THE OFFSHORE OIL BUSINESS IS GUSHING AGAIN
Via AIMU Newsletter
NOTE: This lengthy article appeared in the weekend edition of The Wall Street Journal and a much-edited synopsis appears below. An excellent read for those who have access to the WSJ.
The $1.2 billion Deepwater Titan sat idle in a Singaporean shipyard for five years, looking like an abandoned cruise ship with a derrick attached to its deck. Soon this vessel that spans nearly three football fields will depart for the deepest waters of the Gulf of Mexico, where its crew will be able to drill8 miles below the seafloor in search of oil for Chevron Corp.
The hunt for offshore petroleum is on again, fueled by a surge in global demand for energy, supply disruptions triggered by the war in Ukraine and crude prices that remain above pre-pandemic levels. Other giant rigs such as Titan that were dormant near the end of the last decade are also now operating in deep waters along the coast of Brazil, while rigs lacking propulsion are mining shallower waters in the Middle East after hitching rides to that part of the world on tugboats.
Of roughly 600 rigs worldwide that were available to lease for offshore projects in December 2022, about 90% were working or under contract to do so, according to research firm Westwood Global Energy Group. That was up from roughly 63% five years earlier. Many new offshore bets are gravitating to South America and the Mideast. The Atlantic Ocean coastlines of Brazil, Guyana and Suriname are bristling with drill ships due to a big production push from Brazil’s national oil company as well as several significant oil finds made in neighboring waters in recent years. Saudi Arabia and the United Arab Emirates are each relying heavily on offshore drilling to increase their oil production capacity by 1 million barrels a day as of 2027, bringing their totals to 13 million and 5.5 million, respectively. As much as 80% of Saudi Arabia’s new capacity will come from offshore sources, according to research firm Evercore.
The untapped potential of deep-water reserves offers new appeal since shallower fields have been more thoroughly exploited. Deep-water drilling has long been dominated by the so-called Golden Triangle of Brazil, Gulf of Mexico and West Africa. Of approximately 100 deep and ultra-deep water drillship contracts signed in 2022, nearly two-thirds were for projects in these three regions, according to data from S&P Global. (The Wall Street Journal, 1/21/2023)