Deepwater Discoveries Take Center Stage as Big Oil Returns to Houston
The Resurgence of Deepwater Exploration
As Big Oil returns to Houston for its annual showcase of offshore energy projects and equipment, the spotlight is firmly on deepwater discoveries off Guyana, Namibia, and the U.S. Gulf Coast.
A Shift in Focus
Offshore exploration had taken a backseat in recent years due to the emergence of new and cheaper-to-tap oil supplies from the U.S. shale boom. Additionally, past offshore cost overruns had pushed deepwater projects onto the industry's backburner.
Deepwater Projects: A New Frontier
However, newer deepwater projects are now attracting attention from oil and gas companies for several reasons. Pablo Medina, head of new ventures at energy consultants Welligence, notes that these projects offer longer-term production, lower breakeven costs, significant resource potentials, and lower carbon emissions.
A Surge in Investment
According to consultancy Rystad Energy, capital spending on all-new deepwater drilling is expected to reach a 12-year high next year. Investment in both new and existing deepwater fields could surge to $130.7 billion in 2027, marking a 30% increase over 2023.
Faster Returns
With crude oil prices exceeding $70 a barrel, energy producers anticipate a return on their multi-billion-dollar deepwater investments in just six years. This relatively short payback period is appealing, especially considering the longer lifespan of deepwater wells compared to shale.
Environmental Appeal
Deepwater resources also boast lower carbon emissions intensity compared to shale and other tight oils. Matt Hale, vice president of supply chain research at Rystad, highlights that deepwater emits approximately 2kg less of carbon dioxide per barrel than shale, making it an attractive option for investors amid tightening environmental regulations.
Significant Discoveries
The excitement surrounding offshore exploration has been fueled by recent discoveries and technological breakthroughs. Namibia's Mopane field, estimated to hold up to 10 billion barrels of oil, has garnered attention, alongside Chevron and TotalEnergies' Anchor project in the Gulf of Mexico, which operates at ultra-high pressure environments.
The Promise of Low-Cost Production
The Stabroek block off the coast of Guyana has demonstrated the potential for low-cost production that rivals the best deepwater fields elsewhere. With over half of its recoverable resources expected to pump at a breakeven price of less than $30 per barrel, the prospects for deepwater exploration are promising.
Implications for Offshore Contractors
The renewed interest in deepwater exploration has led to increased demand and improved results for offshore drilling contractors. Rates for vessels have surpassed $500,000 a day, and contract durations are extending as vessel supply becomes scarce.
Looking Ahead
As the deepwater rig market approaches equilibrium over the next 18 months, the industry is poised for further growth and innovation in offshore exploration and production.
