The annual study by the French Petroleum Institute (IFP) on ‘E&P Activities and Markets’ reveals an all time high of $170 billion expenditure for 2005 driven by the perception that, ‘high oil and gas prices are here to stay’. Key players are investing substantially while competition from Chinese companies is on the rise. The report sees growth continuing through 2006 as ‘prices are firm and no significant downturn in the short or medium term is forecast’. Upstream investment should rise by a further 8 to 10% to $185 billion in 2006.
Although oil prices have nearly doubled in the three years since 2002, world E&P capex has only risen by 30%. This is because of lack of access to the most attractive exploration acreage of the Arabian Gulf, Russia and Kazakhstan, an increased tax burden in some oil-producing countries and personnel and rig shortages.
The number of seismic crews active worldwide, in decline since 1999, turned-around sharply in 2005 with a 17% rise in the first 9 months of 2005. Offshore seismics grew by 30%. All regions were up, especially Latin America (+50%) and Europe where crew counts doubled. Again, the outlook is good for 2006 with the seismic industry benefiting from the recovery of exploration spending. Data acquisition and processing forecast for 2005 is $ 6.5 billion (25% up on 2004) with a likely increase to around $7 billion for 2006.
Chinese are coming!
WesternGeco maintained its leading market share of 24%, ahead of CGG (17%), PGS (14%), Veritas DGC (11%) and Fugro (6%). The western front-runners were joined by the state-owned Chinese firm BGP whose ‘aggressive’ pricing moved it into the number five position worldwide in 2004 with its 6% market share. In onshore data acquisition and processing, BGP is the world leader with market share of 20%.
In 2005, the number of wells drilled should be close to 83 000, an increase of 9%, with North America (+11%) driving this growth. The drilling market is expected to reach $26.7 billion (up 13.5%) sparking massive hikes in day rates for deepwater rigs (+160 to 170%). Nabors Industries is the market leader onshore with 17% of the market followed by Ensign Resource Service and Precision Drilling. Offshore Transocean accounted for 19% of the market, followed by Global Santa Fe (8%) and Pride International (7%). The emergence of Chinese drillers is noted, particularly Great Wall Drilling, the services and engineering arm of CNPC. The IFP’s forecast for the 2006 drilling market is around $29 billion.
Offshore construction for 2005 reached about $28 billion (+15%) and is expected to attain $30 billion in 2006. Technip, Saipem and AkerKvaerner share the lead with around 12-13% each. South Korean yards are proving successful in fixed and mobile platforms, especially FPSOs, with companies like Hyundai and Samsung positioned to play an EPC role—competing with established providers. So far, Chinese companies only operate in South-East Asia, mostly building FPSO hulls. But their positioning as ‘second-tier’ subcontractors is similar to that of South Korea a decade ago.
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