In the April edition of Rystad Energy’s thought leadership series REview, Manash Goswami, vice president and analytics editor, sits down with Maierdan Halifu, regional research director for North America, to discuss the global offshore industry and the role it is set to play in feeding global energy demand growth.

Q: Why offshore now? What has changed over the last decade?

Between 2004 and 2012, offshore, particularly deepwater, was projected to dominate future oil production growth. Yet, the US shale oil revolution shifted this, with the unconventional sector driving global supply expansion from 2013 to the present. Consequently, the significant deepwater expansion, potentially requiring up to 500 floating rigs, did not fully materialize. The oil market downturn 2014 led to a focus on cost and efficiency, moderating the pace of shale growth. Offshore is witnessing a rebirth as competitiveness improves, positioning the sector well for steady future expansion, albeit at a more modest pace than initially anticipated. This resurgence sees Brazil and other basins in the Americas and Africa show strong growth, while East Africa presents significant LNG potential.

Q2: What is the current offshore market status?

In 2024, offshore oil production reached 28.4 million barrels per day (bpd), which is nearly a third of the world's total output. Offshore gas production was also substantial, hitting about 115 billion cubic feet per day (Bcfd), representing roughly 30% of global supply. For 2024, the global average of mobile offshore drilling units (MODU) on contract was 550 units (408 units for jackup, 82 for drillship, and 60 for semisub), resulting in a marketed utilization of 88%. These three rig types combined drilled approximately 2,600 offshore wells. While 2024 was one of the slowest years for new discoveries in two decades, a staggering 80% of those were made offshore, primarily in deepwater.

Q3: US tariffs are creating a ripple effect, both immediate and most likely over the long term, on supply chains. What long-term strategies can energy companies, particularly in the offshore, employ to mitigate the risks associated with these tariff policies?

The oil country tubular goods (OCTG) segment will be the most impacted by these tariffs, followed by bulk materials and equipment. The immediate effects include increased raw materials costs, disrupted supply chains, increased price volatility, and the need for companies to find new suppliers, leading to short-term supply gaps and increased lead times. Companies can implement several mitigating strategies for procurement resilience. These include diversification of the supplier base to reduce reliance on tariffed regions, exploring domestic production options, focusing on inventory and logistics planning through stockpiling and data analytics, implementing financial and contractual adjustments like hedging and negotiating cost pass-through agreements, and leveraging technology and digitalization for improved supplier selection and supply chain visibility. These actions can help the offshore sector navigate the complexities introduced by tariff policies.  

Q4: What, according to you, is the future fossil fuel outlook?

Our view is that deepwater supply will outpace shale growth in the next few years. The key regions to watch for future offshore crude oil supply are the Gulf of America (Gulf of Mexico), the Guyana-Suriname Basin, Brazil's pre-salt region (Santos and Campos Basins), and West Africa, particularly Namibia and Angola. These areas have seen significant discoveries and investment and are expected to contribute substantially to global supply.

Offshore projects not only have an attractive breakeven price compared to other resources, but also have low carbon intensity, especially the deepwater projects.

Future demand scenarios vary. A base case scenario suggests oil demand peaking at 110 million bpd in 2033. Even under fast transition scenarios, significant oil volumes will be needed. Meeting this future demand presents a challenge, as existing production declines rapidly without new activity. Depending on the transition speed, between 500 and 730 billion barrels of new oil supply is required between 2024 and 2050.

Q5: Could you share your thoughts on offshore clean tech and the need to diversify energy sources?

Achieving climate goals like those set in the Paris Agreement requires deep decarbonization. This involves transitioning the power sector towards more renewables (solar, wind, hydro, nuclear) and storage, electrifying end-uses like transport and heating, and addressing residual emissions with solutions like Carbon Capture, Utilization, and Storage (CCUS) and clean fuels (hydrogen, biofuels).

Offshore CCUS: Offers vast storage potential in geological formations like saline aquifers and depleted reservoirs, often without land-use conflicts. Leveraging existing offshore infrastructure and expertise can reduce costs. Challenges include higher costs than onshore, logistical complexities and evolving regulations. Projects are underway globally, including Norway's Snøhvit, Sleipner and Northern Lights, and developments in the US Gulf Coast. Direct carbon capture on offshore facilities like FPSOs is also gaining prominence.

Offshore Wind: A rapidly expanding energy source harnessing stronger, more consistent winds offshore. Global installations are growing rapidly, driven by government targets. While bottom-fixed installations dominate, floating wind technology is advancing, projected to constitute about one-eighth of the 658 GW offshore wind capacity expected by 2040. Europe leads, with the UK as a key market, followed by Asia.

Floating and Offshore Solar PV: Floating PV (FPV) involves installing solar panels on water bodies, offering benefits like reduced land use and potentially higher yields. Offshore PV is an emerging concept using specialized panels for marine conditions. The market is nascent, led by China, but faces cost, technological and environmental challenges.

For a more granular understanding of the offshore industry and sectoral overviews on the global energy system, its opportunities and challenges, download our "Evolving energy landscape" whitepaper. The paper was written for our Knowledge Partnership with the Offshore Technology Conference (OTC).

Authors: 

Manash Goswami  

Vice President, Analytics
manash.goswami@rystadenergy.com

Maierdan Halifu  

Regional Research Director, North America
maierdan.halifu@rystadenergy.com

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(The data and forecasts contained in this column are Rystad Energy’s and the opinions are of the authors.)