IEA released its Offshore Energy Outlook, saying that the energy produced offshore is a major component of global oil and natural gas supply and could provide an increasingly important source of renewable electricity. Resources are vast, but offshore projects have to prove that they have to be sustainable, amid a variety of pressures on the world’s oceans.
While offshore oil production has been relatively stable since 2000, natural gas production from offshore fields has increased by more than 50% over the same period. Offshore electricity generation, mostly from wind, has increased rapidly in recent years, notably in the relatively shallow coastal waters of Europe’s North Sea.
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Offshore energy scenarios
In IEA’s projections to 2040, the amount of energy-related offshore activity is expected to increase. This is good news for the offshore supply and services industry. The world’s need for offshore energy is also good reason for regulators to focus on operational and environmental performance.
In the New Policies Scenario, IEA explores the global energy system in line with existing policy frameworks and announced intentions, offshore oil production edges higher, while gas increases ahead to become the largest component of offshore output. Offshore wind will rise more than ten times to 2040, driven by supportive policies in Europe, China and elsewhere.
In a Sustainable Development Scenario, in which the world attains its climate, air quality and energy access goals, the balance of offshore activity shifts, but the overall level remains important. By the 2030s, offshore investment in this scenario is split into three equal parts as oil and gas production is lower than in the main scenario, while offshore electricity generation is forecast to increase twice as fast and provides 4% of global power generation by 2040.
Overall, the Sustainable Development Scenario requires $4.6 trillion in capital investment in all types of offshore energy over the period to 2040, while the New Policies Scenario requires $5.9 trillion over the same period.
A lower price world
The costs of many offshore oil and gas projects have significantly decreased in recent years, as companies want to ensure their viability in a lower price environment. After the oil price fall in 2014, new deepwater projects were generally among the first to be delayed or cancelled as the industry moved towards shorter cycle investments.
However, offshore projects are coming back, looking much better as only the best projects are going ahead, but capital investments in the Norwegian offshore and in the US Gulf of Mexico are now claimed to be robust at $25-40/barrel.
Designs are being simplified, and development in the market for offshore services and equipment is helping to reduce costs. Digitalization of offshore operations is being also pursued, in order to enable efficiency gains and cost reductions.
Furthermore, the interest in offshore hydrocarbon resources remains strong. Shallow water oil production from more mature basins falls in the New Policies Scenario, but this is balanced by an increase in deepwater output. Despite the fact that exploration activity has tailed off recently, deepwater has accounted for around half of discovered oil and gas resources over the last ten years.
The prospects for offshore gas remain relatively strong in a Sustainable Development Scenario, but a reduction in oil demand in this scenario weighs against new capital-intensive offshore oil projects.
See more in the IEA’s Offshore Energy Outlook, in the PDF herebelow
