FUTURE OIL AND GAS NEEDS

According to the International Energy Agency, world demand for oil will reach 116 million barrels in 2030, up 37 per cent from 2006. Top executives in Total and ConocoPhilips have commented that this seems impossible, while ExxonMobil feels that it is possible, provided the companies get access to the major reserves in the Middle East and Russia. British Petroleum maintains the solution is to increase the recovery rate in producing fields substantially from today's global mean of roughly 30 per cent. A higher recovery rate is the only factor the oil companies can influence through the development of ever better technologies.

Today's high oil price of approx. USD 90/barrel is ascribable to the fact that world has almost no available production capacity. Higher investments have entailed a lack of almost all factor inputs in the supplier chain, resulting in significant cost increases. International oil companies are now spending approx. USD 60/barrel when planning the development of new fields, compared with approx. USD 20/barrel three years ago. They see declining oil production at the same time as reserves are being depleted despite significant financial profits.

Trends in offshore oil and gas

One-third of the world's oil production takes place offshore. This is expected to be stable up to 2020, but a growing percentage of offshore production will be from deepwater fields. National oil companies now have the financial wherewithal to develop their own resources onshore and on the continental shelves, leaving the private sector oil companies to concentrate on deepwater fields. Eleven major listed oil companies operate more than 80 per cent of all oil production in deep water and in the North Sea. These companies are the most important customers for suppliers that focus on high-tech products.

At year-end 2005, an estimated 500 bn barrels had been discovered offshore, of which 200 bn barrels have since been produced. Geologists assume that another 400 bn barrels will be found, of which 300 bn at depths of more than 400 metres or in Arctic areas. Since fewer than 10 bn barrels have been produced in deep water, Offshore Research is of the opinion that we are at an early stage of development.

In future, the challenge will be to develop large fields in deep water, as well as smaller fields based on clean subsea solutions, all at great water depths. The distance from subsea fields to processing facilities on existing platforms or onshore facilities is increasingly steadily. Norway is among the countries that obtain the highest recovery rate for oil, and the goal in recent years has been to boost recovery from 40 to 55 per cent. This will call for new technologies, including remote control and the automation of fields in operation to reduce operating expenses and extend economic life.

Market prospects for the supply industry

The supply industry has experienced rising prices on its products and services to the oil companies. They are now running at almost full utilisation of all resources, but the supply industry is in the process of developing considerable new capacity.

Offshore Research believes that more drilling rigs should be ordered to accommodate planned growth in subsea production wells. Floating rig capacity will be a bottleneck for drilling activities up to at least 2012.

The market for subsea vessels has shown continuous growth since 1990. This is because pipelines and increasingly more production equipment are being installed on the seabed. Demand and fleet capacity appear to be growing by 15 per cent per year, so today's good market situation appears to be continuing.

The demand for large supply vessels is expected to increase by five to seven per cent annually in the years ahead, while the existing backlog of orders will entail capacity growth of 15 per cent per year. Hence Offshore Research expects surplus capacity and declining rates in the years ahead.

There is considerable potential value inherent in obtaining a higher success rate when drilling exploration wells and enhancing recovery from producing fields. Seismic is an important contributor and the market prospects appear to be good. Visibility is nevertheless poor as this sector is at the top of the value chain.

Generally, we expect a growing market for solutions that facilitate automation and remote control of offshore fields, and those which improve safety for personnel and the environment.