Highlights

Development still dominates offshore sector, but more exploration seen

Offshore exploration, drilling spend should be up 12% this year: Schlumberger

More offshore production orders seen in 2018-2019: Baker Hughes CEO



Houston —
Schlumberger and Baker Hughes both see pickups in the lagging offshore sector going forward, their CEOs said Friday, adding that three years of under-investment stemming from low oil prices will need to be reversed in the coming years to meet rising global demand.

Not registered?


Receive daily email alerts, subscriber notes & personalize your experience.


Register Now

By volume, upstream projects are still dominated by development rather than exploration, although exploration spending by producers appears to be “starting to turn the corner,” Schlumberger CEO Paal Kibsgaard said in his company’s second-quarter earnings conference call.

“The current level of exploration investment over the past three to four years is clearly not sustainable,” Kibsgaard said. “We are starting to see some uptick in the second quarter in terms of exploration rig count which was up 22% sequentially and up 7% year over year.”

This year, Kibsgaard said he expected exploratory drilling and well services exploration spending to be about 12% higher than in 2017, although no actual amounts were immediately provided.

“I expect that to accelerate going into 2019,” he added.

A further sign of increasing interest in offshore exploration is more discussions with customers in formation evaluation and more elaborate talks about reservoirs with Schlumberger, said Kibsgaard, both of which indicate a focus on pinpointing optimal drilling into new rocks in the subsea and in onshore frontier areas.

Lorenzo Simonelli, CEO of Baker Hughes, a GE company, said he expects more onshore and offshore production orders to ramp in 2019 with the latter especially improving after several sluggish years and a relatively low number of global project awards. During recent years, producers turned their attention toward quicker-payout short-cycle investments such as shale and tie-ins of new wells to existing projects.

But, “as more large projects are sanctioned and offshore spend returns to more normalized levels, we expect these orders to start generating revenues in 2020,” Simonelli said.

Baker Hughes merged with GE Oil and Gas in July 2017 and is just celebrating their first anniversary as a combined company.

MORE INTEGRATED SHALLOW-WATER OFFSHORE PROJECTS SEEN: SCHLUMBERGER

In addition, Kibsgaard said Schlumberger is starting to see more integrated projects in the shallow-water offshore areas.

Both he and Simonelli said that with the recovery fully underway in North America from three years of low oil prices that started in late 2014, all eyes are turned to the international segment where a pickup in activity lagged that of North America by about a year.

And while North America has nicely ramped up production in the past year and a half, particularly from unconventional fields, international supplies continue to weaken with continued falling production in Venezuela, growing geopolitical pressure to remove Iranian oil barrels from the market and continuing volatility in Libya, Kibsgaard said.

“After more than three years of E&P underinvestment, the international production base has started to show accelerating signs of weakness, with noticeable year over year production declines in 15 of the world’s producing countries,” he said.

This only underscores the growing need for increased upstream spending in international markets, since it has become apparent that even new projects that will come online over the next few years will likely not be enough to meet increasing global oil and gas demand, the two CEOs said.

Even in the US, production challenges loom in shale fields linked in part to interference of wells that may have been placed too close together stemming from infill drilling increases, and also drilling continues further afield of the “sweetest spots” that have yielded the highest production rates, Kibsgaard added.

–Starr Spencer, starr.spencer@spglobal.com

–Edited by Richard Rubin, richard.rubin@spglobal.com

Source link

NO COMMENTS

LEAVE A REPLY