Quest Offshore anticipates a reasonably buoyant market for subsea trees during 2009. Indeed, the Houston-based analyst is forecasting a 12.1% compound annual growth rate over the next five years. This compares with 3.6% over the prior five years.
Quest says this ongoing demand continues to be driven by projects in the “golden triangle”: US Gulf of Mexico (GoM), West Africa and Brazil. During the first half this year, Petrobras is expected to award the largest subsea tender in history, with 300 subsea trees and associated manifolds and hardware, and Quest suggests that more of the same is likely.
But with oil prices hovering around $30-40 per barrel for much of January through mid-March, Quest acknowledges that the industry “remains unsure as to what the future holds”, but that consensus remains that the subsea sector will remain relatively unaffected longer-term, with large projects remaining on the books and cash-rich operators poised to continue development activity in the current environment.
Quest says that, according to recent reports from both operators and contractors, there seems to be a consensus opinion that most deepwater projects are economically feasible in the $60-65 per barrel range. Its opinion of continued strong demand for field development execution plans hinges on a long-term view of the market and its sound underlying fundamentals.
It acknowledges that, despite the buoyant long-term outlook, operators are nervous and keen to drive down supply-chain pricing.
“Many super-majors have stated a desire to reduce costs to a ‘more balanced’ level. This may very well result in oil companies delaying final investment decisions on future projects until such a time as prices for equipment and services are considered to be ‘more balanced’.”
A key characteristic of the newest crop of deep and ultra-deepwater projects is a more consistent demand for one or more components of subsea processing, says Quest. It notes that, whether it is the heavy oil of Brazil or the ultra-deep water of lower tertiary plays in the US Gulf, subsea pumping is a necessity for these projects.
“With respect to major West Africa projects and, to some extent, the North Sea, subsea separation is becoming a viable option to replace costly topside separation equipment.
“FMC Technologies, which currently has five subsea processing projects under its belt, anticipates targeting 12-14 additional subsea processing jobs within the next four years.”
Given that an average separation system costs in the range $100-200million, the potential revenues from this growing market niche could have a large impact for any supplier.
Quest also points out that the expected continuation of global demand moves beyond subsea into all markets involved in the larger deepwater arena. Its analysts point out that the deepwater drilling market acts as both a long-lead indicator on behalf of the exploration work it performs as well as a near-term indicator of projects currently being executed.
Moreover, Quest said towards the end of last year that Petrobras was still expected to go to market with the first two of four deepwater MODU packages in 2009, each containing seven rigs.
Quest also claims that, even at $60 oil, the drilling market in general does not currently see an adverse effect on the demand for deepwater drilling units and day rates.
Indeed, in most cases, it seems that contractors still expect demand to eclipse supply in the near future.
Quest remains bullish towards floating production systems demand over the next several years, with Petrobras in Brazil and super-majors in both West Africa and the lower tertiary of the GoM driving their major project plans forward.
Recommended for you
