Skip to main content

Douglas-Westwood: industry collaboration to trigger long term stability

Published by , Editor - Hydrocarbon Engineering
Hydrocarbon Engineering,


The oil and gas industry is known for being cyclical, however, the current reality of a ‘lower for longer’ oil price has made sanctioning large offshore projects financially unviable. Many oil majors have opted to focus on subsea well tiebacks, as the memories of any floating production system (FPS) reaching final investment decision (FID) begins to fade – no FPS units have been sanctioned over the past 18 months. In line with this, OEM earnings have come down significantly in recently released third quarter reports with many reporting a decline of approximately 40% in their subsea backlog compared to 3Q15, an indication that the subsea industry is at a crossroad.

However, with substantial cost cutting already achieved, and as E&P companies continuing to squeeze their supply chain, there is reason for optimism that E&P companies will be able to sanction new projects, with many needing to ensure that production inventory remains high. Many operators will also be aiming to take advantage of the price pressures on the supply chain due to the current market downturn. The current woes experienced by OEMs due to limited order intake over the past two years is could evolve into long term stability, as the industry continues to collaborate and resize itself. Douglas-Westwood (DW) believes subsea tree orders have bottomed out, with mega subsea projects such as BP’s Mad Dog Phase II, Anadarko’s Shenandoah, ENI’s Zabazaba and its commitment to the Coral South project off East Africa all expected to be sanctioned in 2017.

The reality of current market conditions can be tempered by a long term view of the fact that subsea development will remain a critical aspect for future field developments as new reserves are found in more remote and deepwater basins. DW expects a trough in subsea tree installation to linger well into 2017 and 2018, however installation is expected to grow at 4% compound annual growth rate (CAGR) over the next five year period, an indication of a light at the end of what has been a long tunnel.

Read the article online at: https://www.hydrocarbonengineering.com/refining/22112016/douglas-westwood-industry-collaboration-to-trigger-long-term-stability/

You might also like

TotalEnergies and SINOPEC join forces to produce SAF

TotalEnergies and China Petroleum and Chemical Corp. (SINOPEC) have signed a Heads of Agreement (HoA) to jointly develop a sustainable aviation fuel (SAF) production unit at a SINOPEC's refinery in China.

 
 

Embed article link: (copy the HTML code below):