Offshore Oil Is Poised For Significant Growth

Following three painful years of portfolio repositioning, cost cuts, and deferred projects, the offshore oil and gas industry is now more prepared to deliver projects and profits at lower costs and simpler designs.   

Currently, U.S. shale is taking center stage in analyses about oil growth stories, and rightfully so — it’s growing at a much faster pace than previously expected. But cost inflation and investor pressure to prefer profits over production may slow down the pace of that growth going forward.

Meanwhile, offshore oil — which suffered from slashed investments during the downturn — is now coming back with projects that have improved economics, in some cases challenging those of U.S. shale. That’s due to the costs that major oil companies slashed after 2014, to simpler designs, and to the supermajors reshaping portfolios and projects to make as much money at $60 Brent as they were making at $100 Brent four years ago.

According to analysts at Bernstein, some 40 new offshore projects could be approved this year, a significant rise compared with 29 projects approved last year and with just 14 projects in 2016, which, according to Reuters data, was the lowest number since at least 1990. Most of the new offshore projects are also expected to be leaner and smaller and average 42,000 bpd of oil equivalents, compared to 69,000 bpd for last year’s projects, according to Bernstein.

Oil majors have already announced some impressive cost reductions in offshore projects.

Shell said las....

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