The first edition of the World Subsea Hardware Market Report has been launched by UK based energy business analysts Douglas-Westwood. The research forecasts 23% growth in capital expenditure compared to the last five years, with US$139 billion to be spent on subsea hardware over the 2011-2015 period.
The industry is being driven by the challenges involved in accessing new reserves. Fields are being developed in deeper waters, from increasingly-remote locations and in extreme metocean conditions. Smaller, more widely scattered reserves, which were in the past uneconomic or too technologically challenging to develop, are now benefiting from higher oil prices and more advanced subsea hardware solutions. Subsea developments continue to account for an ever increasing share of offshore activity.
Renewed upward pressure on oil prices is already starting to be seen and this is expected to continue over the long-term as the limits of conventional oil production are tested and supply struggles to meet demand. The economic downturn did undoubtedly hit some subsea projects, due to their relative complexity and the associated costs, with most operators using conservative hurdle rates to determine levels of investment. We have witnessed some moderation and reversal of the cost inflation that occurred in the years leading up to 2008.
Subsea pipeline expenditure will account for over half of all subsea Capex over the next five years. Ian Jones, analyst, commented: “Eastern Europe & FSU, Asia and the Middle East are expected to account for 78% of all pipeline expenditure, this huge market is characterised by a number of multi-billion dollar projects which are expected over the next five years – albeit this is dependent upon various political and economical factors which are likely to be dynamic.”
The ‘Golden Triangle’, namely the West African, GoM and Brazilian areas, will make up over 60% of global subsea production, SURF and processing hardware expenditure over the forecast period. Africa will remain the largest market for upstream hardware, however, looking beyond the forecast period Latin America with Brazil’s developments in the presalt Santos basin, could surpass African expenditure. North American spend will remain important, but is likely to see much less growth than Africa and Latin America while North Sea activity is forecast for a slight decline in spend.
These growth rates reflect the relative maturity of the regions. In addition, Asia and Australasia present sizeable markets. Hardware expenditure for deepwater (>500m) developments over the next five years is expected to account for over half of the total market spend and illustrates the increasing importance of deepwater reserves for the industry.
Steve Robertson, director, commented: “This study highlights the astonishing technical capability that exists within the subsea sector and puts into perspective just how capital-intensive oil and gas extraction now is for upstream E&P players. The technology that is being deployed is unlocking reserves that would previously have been impossible to access, but at a price, and as a result our study shows the sector has become a very sizable opportunity for the oilfield service and equipment community.”
