Middle East drives offshore growth

THE OFFSHORE OIL and gas sector is set for the highest growth in a decade in the next two years, one of the leading global drivers being the sizable expansion of offshore activities in the Middle East. US$214bn of new project investments are lined up globally, according to Rystad Energy research, which shows that annual greenfield capital expenditure (capex) will break the US$100bn threshold in 2023 and in 2024 – the first breach for two straight years since 2012 and 2013.

As global fossil fuel demand remains strong and countries look for carbon-friendly production sources, offshore is back in the spotlight. Offshore activity is expected to account for 68% of all sanctioned conventional hydrocarbons in 2023 and 2024, up from 40% between 2015-2018, before the Covid-19 pandemic and related oil price crash. Offshore developments will make up almost half of all sanctioned projects in the next two years, up from just 29% from 2015-2018.

Latham added, “We expect highimpact exploration to be an important source of new resource for as long as demand remains at or near our Energy Transition Outlook (ETO) trajectory. Recent results suggest a contribution of around 5-10bn boe of new advantaged barrels a year. Most will be found within energy super basins. Exploration on this scale over the next two decades will add oil and gas supply of around 10-15mn boe a day by 2050.”

Decarbonisation technologies and biofuels could play an even bigger role. Bio-based diesel and aviation fuels from plant-based feedstock could emit 80% less carbon than the crude oil-based products that dominate today’s oil market. Wood Mackenzie projects up to 20mn bpd being possible by 2050.

“This is really a wake-up call for the industry and for the overall energy transition outlook,” said Latham. “These are avenues that help alleviate advantaged supply pressures, but it is definitely going to be an uphill struggle. We are entering an interesting period in the upstream industry. Some companies will double down and hope for less competition in the sector. However, many may begin or accelerate their exit from the sector to pursue low-carbon energies and renewables. If this is the case, security of supply may become threatened, and, unfortunately, we may see companies turning to disadvantaged resources to meet demand.” in the Middle East will surpass all others, lifted by mammoth projects in Saudi Arabia, Qatar and the UAE. The area’s offshore spending growth looks set to continue at least for the next three years, growing from US$33bn this year to US$41bn in 2025. These countries are tapping into their vast offshore resources to meet rising global oil demand, backed by the necessary capital and infrastructure to outpace other producers. In long-term forecasts, Middle Eastern growth is set to continue, if not accelerate, according to Rystad.

These new investments will be a boon for the offshore services market, with supply chain spending to grow 16% in 2023 and 2024, a decade-high year-on-year increase of US$21bn. Offshore rigs, vessels, subsea and floating production storage and offloading (FPSO) activity are all set to flourish.

For the first time, offshore upstream spending

“Offshore oil and gas production isn’t going anywhere, and the sector matters now possibly more than ever. As one of the lower carbon-intensive methods of extracting hydrocarbons, offshore operators and service companies should expect a windfall in the coming years as global superpowers try to reduce their carbon footprint while advancing the energy transition,” said Audun Martinsen, head of supply chain research with Rystad Energy.