After last year’s lowest spending on new field developments in 30 years, the offshore oil and gas sector is set to significantly increase capital expenditures this year to around US$44 billion, according to Westwood Global Energy Group.
Offshore upstream oil and gas spending is expected to surge to around US$44 billion this year, compared to just US$12.3 billion worth of engineering, procurement, and construction (EPC) contracts awarded in 2020. In 2019, before the pandemic hit oil demand and prices, the EPC contracts in the offshore oil and gas industry were around US$40 billion.
“In 2021, we will see a significant uptick in activity,” Thom Payne, Head of Offshore at Westwood Global Energy Group said at Riviera Maritime Media’s Annual Offshore Support Journal virtual conference and exhibition on Wednesday.
Most of this year’s capital expenditure and the biggest EPC contracts will go to major natural gas projects offshore Australia and Deepwater oil project developments offshore South America.
The major increase in 2021, part of which will come from the deferred spend in 2020, will also help the offshore rig and support vessel markets this year, Payne said at the conference.
Last month, Payne wrote in an analysis that offshore investment is set for a rapid rebound this year, driven by deferred projects from 2020 and a “resurgent Petrobras.”
Last year, offshore investment slumped to the lowest in more than 30 years as companies slashed capex by 30 percent on average and postponed or stalled as much as US$54 billion of 2020 offshore EPC contract awards, Payne said.
Offshore oil has already started to show signs of emerging from last year’s crisis, as costs have been slashed since the previous downturn of 2015-2016. Deepwater oil breakeven have dropped to below those of U.S. shale supply, making deepwater one of the cheapest new sources of oil supply globally, Rystad Energy said last year.
According to the energy research firm, operators are expected to commit to developing a record number of offshore oil and gas projects over the next five years, with Deepwater projects set for the most impressive growth.