Offshore Investments to Outpace Shale in 2019



Offshore Investments to Outpace Shale in 2019
Rystad reports that investments in offshore projects will be higher than shale investments, a shake-up from previous years.

Offshore investments levels are set to rise in 2019 after decreasing each year during the industry downturn.  

Recent analysis by Rystad Energy shows that a recent surge in offshore oil and gas FIDs has set the stage for a significant increase in offshore investments next year. This will be the first time shale investments will not overtake offshore.

The number of offshore projects sanctioned in 2017 rose 50 percent year-on-year and close to 100 offshore projects will be sanctioned this year.

The industry is committed to spending $100 billion over the next few years, Audun Martinsen, Rystad’s head of oilfield service research, said during Rystad Energy’s Annual Summit Sept. 18.

“Our offshore activity index is pointing to annual growth rates of about 6 percent towards 2022, thereby returning to the high activity levels seen in 2014,” said Martinsen. “Coupled with annual service price inflation of 5 percent, offshore oilfield service purchases are projected to grow by 11 percent per year towards 2022.”

 

Shale Loses Momentum

While offshore spending is on the rise, growth levels are slowing in the shale sector. Martinsen noted logistical challenges, takeaway capacity bottlenecks and a growing oversupply in the proppant and fracking market.

Since April 2018, U.S. well fracturing activity has flattened to just above 50 wells per day. And frac sand demand in the U.S. is forecast to grow at 21 percent CAGR from 2018 to 2021, however, this will be overshadowed by an even greater jump in supply, which will have a negative impact on prices, Rystad reports.

These factors will contribute to a slower growth for shale, ending at about $120 billion in 2018 and for 2019, about 22,000 shale wells are expected to be drilled and completed in North America (16 percent investment growth in the sector).

“Shale has thus lost some momentum at a time when investors have again found an appetite for the offshore domain, stimulated by a steep reduction in offshore costs and breakeven levels, which in turn have been driven by favorable unit prices.”



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