Lucien Joppen - 22 October 2020
Offshore oil & gas production are here to stay for the next decades. McKinsey, for example, expects the oil & gas supply to continue to rely on offshore sources, and using a conservative model for growth, anticipates that companies will add some 40 MMb/d of new crude production in the next ten years. As for offshore gas production, DNV GL believes that production will peak around 2030, then gradually decline between 2031 and 2050.
Meanwhile, new offshore discoveries and project sites are still being developed. The International Energy Agency notes the potential of African offshore sources for the global supply of oil & gas, recognizing the largest growth in the offshore industry in the Middle East.
In the short term, price developments will determine whether offshore projects will be put on hold or will continue. Admittedly, costs have been reduced for development and production in the offshore sector thanks to more efficient exploration and extraction technologies. However, the uncertainties in the markets caused by COVID-19 and associated risks have made the industry cautious.
For the mid-term (the next ten-to-twenty years), industry analysts are largely optimistic for offshore oil & gas, despite a current slump in the sectors. Certainly, as research and innovation continues within these industries, greater efficiencies will allow oil & gas companies to more effectively utilize their existing assets, while, at the same time, potentially extending the lifetime of new discoveries.
Ultimately, in the longer term (2050 and beyond), the demand for oil & gas (onshore and offshore) will be impacted more significantly. This demand also depends on the geography. For example, in Europe, the EU and most governments are actively stimulating an energy transition away from fossil fuels and towards renewable energy. Although this transition is taking place at a slower rate than expected, the energy landscape will definitely change. The International Energy Agency reports that “prospects for offshore oil & gas have been shaken by lower prices, and that the sectors must cope with longer-term uncertainties in connection with demand.” For the offshore sector, the blows to oil prices and demand have been strongly felt as offshore exploration and extraction requires more upfront investment and a longer period before returns can be expected. During times of lower demand and lower prices, the offshore sector is more vulnerable to stagnation.
Offshore wind energy could be a viable alternative. The IEA records that “the promise of cost-competitive offshore wind in Europe’s North Sea could spark a virtuous circle of accelerated deployment and technology learning elsewhere,” but uncertainties about cost competitiveness still leave room for doubt. Nonetheless, offshore wind is a growth area that many see as a necessary step for the offshore sector, with the aforementioned environmental pressures pushing companies towards renewables.
In the September-issue of Valve World magazine, Valve World team member Daniel Sweet has written an interesting feature article on offshore development. We also have an exclusive interview with Karan Sotoodeh (Baker Hughes) on an offshore megaproject at the Johan Sverdrup. Karan will present at the Valve World Conference 2020 <link to https://www.valve-world.net/vw2020/
> and focus on various aspects of the three 70tn valves that have been installed.