Rystad on the future of offshore NW Europe…

Really good article and graph from Rystad Energy on the future of NW Europe and the size of reserves and output of the region but highlighting the challenges to production through a lack of exploration activity. It is very hard to disagree with this conclusion:

Northwest Europe, as one of the leading offshore regions globally and with OECD exposure, should therefore expect to see continued capital and resource allocation as along as the projects are competitive. Given the wide array of commercially very robust projects in the region, the expectations are towards a new development boom. However, poor exploration results over the last four years have not filled the project portfolio, potentially creating declining activity past 2020. [Emphasis added].

Rystad make a good point about resource availability and is something I have mentioned here under the #shalenarrative. E&P companies don’t always make capital allocation decisions on a strictly rational basis. The one area I think Rystad could help clarify (given their database) it looks intuitively to me like the bigger E&P companies are divesting smaller offshore areas in favour of larger projects. Statoil announced an increased stake in Roncador (Brazil) today and all the West of Shetland work is harsh environment/ high capex/high flow rate investments.

As an example Subsea 7/ Aker Solutions have won the Skogul tie-back to North Alvheim. These are large contracts, technically complex (pipe-in-pipe) with umbilicals, risers etc. Again it highlights to me that the project work that is going ahead favours larger contractors. In this case case the Aker BP/Aker solutions link was vital: but that is the point that all are large companies and Aker has been actively continuing exploratory and production drilling. It is the smaller E&P companies who have pulled this work back disproportionately.  Those who think there will be a linear increase in offshore work with a rise in the oil price I fear will be disappointed.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s