The Future Remains Bright for Offshore Oil and Gas, Rystad Says

In a rapidly changing landscape, offshore production continues to play a role that is fundamental to the global energy supply. And although the road ahead is likely to be rocky, it is not impassable.

The key, according to Rob Cordray, managing director for the Americas at Rystad Energy, is to understand the challenges in order to identify the opportunities. Cordray discussed market conditions at the Offshore Technology Conference (OTC) on May 5 with Neil Kavanagh, former chief scientist at Woodside Energy and a member of OTC’s board of directors.

In examining how the energy system works, Cordray said, it is important to understand what is driving industry performance.

Diversity—as well as abundance—of energy supply are of paramount significance. “It is important to have as much as we can of all that we can,” he said.

Also of importance is to recognize that oil and gas will be “an essential part of [the] energy mix for some time to come,” he said, pointing out that offshore production makes up approximately 30% of the oil (28.4 MMbbl/day) and gas (115 Bcfd) produced in the world today.

“Oil and gas are needed now and will be necessary going forward regardless of the energy scenario,” he said.

Finally, investment in alternative energy sources will continue.

“The energy transition remains relevant,” Cordray said. Although the focus of individual governments might change, and investment could rise or fall, the movement to advance technologies that improve renewable resource development will continue.

“This genie is not going back into the bottle,” he said.

Challenges in deep water

Cordray explained that global growth in demand is driven by increasing demand in developing countries, and optimization and efficiency gains in developed countries.

Rystad analysts expect deepwater development to contribute significantly to meeting global energy needs, but they understand that deepwater projects pose challenges, one of which is the time between making investment decisions and achieving first oil.

“Given the lead times, you can’t just stop doing things,” Cordray said. “We can’t have holes in development portfolios. We need constant new acreage coming in.”

With solid assets in hand, the rule of thumb in simple economic terms is to develop deepwater when prices are lower and produce when prices are higher. Unfortunately, he said, “You can’t always time that.” The long lead times for developments in deep water complicate matters. “It’s easier to adjust when you’re buying six months ahead rather than six years ahead,” he said. “There’s going to be some pain as we move forward.”

Despite these hurdles, significant deepwater discoveries will continue to be developed, Cordray said.

International opportunities

Developments are taking off in areas like Brazil, where plenty of hydrocarbons have been found and plenty remain to be found, he said. In northern South America, developments are progressing with the sanctioning of Block 58 offshore Suriname and ongoing investment in the prolific Stabroek block offshore Guyana. And south of Brazil, changes in laws in Argentina have created more certainty around big infrastructure projects, which include LNG exports, he said.

There also is significant activity in West Africa, where Block 17 continues to be a cornerstone of Angolan offshore production, and further south in Namibia, where the Venus and Graff discoveries have opened a new frontier.

Navigating through constraints

Cordray made clear that he did not want politics to encumber his discussion, but he did field questions from the audience about how the Trump administration’s policies will impact deepwater development in the U.S.

“It’s hard not to get behind a cheaper, abundant energy-for-all sort of policy, but how we get there will be debatable,” he said. One critical question, he said, is “Will all the things the administration is doing now get us there?”

The Gulf of Mexico, a global leader in deepwater exploration and in the application of new technologies, could certainly be impacted by the current uncertainties, Cordray said. “Without going into the tariff rabbit hole, there is a need to consider the complexity of deepwater projects.”

A global supply chain is in place because offshore exploration is a global business, he said. “Pieces of kit for the entire supply chain come from all over the world, and it is hard to blow that up overnight. We are really good at making some things, but there are a lot of things other countries are really good at making.”

Cordray, who described himself as an “eternal optimist,” said he hopes cooler heads will prevail but believes the dynamic conditions the industry is facing are not all bad. “All this disruption is also an opportunity,” he said.

“We are in a room full of some of the smartest people on planet earth,” Cordray said, pointing to technology advances that have led to the development of equipment capable of working in conditions of 20 kilopounds per square inch, which enables production in fields that could not be developed a few years ago. “We can engineer our way out of this, too, but things have to get a little more steady-state for us to do this,” he said. “Right now, there are too many moving parts to make any exact call.”

In Rystad’s view, the current administration has limited time to demonstrate “improvement in the trajectory of cost” to American voters. “We as an industry—and the current administration—have to deliver within the next 18 months,” he said. “There has got to be a sign that things are going to get better for everyone.”

That is the time between and the mid-term elections in 2026, when all 435 seats it the U.S. House of Representatives and 33 seats in the Senate will be up for election. Depending on the outcome of the vote, the balance in Congress could shift, and that change could impact decision-making.

On the positive side, Cordray said, this seems to be a “nimble and flexible” government, and it is likely that if something being done now is not working, the government will adjust.