June 27, 2013
Subsea technology has undergone a tremendous development during the last two decades. From a marginal production in the Gulf of Mexico 20 years ago, subsea and floating infrastructure is estimated to account for more than half the offshore production in this region by 2020. So, how did we get to where we are, and what will be the development activity going forward?
Let us look back in time. Deepwater developments in the Gulf of Mexico (GoM) began with the Cognac field discovered by Shell in 1975, which was brought on stream three years later in 1978. At the time of installation Cognac was the world’s deepest platform. The next deepwater developments were all a result of refining platform technology and utilizing it in deeper waters (Lena, Cerveza and Boxer platforms). The development of floaters in GoM deepwater began with the ConocoPhillips Jolliet TLP in 1989. Although held up by bouncy, the Jolliet TLP, like the fixed platforms and other TLP’s to come, had dry wellheads reducing the amount of subsea infrastructure. However, they brought with them important infrastructure for future subsea tie-backs. The development of these facilities also contributed to technology enhancements that would benefit future subsea developments.
In the middle of the 1990s, the development of the deepwater resources ramped up when projects like Mars, Auger and Ram-Powell where brought online. The number of floaters brought online reached a high in 2004 with five units. The development activity remained high until 2009 with 2-3 units starting up each year. However, the financial crisis in 2008 caused operators to put projects on hold and few new projects got sanctioned. The activity level in GoM was halted even further when the Macondo well blew out in 2010. These two events resulted in reduced development activity and as a result no floaters are expected to come online in 2013. Looking towards 2020, the development of floaters in GoM is expected to pick up. Three units are expected to come on line in 2014 (Big Foot, Lucius and Jack-St. Malo) and the next five years 2-3 units are expected to start up each year.
Figure 1: Floating production facilities in the Gulf of Mexico (US and Mexico) by production start-up year. Source: UCube
With the push into deeper waters, floating and subsea production units have become an increasingly important part of the offshore production in GoM. In 1990 production from floating and subsea facilities made up just over 2% of the near 4.9 mmboepd produced in GoM. At the historic offshore production peak in 2001 of 5.3 mmboepd, the share of production from floaters and subsea tie-backs had risen to 19.5%. Due to declining production from fixed installations on the shelf, it is expected that floaters and subsea developments will make up 36% of the offshore production in the Gulf in 2013. Especially the last couple of years, investments in gas production on the shelf have been cut back due to the competition from onshore shale and tight gas developments. By 2020 Rystad Energy estimate that 60% of the production from the Mexican and U.S. part of the Gulf will be from floating and subsea infrastructure.
Figure 2: Offshore production (kboepd) in the Gulf of Mexico (US and Mexico) by facility type. Source: UCube
Increasing production from floating and subsea facilities brought stimulating opportunities to the subsea market. Increasing development activities resulted in a doubling of the subsea market, from a level of USD 600 million in 1990 to USD 1.6 billion in 2000. The next decade accelerated things even further. Even with a market downturn in 2010, the market, at USD 5 billion, was still more than three times higher than what it had been in 2000. With stable offshore development activity towards 2020, and developments continuing into even deeper waters, Rystad Energy forecast the market to grow from a level of USD 6 billion in 2013 to more than USD 10 billion in 2020. That is equal to a market growth of 8.2% per year from 2013 to 2020. This growth will affect the different market segments in different ways. The market segments for subsea installation, umbilicals, risers and flowlines (SURF) and subsea equipment (trees, wellheads, manifolds, etc.) are mainly related to field development. As seen in Figure 3, these segments fluctuate with the field development activity. Towards 2020 these segments are forecasted to grow by 8.5% per year. The third segment making up the subsea market, Subsea Services, is mainly related to inspection, maintenance and repair of subsea systems. This segment is driven by the size and the age of the installed base of equipment and is a less volatile but steady growing segment, forecasted to grow by 7.4% per year from 2013-2020.
Figure 3: Subsea Expenditure (MUSD nominal) in the Gulf of Mexico (US and Mexico) by Market Segment. Source: DCube from Rystad Energy.
Subsea technology have come fare the last 20 years. As developments in the deepwaters of the Gulf of Mexico continue, these facilities will become increasingly important. With a good portfolio of projects there should be a high development activity going forward and this is surely one exiting market to be in.
Contact: Jon Fredrik Müller, Project Manager
Mobile: +1 713 865 0521
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About Rystad Energy
Rystad Energy is an independent oil and gas consulting services and business intelligence data firm offering global databases, strategy consulting and research products.
Rystad Energy is fully owned by the management. It is vital to maintain this independence in operations. We consist of highly qualified and experienced consultants, analysts, technology as well as support people that help enhance and create a complete product and service delivery. Our extensive knowledge on global and local markets is driven by the engagement of our international staff members.
Rystad Energy’s products and services are intended for E&P and oilfield service companies, investors, investment banks and governments. We deliver:
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Rystad Energy’s headquarters are located in Oslo, Norway, with additional research teams in India. Further presence has been established in the UK (London), USA (New York & Houston), Russia (Moscow), for Africa as well as South East Asia.
About the Authors
Jon Fredrik Müller, Project Manager
Jon Fredrik is Project Manager within the consulting department of Rystad Energy. His main area of expertise lies in the oil field service segments and particularly within offshore related services. He also has experience with project work for E&P companies. He holds an M.Sc. in Industrial Economics from NTNU, Norway, with specialization in mechanical engineering and finance, including a graduate exchange program at University of Calgary. Jon Fredrik works for Rystad Energy's Houston offices.