U.S. Gulf of Mexico: Transitioning Into A Bright Future

April 2013, Vol. 240 No. 4

Rita Tubb, Executive Editor

The worldwide financial crisis and subsequent recession, shale gas implications on U.S. natural gas prices and the aftermath of the Macondo incident have led to significant changes in the outlook for the U.S. Gulf of Mexico. Despite those obstacles, Quest Offshore’s latest market report, Quest Deepwater Review: Gulf of Mexico, predicts a bright future for the GOM with a pronounced recovery expected in all major market segments from drilling to subsea, floating production and marine construction.

The report’s findings also show:

Overall spending in the region is expected to increase significantly starting in 2013, up nearly 30% to $40 billion. Total expenditures are expected to reach a massive $167 billion in the 2013-2016. For the first time, 2012 is expected to represent an investment shift with deepwater expenditures surpassing that in shallow water. In the under-developed ultra-deepwater frontier areas, challenging technical and reservoir conditions will result in increased spending across the board, a trend expected to continue through the foreseeable future.

Leasing Activity
Leasing activity is rightly seen as the furthest leading indicator for prospective oil and gas activity not only in the Gulf but throughout the world. Due to the relatively long lead times between leasing, drilling and production, leasing trends can be expected to provide insight on future activity for years to come. With one-third of active deepwater leases, oil majors and national oil companies are expected to continue to be the driving force for pushing the boundaries of the GOM’s development.

Excluding Anadarko and Conoco, all recent frontier projects have been undertaken through operatorship’s of one of the majors or national oil companies(BP, Chevron, Exxon, Shell, Total, Statoil, Petrobras), and this trend is expected to persist moving forward.

Increased Drilling Permitting
Drilling permit approvals have shown noticeable increases over the past six months with total counts back to pre-Macondo levels. As of the end of September, there had been 78 new exploration drilling permits and 36 new development drilling permits approved over the year.

While raw permit counts are showing positive movement this year, the comparison in permits issued per project highlights the underlying cause for such steep increases in the first half of 2012. Multi-well projects (defined as five or more wells) have seen a record permitting pace since late 2011; examples of this trend include Chevron’s Jack/St. Malo project, Shell’s Mars B project, Hess’s Tubular Bells project, Chevron’s Big Foot and, most recently, BP’s Atlantis North development. Nevertheless, true wildcat exploration permit numbers are still well below levels seen prior to the drilling moratorium.

Deepwater Outlook
Since 2008, the U.S. Gulf has undergone a shift in project development mix from heavy in small, independent-operated subsea tiebacks to one that is grounded in fewer, larger subsea tiebacks and high-investment stand alone developments developed by international oil companies.

This shift toward fewer, larger subsea tiebacks as well as increased FPS units will have profound effects on the future of the subsea sector as the hardware installed evolves as a direct result of fewer gas developments and deeper, more challenging fields. Subsea equipment manufacturers will experience fewer, but larger scope, award opportunities through the forecast period. As these developments move into more challenging areas, the value of these subsea production packages are expected to increase significantly as HP/HT trees and subsea processing become more common.

This next wave of FPS developments is, for the most part, in ultra-deepwater and in more remote areas not connected to shallow water or onshore infrastructure. These developments will significantly impact the pipeline and marine construction markets as these production hubs are connected to existing export infrastructure through 2016 and beyond. The subsea tieback potential for these hubs is most likely to be seen in the latter half of this decade and into the following, with these latest hubs laying the foundation for the next generation of deepwater developments in the region.

Editor’s Note:
Quest Offshore’s market report, Quest Deepwater Review: Gulf of Mexico, provides a strategic overview and in-depth market analysis of the U.S. Gulf of Mexico since the Macondo incident and the drilling moratorium and, more importantly, the future of the region. The report highlights key trends in:
? Recent leasing activity
? Recovering trends in drilling permits
? Floating rig supply and forecast drilling activity
? Deepwater development profiles and trends (Hub and Spoke)
? Decommissioning and P&A market review
? Overview and market forecast by segment

Also included is a 100+ page white paper with a supporting market overview presentation in MS PowerPoint (200+ slides). The report can be purchased by contacting Quest’s Sales Manager, Josh Douglas, at josh.douglas@questoffshore.com or +1 281-491-5900.

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