U.S. Oil Price recently reported that offshore oil and gas drilling activity will grow strongly in the coming years as ongoing energy shortage conditions and tight markets in Europe reflect the massive global demand for fossil fuels.
Analysts say high-impact drilling activity is resuming after the epidemic-induced oil price crash, with oil giants recently approving more offshore oil and gas projects. While oil giants claim to be investing more in clean energy and the need to curb oil and gas production by 2030, they are still looking for significant oil and gas resources offshore. These resources will require significant capital expenditures to run, but once commissioned, offshore projects can produce oil at lower break-even prices for decades to come.
Of course, more offshore drilling would be strongly opposed by environmental groups, who want the oil giants to stop extracting oil immediately and warn that potential offshore oil and gas spills would endanger the offshore ecosystem.
Global oil demand trends will be a key factor in the profitability of future offshore oil and gas fields during the energy transition in the coming decades. Now that an unprecedented energy crisis is sweeping the world, exploration and production companies are not giving up on offshore oil and are looking to develop offshore oil and gas projects that can extract oil for years, if not decades, at a much lower cost than other types of oil and gas development projects.
Break-even prices for offshore oil and gas fields are lower than onshore
Reuters quoted the Norwegian energy consulting firm Rystad’s analysis that the break-even price of global offshore oil and gas projects is $18.1 per barrel of oil equivalent, and the break-even price of global onshore oil and gas projects already in production is $28.2 per barrel of oil equivalent. Break-even means that it is commercially viable for the asset to continue operating at a stable level of actual oil prices.
A final investment decision will be made in the near future on the world’s first deep-sea oil and gas project, the North Bay project in Newfoundland and Labrador waters led by Equinor (Norway’s Statoil), which is far from the Canadian coast, in international waters and requires Canada to pay royalties to the United Nations based on project production.
In April, the Canadian government conducted an environmental assessment of the $12 billion deep-sea oil and gas project, which is expected to produce its first barrel of crude oil by the end of the 1920s.
In addition to Equinor, bp also sees the potential of the North Bay project. While announcing its exit from the Canadian oil sands industry, the British oil giant also acquired Senovos Energy’s 35 percent stake in the North Bay project, shifting its focus to potential future offshore oil and gas growth in Canada.
Commenting on the deal in June, Sykes, bp’s senior vice president for the Gulf of Mexico and Canada, said, “This is an important step in our plan to build a more focused, resilient and competitive business in Canada. The North Gulf project will add considerable prospective and proved reserves to our existing portfolio in Newfoundland and Labrador waters.”
Number of offshore oil and gas contracts to surge in next 5 years
According to data released by Westwood Global Energy Group, overall, global offshore oil and gas engineering, procurement and construction (EPC) spending is expected to reach $276 billion from 2022 to 2026, an increase of 71% compared to the previous five years. westwood Global Energy Group said that Asia, the Middle East and Latin America will dominate these expenditures.
In addition, high-impact drilling activity is set to make a comeback, with a higher success rate of high-impact drilling so far this year compared to 2011. After a dismal 2021, which saw one of the lowest success rates ever for new oil and gas discoveries, high-impact exploration activity is back.
Rystad recently said that so far this year, exploration and production companies have discovered more than 1.7 billion barrels of oil equivalent reserves in high-impact drilling campaigns, almost four times the 4.5 billion barrels of oil equivalent discovered in 2021. So far this year, the success rate of high-impact drilling has reached 47 percent, much higher than last year’s low success rate of 28 percent.
The dramatic increase in high-impact drilling success this year is a good sign for global energy supply.