Archives for posts with tag: natural gas production

Natural gas demand and onshore and offshore production data is now available in Offshore Intelligence Monthly, split out by region and country on pages 3, 6-7 and 20-25. Analysing this data, it is apparent that the offshore hydrocarbons cake just keeps on getting bigger.

Since 1993, world combined offshore oil and gas production has increased by 58%, to 43.7m boepd in 2013; and between 2013 and 2023, it is forecast to increase by a further 35%, to 58.9m barrels oil equivalent per day (boepd). While oil is playing its part in this, gas is proving an even more potent rising agent in the offshore mix, of which it is taking an increasing share.

Measuring the Ingredients

As the Graph of the Month shows, growth rates for offshore oil and gas production have moved more or less in line y-o-y, with gas consistently ahead of oil as hitherto undeveloped historical offshore gas discoveries are brought onstream. While offshore gas production grew with a 3.8% CAGR from 1993 to 2013, oil exhibited a 1.4% CAGR. The spread between gas and oil production is forecast to continue 2013-23, with gas and oil production CAGRs of 4.2% and 2.0% respectively. It is thus expected that offshore gas production will almost achieve parity in volume terms with offshore oil by 2023, accounting for over 49% of offshore hydrocarbons output (versus 32% in 1993).

Energy Hunger

The strength of gas in the offshore production mix in part reflects faster historical and anticipated growth in gas demand. Since 2009, oil demand growth has stagnated in OECD countries whereas gas demand growth has remained firm, averaging 3.0% p.a. 2010-13 with a rate of 2.1% projected for 2014. In non-OECD countries, gas demand growth averaged 4.7% over the 2010-13 period, compared to 3.9% for oil demand. Similarly, 2014 demand growth is forecast at 3.7% for gas and 2.7% for oil. As non-OECD countries continue to industrialise, demand growth for natural gas is likely to remain firm.

Let Them Eat Cake

Given this scenario, it is likely shale gas will meet only a portion of future demand. Conventional gas will still have a role in feeding world energy hunger, and the offshore gas element of this increasingly so. In 2013, 30% of world natural gas production was offshore; in 2023 this is forecast to reach 36%. Accordingly, the offshore gas field investment outlook is positive. Offshore field operators are initiating schemes to utilise associated gas at mature oilfields. Moreover, development of offshore gas fields is increasingly perceived as economic. Gas fields account for 51% of fields under development and 48% of undeveloped offshore discoveries.

More so than oil, offshore gas growth is driven by mega-projects. Current examples include nine South Pars phases off Iran, Leviathan off Israel and Shah Deniz II in the Caspian, due onstream in 2015-17, 2017 and 2019. Major LNG projects planned offshore East Africa and Australia, entailing extensive subsea production systems and deployment of the world’s first floating liquefied natural gas (FLNG) vessels (like Shell’s “Prelude”), are also responsible much of the forecast growth in offshore gas. All in all then, gas looks to be quite a tasty slice of the offshore cake. Bon appétit!

OIMT201407

OIMT201405Russia is forecast to account for 13% of world crude oil production and 18% of world natural gas production in 2014. While its prodigious Siberian flows tend to receive most of the credit for this feat, fields located off the country’s 16 million km of coastline are nonetheless projected to produce 390,000 bpd oil and 2.64 bcfd gas in 2014. So where exactly is Russian offshore production to be found? And what is the outlook?

Mastering the Arctic

As the Graph of the Month shows, offshore oil and gas production in Baltic & Arctic Russia stagnated after the break-up of the USSR, declining to 0.03m boepd in 2013, when it accounted for 4% of Russian offshore production. This trend was thrown into reverse when the Prirazlomnoye field came onstream in December 2013. Located 23km from shore in the Pechora Sea, the field is exploited via a ice-class platform and production is scheduled to reach 120,000 bpd by 2019. New technologies and robust oil prices are thus unlocking reserves hitherto stranded, and by 2023 Arctic oil and gas is forecast to constitute 11% of Russia’s offshore production.

Caspian and Crimean Conquests

Russia’s southern offshore fields, mainly in the Caspian, accounted for 9% of Russian offshore production in 2013. In the Caspian, as in the Arctic, harsh conditions have limited field development and disincentivised efforts to halt production decline. However, as in the Arctic, decline is now forecast to be arrested. Lukoil, for example, are planning substantial investment over the next four years at fields like Khvalynskoye and Yuri S. Kuvykin, where ice-class jack-up production units are likely to make development feasible. By 2023, the area is forecast to account for 24% of Russian offshore oil and gas production (excluding gas produced by fields off the Crimea, over which Russia now has de facto control, and which produced 410m cfd in 2013).

Expanding Eastwards

The Russian Far East is a relatively new area of offshore E&P. The Sakhalin-2 project started up in 1996 but offshore activity is still geographically limited, even if production volumes, at 0.78m boepd, are significant. The area accounted for 88% of Russian offshore production in 2013. Moreover, the Far East is Russia’s window on the developing economies of the Asia Pacific region, so companies are seeking to increase activity there, particularly with regards to LNG. In October 2013, the first Sakhalin-3 field, Kirinskoye, a subsea-to-shore development, began ramping up to 580m cfd. Further such field developments are planned out to 2023, when the area is projected to produce 0.95m boepd, its share falling to 65% despite new Capex due to faster Arctic and Caspian growth.

Thus production is forecast to grow in each of Russia’s offshore areas, driven largely by investment in high-spec jack-up, fixed platform and subsea field solutions. Total offshore oil production is projected to grow with a CAGR of 8.9% from 2014 to reach 890,000 bpd in 2023, and gas production likewise at 2.5% to reach 3.36 bcfd. Offshore would then account for 6.7% of the country’s oil and gas production, a far cry from the 2% nadir of post-Soviet decay.