By Wendy Laursen 2015-04-22 20:47:34
Despite imminent project delays, global deepwater expenditure is expected to increase by 69 percent to reach a total of $210 billion between 2015 and 2019. Africa forecast to experience the greatest growth.
“Africa, Latin America and North America will continue to dominate deepwater Capex, with $173bn set to be spent over the next five years, says Douglas-Westwood (DW) analyst, Balwinder Rangi. “The development of East African natural gas basins has not been aided by the plunge in Asian gas prices. However, the development of these gas basins is inevitable.”
East African deepwater activity has been increasing, following recent successes in Tanzania with discoveries such as Statoil’s Piri and BG Group’s Kamba gas discoveries. East Africa has the potential to become a major hub for natural gas as further discoveries are made, driving subsea Capex, says Mark Adeosun, DW analyst and author of DW’s World Deepwater Market Forecast 2015-2019.
This development will be aided by the expected oil price recovery. Operators are moving ahead with various development plans within the region, says Adeosun. A notable example is ENI’s decision to reach a final investment decision for the Coral FLNG development in the second half of 2015 located in Area 4 offshore Mozambique.
Anadarko is also targeting 2019 for its first gas from Area 1 offshore Mozambique.
In Mozambique, Eni made the greatest discovery in its exploration history, the Mamba complex discovered in 2011, which has a mineral potential of about 2,500 billion cubic meters of gas in place. This gives an indication of the massive reserves within the East African gas basin, says Adeosun.
Other major operators within the region include Anadarko petroleum, BG Group, and Statoil. Other international oil companies such as Exxon Mobil, Ophir Energy and Pavilon Energy have substantial stakes as well.
In releasing Douglas-Westwood’s (DW) World Deepwater Market Forecast 2015-2019, Adeosun said, “As production from mature basins onshore and in shallow water declines, development of deepwater reserves has become increasingly vital, particularly to the world’s oil majors. However, the recent oil price decline has intensified pressure on operator budgets. Consequently, numerous operators have deferred sanctioning of capital intensive developments.
“DW has identified a trough in global expenditure in 2015 and 2016 primarily driven by delays to delivery of FPS units in Latin America. We expect deepwater Capex to rise post-2016, driven by the continued development of deepwater fields off Latin America and West Africa, as well as new developments off East Africa. However, in the short-term, delays as a result of the oil price are causing significantly slower growth than was expected a year ago.”
Current, industry consensus indicates that an oil price recovery is expected in the mid-to-long term. Whilst the economic feasibility of deepwater fields varies, typically long-term oil prices of $80 per barrel would ensure the viability of the majority of developments, says Rangi, an assistant editor of the report.