According to a press release put out by Datamonitor Group on March 1, 2010, the global offshore drilling industry will stabilize this year. Although growth is unlikely to return before next year, this qualifies as good news! Independent business analyst Datamonitor says after a sharp decline in 2009, global drilling will rise 12% 2010-2014 compared with the previous five years. Global spending is forecast to rise 33% over the period, translating to a total expenditure of US $387 billion. According to Datamonitor, much of this spending can be ascribed to increased costs both as a result of more expensive well types and general inflation. Africa, which recently surpassed Western Europe in spending terms, looks set to be the boom market. Last year saw deflation in prices and delays in both shallow-water and deepwater projects. In early 2009, however, the supply/demand balance for oil had already stabilized, and by the end of the year, the decline in service rates had ceased. The low-end rig sector is still vulnerable, but the big contractors are looking at a brighter future. Datamonitor’s projections, contained in a newly-published report, point to a return to overall stability in 2010 within the industry. Nearly 18,000 offshore wells were drilled over the last five years, with numbers peaking in 2007. The forecast is of a recovery in 2010, followed by consistently rising numbers up to 2013 to total more than 20,000 wells over the five-year period. Dr Michael Smith, report author and consulting oil and gas advisor at Datamonitor, said around $291 billion was spent over the last five years on offshore drilling. “The forecast for 2010-2014 is a surge in 2011 and 2012, followed by a return to previous levels of growth, but with a small drop-off in 2014.” Since 2005 (when it overtook North America for the first time) Asia has attracted the highest volume of drilling spend. Around 60% of this occurs in Southeast Asia and the remaining is split between North Asia (primarily China) and South Asia (mainly India). Datamonitor forecasts that spending in Asia will rise 24% over the next five years, after the sharp decline in 2009. Well numbers for the whole period could increase by 9%. North America is expected to attract the second highest volume of spending over the next five years, the majority directed at the Gulf of Mexico. A rise in spending of 30% is forecast over the period 2010-2014. Africa now attracts the third highest volume of drilling spend, having just surpassed Western Europe. Nearly 75% is directed at West Africa – primarily Angola and Nigeria – while Egypt attracts most of the remainder. Spending is forecast to rise 55%, and well numbers are forecast to increase by 29%. “Africa has enjoyed rapid growth in deepwater spending, which should continue over at least the next four years, despite a slowing of exploration activity in the older deep water regions,” Smith said. “Continued high spending levels are expected as ultra-deepwater discoveries are developed and as additional countries begin to drill deep exploration wells. “The African market continues to boom for deep water services with high-specification rigs still in demand and many opportunities for a wide range of services in a wide range of countries,” Smith said. Eastern Europe and the former Soviet Union (FSU) attract only a small share of global offshore drilling expenditure, primarily due to the region’s limited offshore areas outside the Caspian Sea, Sakhalin Island, the Russian Arctic, and the Black Sea.” That said, spending is forecast to rise a substantial 74%, after an only modest decline in 2009. In Western Europe, spending is expected to rise only 5%, and well numbers are projected to fall by 8%. In the Middle East, where spending and well numbers are forecast to rise 63% and 40% respectively, the Persian Gulf region will once again become fundamental to supporting oil supply, increasing output to satisfy world demand.
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