DW: Gap in oil supply/demand to narrow later this year?

Market researcher and energy industry consultancy Douglas-Westwood used its inaugural business breakfast, held in London last week, to present the company’s latest research for the financial sector and energy industry. 

DW founder John Westwood chaired the proceedings and gave an introductory talk focusing on macro challenges and opportunities in the current cycle including skills transfer, geographic and sector diversity and cost-effective technical innovation. Westwood also highlighted the significant drive towards the use of natural gas and the potential for the supply/demand gap for oil to narrow later this year.

DW’s Research Director Steve Robertson provided a summary of trends in a number of key offshore sectors including floating production, LNG, subsea, offshore logistics and compared the outlook for the onshore and offshore production, noting that a significant extra oil production from long-lead time projects that were committed to prior to the downturn should be expected.

DW said that a comparison was also made between the previous outlook for Deepwater expenditure one year ago and the current view now, with some 92 projects having been delayed/deferred or cancelled. It was also suggested that 2016 and 2017 could be very difficult years for subsea equipment providers that to-date have been partially-insulated from the downturn by significant backlogs – these backlogs are now rapidly declining and order levels remain low.

Ben Wilby provided an in-depth review of DW’s North Sea Decommissioning report, explaining the underlying data, methodology and outputs by country. Wilby illustrated how the UK will provide the bulk of decommissioning opportunity overall and the vast majority of North Sea removal work that will occur in the next decade, as Norway (a less-mature producing province with significantly less installed infrastructure) sees most of its respective activity post-2030.

The various approaches to decommissioning (including offshore and onshore ‘deconstruction’ and single-lift & transport to shore) were discussed along with potential cost savings from single-lift operations – providing they become commonplace.

Katy Smith finished the session by sharing DW’s latest views on Iran, including an update on sanctions, the outlook for oil and gas production, specific projects that are known to be moving ahead and the expectations for rig requirements, both offshore and onshore.

It was explained how DW has taken a conservative view of the potential activity, given a number of evident challenges in working in Iran not least the bilateral US sanctions that remain in place, the caution amongst foreign banks regarding the processing of Iranian payments, and the uncertainty surrounding the structure of the Iranian Petroleum Contract.

Source: Douglas-Westwood