Even though the oilfield service market in shale is the place to be in 2017, Rystad Energy says there is clear evidence that offshore projects are still being prioritized by exploration and production (E&P) companies. <\/p>\n
In fact,for every dollar that is invested into the North American shale market in 2017, a dollar is also earmarked for the development of new offshore resources. Both sources of future production, shale and offshore, will receive around US$70 billion each of planned capital expenditures, says Rystad. <\/p>\n
In both 2014 and 2015, E&P companies looked at North America and the shale industry for where they would invest in new production capacity. In 2014,$160 billion was invested into drilling and completion of wells and $20 billion on infrastructure, while only $95 billion was committed to unlock new offshore resources. <\/p>\n
For 2015, 40% more was directed towards shale. Both 2014 and 2015 were the result of offshore projects pricing themselves out of the competition of providing oil to the market. However, with two years of cost cutting programs in the offshore value chain,2016 and 2017 are showing full competitiveness within these two sources of supply. This shows what the offshore industry has worked with during the downturn. In a time when many thought that offshore projects could not compete with shale, offshore operators managed to turn uncommercial projects into highly competitive projects with the help from service companies.Offshore projects that were uncommercial at $110\/bbl in 2013 are now commercial at an oil price of $50\/bbl. <\/p>\n
The top 10 offshore projects in 2017 make up almost 70% of all of the committed capex and it is only the best-in-class projects that will pass the decision gate in 2017.One of the key efforts has been reviving projects such as Mad Dog phase 2, Coral FLNG and Leviathan. It would be key for suppliers to be exposed to these projects, but for those that win these contracts, most of them will need to wait until 2018 before seeing increased revenues. <\/p>\n
One of the key reasons for offshore projects starting to becoming competitive again, is the strong deflation of unit prices which is actually higher for offshore than onshore. In 2016,unit prices for offshore developments have been reduced 27% from the peak in 2014 for awarded contracts. One of the key segments, which have helped the offshore cost to come down, is related to the immense pressure on dayrates for drilling rigs. Here, prices have come down more than 50%. For other segments, the cost is down more in the range of 20-30%, where subsea is on the upper end. <\/p>\n
For onshore developments, the overall deflation is 21% where well services and commodities, as well as land rigs, holds the majority share of the reduction.On top of the unit price deflation, comes efficiency gains, currency effects, and changes to design which have helped total breakeven prices to come down.However, with surging activity increase, both within shale and offshore this year, inflation will take its toll going forward. The time window of low service prices has started to shrink, but it will stay open longer for offshore activity due the longer contract durations and lead times.This will impact even more the 2018 volumes of activity and benefit service companies on their top and bottom line. <\/p>\n
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Rystad: Offshore gaining on shale - OE Digital<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" Even though the oilfield service market in shale is the place to be in 2017, Rystad Energy says there is clear evidence that offshore projects are still being prioritized by exploration and production (E&P) companies. In fact,for every dollar that is invested into the North American shale market in 2017, a dollar is also earmarked for the development of new offshore resources. Both sources of future production, shale and offshore, will receive around US$70 billion each of planned capital expenditures, says Rystad Continue reading