Home / Oil & Energy / Oil & Companies News / Offshore likely to play increased role in energy industry recovery: Schlumberger CEO

Offshore likely to play increased role in energy industry recovery: Schlumberger CEO

Offshore markets are likely to play a growing role in the current energy industry recovery throughout the world as oil demand rises not only for more barrels from OPEC+ but from other sources, the top executive at oil services giant Schlumberger said.

The present upcycle will be “broad-based across geographies and operational environments” that include land, offshore, North America and particularly, international markets, Schlumberger CEO Olivier Le Peuch said during his company’s Q2 earnings call.
“With oil price at elevated levels, the supply response to this demand recovery is developing broadly as anticipated,” Le Peuch said. “This combination has resulted in a call on short-cycle production as well as an uptick in long-cycle projects, reflected in new FIDs [final investment decisions] and encouraging recovery in both offshore development and near-field exploration activity through the second quarter.”

Over the short term, the rebalance of supply and demand will be mostly from the release of the spare capacity that exists, he said. US oil output is 1.5 million b/d below its early-2020 peak approaching 13 million b/d, but Le Peuch said he doesn’t expect that gap to be narrowed in 2022.

As a result, incremental oil supply will pull on international markets that are deliverable short-term. “And this is why you see the return of offshore and the commitment of FID” on new projects, he said.

50 FIDs year to date

Year to date, there are already about 50 FIDs for projects both onshore and offshore, and a total of 100 are expected by end-2021 – mostly from offshore, Le Peuch said That is 50% more than in 2020.

“And the trajectory is towards 150 – another 50% increment after that,” he added. “So now going forward and expanding beyond, I would expect within the next two to three years … the international supply will create the flow of activity to reach and/or exceed the level of 2019 activity.”

Q2 represented the second consecutive quarter of international rig count growth, Le Peuch said.

Volatility since 2014 in oil markets from several rounds of price spikes and plunges over that time has shown that offshore markets are often one of the first areas to be pulled back in uncertain times.

In 2015 and 2016, some oil companies that had operated in the Gulf of Mexico, for example, temporarily (and in a few cases, permanently) shelved those operations in favor of US shale plays that delivered quicker paybacks.

But rig counts are rising offshore. The international rig count rose from 157 in Q4 2020 to 165 in April 2021 and186 in June 2021. Also, the traditional high costs and long lead times that characterized offshore operations in previous years have improved by focusing on tiebacks to existing production hubs which offer relatively quick hookups and no need to plan expensive new infrastructure construction.

Schlumberger posted offshore growth in its own business book during Q2. It received “significant” deepwater awards in its OneSubsea business line, resulting in a doubling of the booking volume versus the prior quarter, Le Peuch said.

Q2 Brazil marine activity grew

The Q2 offshore rebound was led by high single-digit deepwater activity growth, partly in Brazil, and also included a mid-teens growth in exploration and appraisal activity across Europe and the Middle East, he said.

“As we look further ahead, the conditions are set for an exceptional growth cycle in response to the call for supply in 2022 and future demand growth in subsequent years,” Le Peuch said. “This will increasingly favor international supply impacting land and offshore, short and long cycle globally.”

Echoing comments made by both peer oil services giants Halliburton and Baker Hughes in recent days, Le Peuch sees a generally upturning North American market, and an even more pronounced recovery internationally during the next 18 to 24 months.

For the third quarter, growth is expected in North America but the pace should “moderate” in US land, led by private operators and horizontal oil drilling and seasonal recovery in Canada. Internationally, “positive growth momentum” should persist through Q3 across all areas, with short-cycle activity boosted by longer-cycle project startups.

Longer-term in North America, where rig counts have already grown although still sizably below Q1 2020 levels, and spending by public E&P operators remains disciplined, the market will be “structurally smaller” in the present upcycle than in the previous one despite WTI prices exceeding pre-pandemic levels, Le Peuch said.

Internationally, investment deficits of the past couple of years that would have brought oil production to levels required by current rising demand represent a “sustained growth opportunity, particularly in the low-cost advantage basis,” he said.
Source: Platts

Recent Videos

Hellenic Shipping News Worldwide Online Daily Newspaper on Hellenic and International Shipping