The Future of the Offshore Drilling Industry to 2015 - Market Analysis, Capital Spend and Competitive Landscape

Introduction

GBI Research has released a study “The Future of the Offshore Drilling Industry to 2015 - Market Analysis, Capital Spend and Competitive Landscape” The study, which is an offering from the company’s Energy Research Group, provides an in-depth analysis of the offshore drilling industry and highlights the various concerns, shifting trends and emerging regions in the global offshore drilling industry. The report provides forecasts of the offshore exploratory and development drilling expenditure to 2015. The report provides in-depth analysis of the key trends and challenges in the global drilling industry. The report also discusses the major offshore projects globally and provides an analysis of the competitive scenario in each of the geographies covered. The report is built using the data and information sourced from proprietary databases, primary and secondary research and in-house analysis by GBI Research’s team of industry experts.

The global offshore drilling market experienced a slowdown in 2009 following the hectic activity witnessed in the previous years. The growth of the offshore drilling market is driven by high demand and the prices of crude oil and natural gas. The increase in the demand for oil and natural gas due to high economic growth during the period from 2004 to 2008 was responsible for the continuous increase of crude oil and natural gas prices until mid 2008. The demand for oil and gas and the prevalent high prices stimulated increased activity in the offshore drilling market. However, since the economic slowdown and the collapse of the oil and gas prices from the record levels of 2008, many of the offshore projects have become uneconomical and have since been delayed or cancelled. Also, offshore drilling expenditure is directly dependent on the exploration and production capital spending of the international oil companies, national oil companies and independent producers. The tight credit situation and an uncertain outlook for the oil and gas global demand have affected the capital expenditure plans of the exploration and production companies. These factors have had a negative effect on the offshore drilling expenditure in 2009. However, the future outlook for offshore drilling is encouraging and the expenditure is expected to steadily increase to 2015.

Report Highlights
GBI Research’s new report “The Future of the Offshore Drilling Industry to 2015 - Market Analysis, Capital Expenditure and Competitive Landscape” provides an in-depth analysis of the offshore drilling industry and highlights the various concerns, shifting trends and emerging regions in the global offshore drilling industry. The report provides forecasts on the offshore drilling expenditure to 2015. The report includes exploratory and development drilling expenditure forecasts to 2015. The report also provides an in-depth analysis of the key trends and challenges in the global drilling industry. The report also discusses the major offshore projects globally and provides an analysis of the competitive scenario in each of the geographies. The report is built using the data and information sourced from proprietary databases, primary and secondary research and in-house analysis by GBI Research’s team of industry experts.

Global Offshore Drilling Expenditure is Expected to Grow to More Than $490 Billion in the Period from 2009 to 2015

The global offshore drilling expenditure has increased in recent years especially during the period from 2004 to 2008. According to GBI Research’s estimates, approximately $350 billion was spent on offshore drilling from 2000 to 2008. The regions accounting for the major share of the spending were the US Gulf of Mexico (USGOM), West Africa, Brazil and Asia Pacific. The offshore drilling expenditure peaked in 2007- 2008.

The global drilling expenditure is forecast to grow at an annual average growth rate of about 6.6% in the forecast period of 2009 to 2015. The depletion of the reserves in onshore and shallow waters and the advancement in seismic and drilling technologies are driving the increased drilling activities in deepwater offshore regions. This trend is most visible in the offshore areas of the USGOM, Brazil and West Africa. The discovery of deep water and subsalt reserves is expected to drive investments in the sector.

As a result of the increasing demand and the decline of the reserves of crude oil and natural gas, the prices of crude oil and natural gas are expected to continue to rise. However, factors such as decreases in service costs as the offshore regions mature, and advances in technology leading to increased efficiency and a reduction in extraction costs, will combine to reduce the total investments. Nonetheless, the positive factors leading to increases in investments are likely to outweigh the negative factors, thereby significantly increasing the offshore drilling expenditure in the future.

Global Offshore Drilling Expenditure in $ Bn, 2000-2015

Source: GBI Research

South and Central America is Expected to be One of the Top Regions for Offshore Drilling Expenditure by 2015

Advances in technology and recent increased in commodity prices have lead to increased exploration in the offshore areas of South and Central America. Increased exploration has lead to some significant discoveries in the offshore regions. Brazil is the most promising region in South and Central America for offshore activity. Brazil is emerging as one of the most important offshore drilling markets in the world due to the discovery of huge reserves in the offshore regions of Brazil. Brazil’s offshore crude oil reserves were 11,744.3 million barrels in 2008. New discoveries such as the Tupi field and the Azulao field are expected add significant reserves during the forecast period. These discoveries have demonstrated the presence of vast reserves of crude oil in the offshore regions of Brazil and are expected to attract a greater share of the future offshore drilling expenditure. Other countries, such as Venezuela, Peru, and Trinidad and Tobago, are also witnessing offshore activity, although to a smaller extent than in Brazil. According to GBI Research’s estimates, offshore drilling expenditure in South and Central America totaled more than $55 billion from 2000 to 2008 with Brazil accounting for more than $45 billion of this. Further, South and Central America is estimated to attract close to $100 billion in the period from 2009 to 2015. Brazil alone is expected to attract a drilling spend of more than $80 billion in the offshore regions during the period from 2009 to 2015. The discovery of significant new offshore fields is expected to boost the growth of the drilling market in the region. With Brazil expected to become one of the major crude oil suppliers in the next decade and with most of Brazil’s production coming from offshore areas, the drilling spend in Brazil is expected to increase significantly thereby increasing the overall expenditure in the South and Central American region.

South and Central America Offshore Drilling Expenditure in $ Bn, 2000-2015

Source: GBI Research

Increasing Trend Towards Deep and Ultra Deep Water Exploration and Production is Driving the Growth of the Offshore Drilling Industry

In recent years, there has been an increasing trend towards deep and ultra deep water exploration. With the decline in the available resources in the onshore areas, there has been a marked shift towards increased offshore exploration. Initially, the offshore exploration was mainly in shallow waters. However, in recent years, with the near complete exploitation of the shallow water resources worldwide, companies have begun drilling deeper in the oceans.

There have been huge deep water discoveries in various regions of the world, from Brazil, the USGOM to West Africa and the Asia Pacific region. In the USGOM there has been decreased activity in the shallow water areas. Natural gas production, which was the mainstay of the shallow water activity in the USGOM, has seen a steady decline in recent years. As offshore natural gas production is expected to decline in the USGOM, shallow water activity is expected to decrease. Also, shallow water operations are more likely to be affected by the economic downturn than the deep water areas, since the lease arrangements for the deepwater areas are typically longer and projects take more time to develop. Another major factor promoting the increased activity in the deep and ultra deep waters has been the advancement of technology. Perdido development operated by Shell is a classic example of advances in technology being put to good use. Perdido will be the deepest production platform in the world operating at depths of 8,000 feet under water. Petrobras’ FPSO, which will be introduced next year, is a converted double-hulled tanker that can operate at extreme water depths and also will have a detachable turret buoy to be used during hurricanes while the FPSO can be moved to safer waters.

These and other factors have been mainly responsible for companies reaching previously unreachable areas. Subsalt reserves, which are typically petroleum reserves thousands of meters below layers of sand and rocks and salt, contain huge reserves of oil. Recent sub-salt discoveries have transformed Brazil into a country with one of the highest potential investment acreages globally. Tupi Field, which was discovered in November 2007, is the largest discovery in the Americas since 1970. It has estimated recoverable reserves of 5-8 billion barrels. This discovery in the pre-salt layer, which extends from the State of Espírito Santo to the State of Santa, is considered to be one of the most attractive exploration acreages worldwide. It will increase Brazil’s recoverable reserves of crude oil by 50%, which will significantly increase the revenues of the country’s oil and gas industry. Geological similarities between the subsalt ares in Angola and Brazil have increased the hopes of finding huge subsalt reserves in the continental shelf areas of Angola.

As shallow water resources decrease, deep and ultra deep subsalt areas will play an increasing role in offshore oil and gas production. As the exploration and production activity moves into deeper water, offshore drilling contractors, especially major and technically strong companies, will grow strongly.
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1 Table of Contents
1 Table of Contents 6
1.1 List of Tables 8
1.2 List of Figures 9
2 The Future of the Offshore Drilling Industry to 2015 10
2.1 Report Guidance 10
3 Introduction To The Offshore Drilling Industry 12
3.1 Importance of Offshore Oil and Gas Production and Major Offshore Areas 13
3.2 Offshore Drilling Industry Structure and the Process of Offshore Drilling 14
3.3 Types of Rigs and Support Services 14
3.3.1 Mobile Bottom Supported Rigs 15
3.3.2 Floating Rigs 15
3.3.3 Key Technologies Used As Supporting Mechanisms in Floating Rigs 15
3.3.4 Subsea Production and Processing Systems 16
4 Key Trends And Challenges In The Offshore Drilling Industry 17
4.1 Key Drivers of the Offshore Drilling Industry 17
4.1.1 Growth In Oil And Gas Demand In The Long Term And The Increase In The Offshore Oil And Gas Production are Driving The Growth Of The Offshore Drilling Industry 17
4.1.2 The Shift in Investment to New and Emerging Offshore Regions such as Asia and Brazil is Driving the Growth of Offshore Drilling on these Regions 17
4.1.3 Increasing Trend towards Deep and Ultra Deep Water Exploration and Production is Driving the Growth of the Offshore Drilling Industry 17
4.1.4 Rapid Technology Advances are a Key Driver of the Development of the Offshore Drilling Industry 18
4.2 Major Challenges in The Offshore Drilling Industry 19
4.2.1 Global Economic Slowdown and Low Commodity Prices are a Challenge for the Growth of the Offshore Drilling Industry in the Short Term 19
4.2.2 Decreases in Exploration and Production Capital Expenditure is a Major Challenge for the Offshore Drilling Contractors 20
4.2.3 Geopolitical Risks and Terrorist Threats Might Have a Major Impact on the Offshore Drilling Activities In Particular Countries 21
4.2.4 Highly Competitive Drilling Industry with Intense Price Competition in Addition to the Decrease in the Drilling Activity will be a Major Challenge 22
4.3 Offshore Drilling Units Planned and Under Construction 22
4.4 Mergers and Acquisitions in the Global Offshore Drilling Industry 27
5 Global Offshore Drilling Expenditure Forecasts To 2015 29
5.1 Global Offshore Drilling Expenditure Forecasts To 2015 29
5.2 Global Exploratory and Development Drilling Expenditure 31
5.3 Competitive Analysis of the Offshore Drilling Industry, 2009 34
5.3.1 Competitive Structure 34
5.3.2 Market Share Analysis of the Global Offshore Drilling Industry, 2009 34
5.4 Profiles of the Major Offshore Drilling Contractors 35
5.4.1 Transocean Ltd. 35
5.4.2 Noble Corporation 36
5.4.3 Diamond Offshore Drilling 37
5.4.4 Ensco International 37
5.4.5 Seadrill 38
6 North America Offshore Drilling Expenditure Forecasts To 2015 40
6.1 North America Drilling Expenditure Forecasts To 2015 40
6.2 North America Exploratory Drilling Expenditure 41
6.3 North America Development Drilling Expenditure 42
6.4 Major Offshore Oil and Gas Projects In North America 44
6.5 Exploration and Production Companies’ Offshore Activity in North America 44
6.5.1 North America, Top Lease Holders In 2009 44
7 South And Central America Offshore Drilling Expenditure Forecasts To 2015 46
7.1 South and Central America Drilling Expenditure Forecasts To 2015 46
7.2 South and Central America Exploratory Drilling Expenditure 47
7.3 South and Central America Development Drilling Expenditure 49
7.4 Major Offshore Oil and Gas Projects in South and Central America 50
7.5 Offshore Activity of the Exploration and Production Companies in South and Central America 51
7.5.1 South and Central America, Top Lease Holders In 2009 51
8 Europe Offshore Drilling Expenditure Forecasts To 2015 54
8.1 Europe Drilling Expenditure Forecasts To 2015 54
8.2 Europe Exploratory Drilling Expenditure 55
8.3 Europe Development Drilling Expenditure 57
8.4 Major Offshore Oil and Gas Projects in Europe 58
8.5 Offshore Activity of Exploration and Production Companies in Europe 59
8.5.1 Europe, Top Lease Holders in 2009 59
9 Middle East And Africa Offshore Drilling Expenditure Forecasts To 2015 62
9.1 The Middle East and Africa Drilling Expenditure Forecasts to 2015 62
9.2 The Middle East and Africa Exploratory Drilling Expenditure 63
9.3 The Middle East and Africa Development Drilling Expenditure 65
9.4 Major Offshore Oil and Gas Projects in the Middle East and Africa 66
9.5 Offshore Exploration and Production Activity in the Middle East And Africa 68
9.5.1 Middle East and Africa, Top Lease Holders in 2009 68
10 Asia Pacific Offshore Drilling Expenditure Forecasts To 2015 70
10.1 Asia Pacific Drilling Expenditure Forecasts To 2015 70
10.2 Asia Pacific Exploratory Drilling Expenditure 72
10.3 Asia Pacific Development Drilling Expenditure 73
10.4 Major Offshore Oil and Gas Projects in Asia Pacific 74
10.5 Offshore Exploration and Production Activity in Asia Pacific 75
10.5.1 Asia Pacific, Top Lease Holders in 2009 75
11 Appendix 78
11.1 Methodology 78
11.1.1 Coverage 78
11.1.2 Secondary Research 79
11.1.3 Primary Research 79
11.1.4 Expert Panel Validation 79
11.2 Units of Measure 79
11.3 Contact Us 80
11.4 About GBI Research 80
11.5 Disclaimer 80
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1.1 List of Tables
Table 1: Global, Oil & Gas Spending ($ Bn), 2005-2009 21
Table 2: Global, Semi-Submersibles Under Construction to 2012 23
Table 3: Global, Drillships Under Construction to 2012 24
Table 4: Global, Jackup Rigs Under Construction to 2012 26
Table 5: Merger & Acquisitions and Asset Transaction Activity in the Offshore Drilling Industry
($ M), 2007 – 2009 28
Table 6: Global, Offshore Drilling Expenditure ($ Bn), 2000-2015 30
Table 7: Global, Offshore Exploratory Drilling Expenditure ($ Bn), 2000-2015 32
Table 8: Global, Offshore Developmental Drilling Expenditure ($ Bn), 2000-2015 33
Table 9: Global Offshore Drilling Industry, Competitive Analysis, 2009 35
Table 10: Transocean Ltd., Key Statistics, 2008 36
Table 11: Noble Corporation, Key Statistics, 2008 37
Table 12: Diamond Offshore Drilling., Key Statistics, 2008 37
Table 13: Ensco International. Key Statistics, 2008 38
Table 14: Seadrill Limited. Key Statistics, 2008 38
Table 15: North America, Offshore Drilling Expenditure ($ Bn), 2000-2015 41
Table 16: North America, Offshore Exploratory Drilling Expenditure ($ Bn), 2000-2015 42
Table 17: North America, Offshore Development Drilling Expenditure ($ Bn), 2000-2015 43
Table 18: North America, Major Offshore Oil and Gas Projects, 2010-2015 44
Table 19: North America, Top Offshore Lease Holders, 2009 45
Table 20: South and Central America Offshore Drilling Expenditure ($ Bn), 2000-2015 47
Table 21: South and Central America Offshore Exploratory Drilling Expenditure ($ Bn),
2000-2015 48
Table 22: South and Central America Offshore Development Drilling Expenditure ($ Bn),
2000-2015 50
Table 23: South and Central America, Major Offshore Oil and Gas Projects, 2010-2015 51
Table 24: South and Central America, Top Offshore Lease Holders, 2009 53
Table 25: Europe Offshore Drilling Expenditure ($ Bn), 2000-2015 55
Table 26: Europe Offshore Exploratory Drilling Expenditure ($ Bn), 2000-2015 56
Table 27: Europe Offshore Development Drilling Expenditure ($ Bn), 2000-2015 58
Table 28: Europe, Major Offshore Oil and Gas Projects, 2010-2015 59
Table 29: Europe, Top Offshore Lease Holders, 2009 61
Table 30: Middle East and Africa Offshore Drilling Expenditure ($ Bn), 2000-2015 63
Table 31: Middle East and Africa Offshore Exploratory Drilling Expenditure ($ Bn), 2000-2015 64
Table 32: Middle East and Africa, Offshore Development Drilling Expenditure ($ Bn), 2000-2015 66
Table 33: Middle East and Africa, Major Offshore Oil and Gas Projects, 2010-2015 67
Table 34: Middle East and Africa, Top Offshore Lease Holders, 2009 69
Table 35: Asia Pacific Offshore Drilling Expenditure ($ Bn), 2000-2015 71
Table 36: Asia Pacific Offshore Exploratory Drilling Expenditure ($ Bn), 2000-2015 73
Table 37: Asia Pacific Offshore Development Drilling Expenditure ($ Bn), 2000-2015 74
Table 38: Major Offshore Oil and Gas Projects in Asia Pacific, 2010-2015 75
Table 39: Asia Pacific Top Offshore Lease Holders, 2009 77
1.2 List of Figures
Figure 1: Crude Oil Price, Brent and WTI, Natural Gas Price, Henry Hub, December 2008 – January 2010 19
Figure 2: Oil & Gas Expenditure ($ Bn), 2005–2009 21
Figure 3: Merger & Acquisitions and Asset Transaction Activity in the Offshore Drilling Industry ($ M), 2007 – 2009 28
Figure 4: Global, Offshore Drilling Expenditure ($ Bn), 2000-2015 30
Figure 5: Global, Offshore Exploratory Drilling Expenditure ($ Bn), 2000-2015 32
Figure 6: Global, Offshore Development Drilling Expenditure ($ Bn), 2000-2015 33
Figure 7: Global Offshore Drilling Industry, Competitive Analysis, 2009 35
Figure 8: North America, Offshore Drilling Expenditure ($ Bn), 2000-2015 40
Figure 9: North America, Offshore Exploratory Drilling Expenditure ($ Bn), 2000-2015 42
Figure 10: North America, Offshore Development Drilling Expenditure ($ Bn), 2000-2015 43
Figure 11: North America, Top Offshore Lease Holders, 2009 45
Figure 12: South and Central America Offshore Drilling Expenditure ($ Bn), 2000-2015 46
Figure 13: South and Central America Offshore Exploratory Drilling Expenditure ($ Bn),
2000-2015 48
Figure 14: South and Central America Offshore Development Drilling Expenditure ($ Bn),
2000-2015 49
Figure 15: South and Central America, Top Offshore Lease Holders, 2009 52
Figure 16: Europe Offshore Drilling Expenditure ($ Bn), 2000-2015 54
Figure 17: Europe Offshore Exploratory Drilling Expenditure ($ Bn), 2000-2015 56
Figure 18: Europe Offshore Development Drilling Expenditure ($ Bn), 2000-2015 57
Figure 19: Europe, Top Offshore Lease Holders, 2009 60
Figure 20: Middle East and Africa Offshore Drilling Expenditure ($ Bn), 2000-2015 62
Figure 21: Middle East and Africa Offshore Exploratory Drilling Expenditure ($ Bn), 2000-2015 64
Figure 22: Middle East and Africa Offshore Development Drilling Expenditure ($ Bn), 2000-2015 65
Figure 23: Middle East and Africa, Top Offshore Lease Holders, 2009 68
Figure 24: Asia Pacific Offshore Drilling Expenditure ($ Bn), 2000-2015 71
Figure 25: Asia Pacific Offshore Exploratory Drilling Expenditure ($ Bn), 2000-2015 72
Figure 26: Asia Pacific Offshore Development Drilling Expenditure ($ Bn), 2000-2015 74
Figure 27: Asia Pacific Top Offshore Lease Holders, 2009 76
Figure 28: GBI Research Methodology, 2010 78
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