STAVANGER, Norway -- Deepwater oil and gas will continue to be a long-term growth sector. John Westwood, president of Douglas-Westwood, made this pronouncement at the closing session of the Deep Offshore Technology Conference and Exhibition in Stavanger, Norway, on Friday, Oct. 12.
Westwood began his talk with an assessment of supply and the growing need for hydrocarbons. "Population growth across the world is driving oil demand," Westwood said. Since the late 1960s, oil demand has increased by 268% and gas by 435%. Oil prices are high, he said, and production is declining. "It is the developing world that is driving this growth." The oil crunch that is predicted over the next five years could push demand to 95.8 MMb/d by 2012. "We are now about to enter a new era of deficit," Westwood said. "Where the oil will come from, I don't know."
Today and for the foreseeable future, "The serious prospects are in deepwater," Westwood said. This news is not good news for the North Sea, which Westwood says is "going down the ski slope of production decline." Opportunities for growth in Norway exist, "but they are in extreme conditions."
Westwood predicts that Russia might well be a major source of hydrocarbons going forward. "St. Petersburg was the first Russian Revolution," Westwood said, "Gazprom is the second." With approximately 16% of the world's gas reserves, Gazprom is a giant aware of its power, he said.
The long-term growth for the industry is assured according to Westwood, who predicted capex/opex growth will reach $270 billion by 2012. Subsea spending will reach $41 billion between 2007 and 2011, a 25% growth, Westwood said. West Africa will lead in subsea growth, with a large amount of the expenditure going to Southeast Asia.
One limiting factor for exploration and production, Westwood said, is the shortfall in rigs, particularly 5th and 6th generation semisubmersibles. Although 25 new floaters will become available in the next few years, the rigs alone will not fill the need because a second critical limitation is personnel. Westwood estimates that as many as 20,000 people will be needed to man the new rigs.
Westwood discussed the role that will be played by new frontiers, made up primarily of arctic areas, which hold 160-300 Bboe in reserves. Because the artic is not under the jurisdiction of any individual nation, the move toward arctic exploration has set in motion what Westwood called, "the great deepwater land grab."
Although Canada, the US, Norway, Denmark, and Russia have some claim to the arctic region, Westwood predicts that when the dust settles, Russia will control 60% of the acreage. And the Russians will need partners. Development will require "huge investments" and will present "huge challenges," Westwood said.
"The arctic and deepwater are the world's greatest offshore challenge," Westwood concluded. "Enjoy it!"
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