The growth of the offshore drilling market is being driven by high demand and rising prices of crude

Wednesday 7 March 2012, Amsterdam

The study, which is an offering from the company’s Energy Research Group, provides an in-depth analysis of the global offshore drilling industry and highlights various concerns, key trends and challenges, along with major companies in the industry. The report provides forecasts for the offshore drilling industry to 2016. It also provides offshore drilling forecasts worldwide by individual region, and provides comprehensive statistics and key data such as break-up of the offshore drilling expenditure, by water depth. The report also provides in-depth statistics and details on the current offshore rig deployment scenario worldwide, by individual rig name, for every major rig type. The report also provides information on the major offshore drilling companies operating worldwide. The report is built using data and information sourced from proprietary databases, primary and secondary research, and in-house analysis by a team of industry experts.

The production from offshore regions accounts for an increasing share of the total world oil and gas production. Offshore crude oil production accounts for around 30% or more of the total global crude oil production. Also, offshore natural gas production accounts for about a quarter of the total world natural gas production.

In the recent decade, the offshore crude oil industry has witnessed consistent growth in production. The global crude oil production from offshore resources is expected to increase in the near future, mainly due to an increase in offshore production from major offshore regions worldwide, such as deepwater US Gulf of Mexico, offshore Brazil, offshore Africa. offshore India, China and Australia, and also offshore regions in the European regions. In the past decade, offshore drilling activity has picked up pace worldwide, as an increased effort to meet energy needs.

The growth of the offshore drilling market is being driven by high demand and rising prices of crude oil and natural gas. However, the global offshore drilling market experienced a temporary slowdown in 2009 as a result of relatively fewer investments by offshore exploration companies in that year, due to the global financial crisis and the subsequent fall in demand. However, the period 2012- 2016 for offshore drilling worldwide is expected to be encouraging considering aggressive offshore E&P activity expected in regions worldwide. This is a result of ambitious plans by international oil companies, national oil companies and governments worldwide to boost the search for fresh discoveries of hydrocarbons; with the predicted recovery of the industry from the financial slowdown meaning that drilling expenditure is expected to steadily rise until 2016.

Stringent Policies by Regulatory Bodies Are Expected to Better Offshore Drilling Operations With Regard to Meticulous Compliance of Environment and Safety Norms

Rigorous regulatory norms imposed on E&P companies and offshore drilling contractors by offshore regulatory bodies of governments worldwide are expected to make a positive change in terms of making the operational environment safe and environmentally sensitive in the offshore drilling industry.

The Chinese government has called for increased safety checks on all E&P activity being carried out in offshore China and has stalled the approval of environmental impact plans for new wells. Also, E&P companies in China would additionally require to re-apply for certification of new exploration and production machinery and equipment.

The subsequent rise in regulatory stringency in China could potentially mean a delayed E&P and offshore drilling activity in the region, thereby reducing hydrocarbon production considerably.

Recently in September 2011, Michael Bromwich, chief of the director of the Bureau of Ocean Energy Management, Regulation and Enforcement (USBOEMRE), stated that despite the USBOEMRE equipped with a staff deficient in size enough to handle the existing workload and an increasingly stringent and rigorous review and analysis of the fresh applications related to offshore exploration and production permits, the regulatory body was taking sufficient measures to ensure stringent safety norm related checks before making offshore drilling permits available, as well as simultaneously coping up in terms of speed with regard to providing permits for fresh exploration and drilling.

Rising Demand for Hydrocarbons Is Expected to Boost Offshore Drilling in Geographically Challenging and Remote Regions Such as the Arctic Sea

The increasing need for fresh successful discoveries of offshore reserves has been pushing the global exploration areas to the geographically challenging Arctic regions.

Recently, the oil and gas regulatory body of Canada, the National Energy Board (NEB) has been extensively reviewing safety and environmental requisites. Since 2010, NEB has been collaborating with other regulatory bodies, environmental bodies, oil and gas super majors, and scientists from the upstream oil and gas sector in an effort to understand safety, environmental, and probable technical issues to implement an effective, efficient and safe offshore technology for its exploration and production (E&P) operations in the Arctic waters.

In the near future, many exploration companies are expected to commence offshore drilling operations in the Beaufort Sea as they have purchased exploration rights in these offshore areas. For instance, Imperial Oil has planned a budget allocation of around $600 million for its drilling operations in Arctic waters. Also, currently exploratory drilling has already commenced near Denmark’s offshore areas – a fact that could boost Canadian as well as Russian interests in offshore Arctic region.

It should be noted that technology-based findings have asserted that in the event of an oil spill in offshore Arctic region, the clean-up procedure would pose significant challenges, and an extremel
low recovery of leaked hydrocarbons due to a recovery challenge in ice-filled waters could cause substantial damage to the ecosystem, besides monetary losses. Also, in the case of an oil spill in the Arctic Ocean, sub-zero temperatures which cause moving ice formations and storms and hurricanes would tend to make the clean-up process tedious.

Successful Deepwater Explorations Worldwide Resulting In Fresh Discoveries Are Expected to Boost the Offshore Drilling Activity

An observed trend is a shift towards an increase in deepwater exploration and drilling and also in geographically challenging areas such as the Arctic region, as more and more international as well as national oil companies are successfully venturing into deepwater and remote region exploration and production for finding huge oil and gas reserves.

It could also be noted that offshore technology advances encouraging deepwater and harshenvironment drilling which lead to an enhanced efficiency of offshore operations and subsequent reduction in operational costs are likely to boost ambitious plans by international oil companies and national oil companies (NOCs) to drill in remote offshore areas in the search of fresh reserves of oil and gas. For instance, deepwater Brazil, offshore West Africa, the Krishna Godavari deepwater basin located on the eastern coast of India, and the US Gulf of Mexico along with some specific basins identified in the Arctic Sea are proving to be a hotbed in terms of offshore drilling activity and expenditure, especially in deepwater and geographically challenging offshore areas. Hence, deepwater activity is expected to grow substantially in the period 2012 to 2016, considering aggressive steps by E&P companies worldwide to drill for fresh hydrocarbon reserves in deeper waters.