The global deepwater oil and gas industry is booming

Deepwater block area licensed by major oil companies Source: Restech Energy

On April 21, Portuguese oil and gas company Galp Energia said it had completed the first phase of exploration of the Mopane field offshore Namibia, which is expected to contain 10 billion barrels of oil.

Recently, international oil companies have stepped up the exploration and development of offshore oil and gas, especially deepwater oil and gas, and the global deepwater oil and gas industry has shown a vigorous development trend. In the offshore exploration hotspots of South America and Africa, these companies have discovered abundant resources and are actively developing large-scale, low-cost, low-emission oil and gas fields that are expected to deliver consistently high returns for decades to come.

Deepwater is expected to be the world's main source of oil and gas supply

In recent years, the pace of global offshore oil and gas exploration and development has been significantly accelerated, and reserves and production have increased steadily, especially in the field of deepwater (including ultra-deepwater), which has always been the place of competition for major international oil companies and has become a strategic successor area for global oil and gas resources. At the end of last year, the China Marine Energy Development Report 2023 released by the Energy Economics Research Institute of CNOOC Group estimated that in 2023, global offshore crude oil production will be about 27.6 million barrels per day, a year-on-year increase of 1.7%; Global offshore natural gas production was 1.2 trillion cubic meters, up 0.3% year-on-year. Among them, the production of ultra-deepwater oil increased by 10.6% year-on-year, and the production of ultra-deepwater natural gas increased by 15.5% year-on-year.

In the decade of the 21st century, the global oil and gas industry has undergone significant changes, with tight oil attracting significant investment and achieving significant production growth. However, as tight oil investment flattens out and production growth slows, deepwater is a key new source of supply. Rystad Energy noted in March that investment in approved deepwater oil and gas development projects worldwide reached nearly $60 billion last year, up about 40% from 2022. These projects are mainly in Guyana, Brazil and Norway, with Equinor and ExxonMobil being the main operators.

In the future, deepwater oil and gas exploration and development activities will remain active. On the investment side, Restech Energy expects capital expenditure on deepwater oil and gas drilling to jump to its highest level in more than a decade next year. According to Reuters, global capital spending on new and existing deepwater fields could surge by 30% to $130.7 billion in 2027 compared to 2023. In terms of exploration, WiseTech Energy expects about 50 more deepwater and ultra-deepwater exploration wells this year than last year. The proportion of deepwater and ultra-deepwater wells in offshore exploration wells will increase from 27% last year to about 35% this year. WiseTech Energy believes that deepwater oil and gas is expected to become a major source of global oil and gas supply in the 20s of the 21st century, due to record high project approval activity and increased investment.

As deepwater oil and gas exploration and development continues to advance, the demand for offshore rigs and drilling services is also growing. Wood Mackenzie noted in April that the supply of ultra-deepwater rigs is extremely tight, with the highest specification rigs in the hottest areas costing nearly $500,000 per day per day. The company predicts that utilization of these rigs will increase to 96% this year, up from 88% last year, and daily rates will climb to $419,000/day. In addition, the rebound in offshore drilling and continued world demand for oil and gas have helped Schlumberger (SLB), the world's largest oil service company, improve its profits in the first quarter of this year.

Namibia is catching up with deepwater exploration in South America

In recent years, South America has become one of the most favored regions for international oil companies. Among them, Guyana and Suriname have become the hottest exploration hotspots in the world because of their rich deepwater oil and gas resources and a series of major oil and gas discoveries.

In the Stabroek deepwater block offshore Guyana, ExxonMobil and its partners have discovered oil and gas resources totaling 11 billion barrels of oil equivalent. According to S&P Global, seven of the world's top 20 oil and gas discoveries since 2022 are located in the deepwater region of Guyana, with a total 2P recoverable reserves of 3.5 billion barrels of oil equivalent, accounting for nearly 22% of the total 2P recoverable reserves. With more and more oil and gas discoveries, Guyana is attracting more and more foreign energy companies to invest in the country, such as Chevron and Canada's CGX Energy.

In recent years, a series of oil and gas discoveries have been made at TotalEnergies' Block 58 and Petronas' Block 52 in Suriname. As a result, the oil and gas industry in the South Surisea Sea is expected to flourish. Following the acquisition of the Sapakara South and Krabdagu oil and gas discoveries, the reserves of Suriname's Block 58 increased by a significant 700 million barrels of oil equivalent. Some analysts believe that the oil reserves in Block 58 in the South of Suri alone could be as high as 6.5 billion barrels.

It is worth noting that Namibia is catching up with Guyana and Suriname, two deepwater oil and gas exploration hotspots. In recent years, Namibia has wow the oil and gas industry with several significant oil and gas discoveries in its offshore deepwater areas. In 2022, TotalEnergies discovered the Venus oil field in Namibia, making it the world's largest oil and gas discovery that year. This year, Namibia has made two more discoveries – TotalEnergies' Mangetti and Galp Energia's Mopane, bringing the total number of major discoveries in Namibia since 2022 to seven. Wood Mackenzie estimates that nine exploration wells in Namibia have proven 5 billion barrels of oil equivalent.

International oil companies have stepped up deepwater oil and gas exploration and development

Deepwater oil and gas resources are very abundant, and deepwater oil and gas projects generally have the advantages of low carbon emission intensity and high return on investment, which are highly valued by major international oil companies.

ExxonMobil is concentrating its efforts on the exploration and development of deepwater oil and gas offshore Guyana. On April 12, the company announced that it had made a final investment decision for the Whiptail development project offshore Guyana following government and regulatory approvals. Whiptail is ExxonMobil's sixth project in the Starbrook Block, which is expected to produce approximately 250,000 barrels of oil equivalent per day by the end of 2027.

Shell is one of the major players in deepwater oil and gas exploration and development, with a number of major projects planned for this year, particularly in Southeast Asia, Africa and the Americas. Shell is currently drilling at the ultra-deepwater Pekaka, an ultra-deepwater prospect in the SB 2W block offshore Sabah, Malaysia. Shell will also undertake exploration at the Bijak discovery in the SB X block offshore Malaysia and in the Sarawak continental shelf area of Malaysia.

BP also has deepwater exploration programs in Africa and the Americas. The company plans to drill multiple wells in Egypt, including appraisal drilling at the Raven gas field and pre-exploration drilling at the King Mariout offshore concession block in the Western Mediterranean. BP has also expanded its deepwater oil and gas business into the Santos Basin off the coast of Brazil.

Chevron and Shell are working together to plan drilling at Block 42 in the South Suribahn Sea, which contains the Walker carbonatite prospect. In addition, Chevron plans to enter Guyana's deepwater oil and gas sector through the acquisition of Hess.

In recent years, IOCs have insisted on controlling capital expenditures, but they are still investing heavily in deepwater oil and gas and are venturing into deeper waters. Santosh Kumar Budankayala, senior analyst at Restech Energy, said major international oil companies are moving into deeper waters and re-evaluating their approach to cutting-edge exploration. While they are expected to assess frontier areas and mature in the area, we expect them to continue to focus on familiar areas – areas with proven expertise and existing infrastructure that can reap the benefits quickly and with less risk.

Source of this article | China Petroleum News

Reporter | Li Xiaosong