Maritime Strategies International (MSI) has scaled back its Middle East Gulf region jackup drilling demand growth after Saudi Aramco suspended contracts for over 20 jackups. Saudi Aramco's surprise move came in the wake of the country's decision to pause further expansion of its oil production capacity. MSI now expects growth in the region to clock in at 1%, down from its previous estimate of 4%, thanks to healthy levels of activity in Qatar and the UAE as they look to meet their respective oil and gas production targets. The analyst has also revised down its charter rate growth projection for standard jackups by around 4%, adding that some rigs will still be stacked in Saudi Arabia to limit running costs and in anticipation of continued work once the suspensions are lifted. For instance, strong global demand allowed ADES to lock up three of its five jack-ups temporarily suspended by Saudi Aramco. The company inked a charter for a jack-up worth a potential US$93.3M with TotalEnergies (NYSE:TTE) for drilling work in Qatar.
Thankfully, general offshore activity in the Middle Eastern Gulf remains strong. Iran's Oil Ministry has awarded offshore contracts worth $20 billion to build 28 new platforms and install 56 compressors at the South Pars gas field in the Persian Gulf. The contracts have been awarded to Iranian companies including Petropars, OIEC, Khatam Al Anbiya Construction and Mapna Group.
Related: The Value of Norway's Oil Fund Soars to New High of $1.7 Trillion
Italy's Saipem won two contracts in Saudi Arabia to replace lateral lines at the Berri & Manifa oilfields.
Meanwhile, ADNOC has awarded NMDC Energies an EPCI contract for water injection pipelines and topside modifications on four wellhead platforms. Overall, MSI has revealed that Gulf region continues to contribute strongly to contract volumes with US$50Bn in awards during H1 2024, with capex spend in the current year on course to outstrip levels seen in 2022 and 2023
Source: Offshore-Mag.com
Global Offshore & Deepwater Boom
Over the past few years, energy investors have been betting heavily on one corner of the market: offshore oil and gas. Full year 2023 Offshore Oil & Gas Report by Clarksons Research paints a picture of a sector in the pink of health, with robust growth across the board. Global offshore oil and gas markets posted impressive growth in 2023, with the proprietary Clarksons Offshore Index that tracks rig count as well as offshore support vessels (OSV) and subsea day rates climbing 27% to a multi-year high of 106 points.
Even better for the bulls, the Clarksons Offshore Index is projected to reach an all-time high in 2024. Rig, OSV and Subsea markets are particularly robust, with oil and gas vessel rates now higher than 2014 levels in the majority of sectors/regions. Activity remains particularly strong in the Middle East, Brazil and West Africa.
Clarksons has predicted that global offshore oil and gas CAPEX will hit $125 billion in the current year. Last year, $116 billion in offshore oil and gas CAPEX reached FID (Final Investment Decision), 49% higher than the 10-year average.
Given this backdrop, it comes as little surprise that stocks of offshore oil and gas drillers and producers have been able to reverse their seven-year downturn and outperformed other oil and gas sub-sectors.
Deepwater drilling specialist Diamond Offshore Drilling Inc. (NYSE:DO) has gained 22.0% in the year-to-date; TechnipFMC Plc. (NYSE:FTI) +34.1%, Seadrill Ltd. (NYSE:SDRL) +12.3%, Valaris Ltd (NYSE:VAL) +12.5% and Oceaneering International Inc. (NYSE:OII) +19.0% have all outperformed the oil and gas benchmark Energy Select Sector SPDR Fund (NYSEARCA:XLE) which has returned 7.9% over the timeframe.
Notable offshore energy stocks that have underperformed are Transocean Ltd (NYSE:RIG) -16.2% and Noble Corp.(NYSE:NE) -5.1%. Last month, Diamond Offshore agreed to be acquired by Noble Corp. in a cash and stock deal valued at ~$1.6B, the latest move in the wave of consolidation sweeping the energy industry.
One notable trend in the ongoing offshore boom is a large increase in deepwater and ultra-deepwater drilling. Recently, the China National Petroleum Corporation (CNPC), the government-owned parent company of PetroChina, and Cnooc (OTCPK: CEOHF), kicked off ultra-deepwater exploratory drilling for oil and gas as the country looks to wean itself of foreign oil. According to the Chinese news agency Xinhua Global Service, CNPC will drill a test borehole of up to 11,000 meters (36,089 feet), the country's deepest-ever, which will help it better understand the Earth's internal structure better, as well as to test underground drilling techniques.
Last year, Norway's Aker BP (NYSE:BP) (OTCQX:AKRBF) became the latest oil major to make an ultra-deepwater discovery. At a total depth of 8,168 m, Aker BP says the well is the longest exploration well drilled in offshore Norway. The much bigger-than-expected oil discovery was made in the Yggdrasil area of the North Sea.
Preliminary estimates indicate a gross recoverable volume of 40 million-90 million barrels of oil equivalent (boe), much higher than the company's earlier projection of between 18 million and 45 million boe.
Deepwater oil and gas production is set to increase by 60% by 2030, to contribute 8% of overall upstream production, according to a new report from Wood Mackenzie, as cited by Rig Zone.
Ultra-deepwater production is set to continue growing at breakneck speed to account for half of all deepwater production by 2030.
By Alex Kimani for Oilprice.com
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Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com. More