Oil Price Recovery Supports Investment, with Subsea Vessel Operations and Hardware Spend Amounting to $152bn over the 2019-2023 Period
The recovery in oil prices to above $70/bbl continues to spur a new wave of offshore investment. In view of this, Westwood is forecasting a rebound in offshore activity, with subsea vessel operations and hardware expenditure expected to amount to $152bn over the 2019-2023 period. The recovery in the subsea market is evident, with the positive sentiment seen in 2017 continued into 2018. This has significantly supported project sanctioning, with the number of greenfield projects passing the final investment decision stage in 2018 increasing by 154% compared with 2016, at the low-point of the downturn. This is supported by positive macro drivers in the near and long-term, albeit the recovery remains dependent on geopolitics and OPEC.
Supply-chain conditions remain challenging, and despite the strength of free-cash flow to operators, this has not yet translated to an improved commercial environment for services and equipment. In addition to tight cost control and capital discipline, operators are also managing their risk exposure through phased developments and standardised solutions for equipment.
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Key Conclusions
- Over the forecast period, subsea hardware will account for 64% ($97.6bn) of expenditure, with subsea vessels operations accounting for the remaining 36% ($55.4bn) of forecast expenditure.
- Subsea tree installation, a key indicator of subsea activities, is forecast to grow at a 6% CAGR over the 2019-2023 period, driven by Petrobras’ investments in the Santos Basin and Equinor’s commitments to ongoing projects in the Barents Sea and North Sea.
- Over 18,482km of line pipes are expected to be installed over the forecast, amounting to $44.7bn in both material and installation costs – 29% of total expenditure over 2019-2023.
- Westwood expects a significant volume of IMR activity to return to the market, with vessel-related IMR activity expenditure forecast to amount to $21bn over 2019-2023. This represents a 25% growth compared to the 2014-2018 period.
- Subsea vessel demand days are forecast to total over 387,963 vessel days, representing a 12% growth compared to the hindcast. This will support an expected rise in vessel day rates in the latter years of the forecast, as the vessel supply-demand balance tightens due to low book-to-fleet ratio and an increase in retired vessels.
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The World Subsea Vessel Operations & Hardware Market Forecast 2019-2023 is presented using Westwood’s proprietary database, with detailed insight on both the subsea hardware and vessel day demand by vessel type in eight distinct regions. This market forecast is based on a thorough scrutiny of the data which enables the forecasts to be built on a project-by-project basis, enabling Westwood to consider various market conditions which further complement the detailed evaluation of market activity and anticipated market development.
