater portfolio is about twice as large as the next nearest operator, Shell, which is the top major for production and cash flow. ExxonMobil and TotalEnergies posted the highest growth rates this decade.
“The future of the deepwater sector remains in their hands of the majors and Brazil’s Petrobras for the foreseeable future,” de Assis said.
Deepwater commercial development is focused on only the best plays, and as a result, wells tend to be highly productive yielding huge volumes of oil and gas from a single well. This translates into high economic returns and low air emission intensity compared to other oil and gas resources, Wood Mackenzie said.
There is a range of investment opportunities in the sector, with average investment returns in Wood Mackenzie’s global database of deepwater development projects at 24 percent, with oil at $60 a barrel for Brent crude.
“The best returns are generated by smaller oil fields which can be tied back to nearby infrastructure,” Wood Mackenzie said. “The lowest are long lead-time gas supply projects.”
Two challenges facing the sector are supply chain limitations and inflation. Oil service companies have made huge fleet reductions for key equipment, such as floating rigs, since a 2010 peak. “With activity levels growing, equipment and services availability will be a constraint,” Wood Mackenzie said.
The result of supply chain constraints will be increased lead times and unit costs “across the board.”
As for inflationary impacts, in some regions deepwater rig costs have doubled compared to 2021 rates. “Cost inflation will continue to risk project economics as higher utilization combines with higher commodity prices,” Wood Mackenzie said.
Operations in the U.S. Gulf of Mexico and Brazil have been hardest hit by increased costs.
Still, de Assis said, “the characteristics of deepwater makes it an attractive hunting ground for those seeking advantaged resources. Deepwater economics and emissions intensity metrics are among the best in the industry.”
