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60% (US) and 42% (UK) of 2014 levels.
However, for Australia we see the downturn
having a significant impact, as we estimate off-
shore investments to hit bottom in 2018 with $5
billion, before increasing to $8 billion in 2022,
still nearly 75% below 2014. The poor recover y
in Australia is due to many LNG investments
in the years prior to 2014, which subsequently
became a lot more expensive than budgeted.
With low LNG prices in Asia, these investments
have struggled severely with profitability, and
companies have largely postponed further
investments or deemed projects uncommercial.
In addition, offshore exploration activity in
Australia has collapsed in recent years, with
no signs of a recovery. This resulted in few
new projects to invest in, thus prolonging the
downturn in that region.
On the production side, global offshore
production has been strong in recent years,
despite the downturn. Total production has
been increasing since 2013, and Rystad Energy
estimates a continued growth until a peak in
2020, before it declines in both 2021 and 2022.
If we look at offshore production at a country
level, the trends are even more diverse than in-
vestments. Rystad Energy forecasts that among
the five countries with the highest estimated
production in the period – Saudi Arabia, Qatar,
Nor way, Iran, and Brazil – the trio of Saudi Ara-
bia, Iran, and Brazil are showing strong growth
after 10 years of flat development. Qatar offshore
production, on the other hand, is showing the
opposite trend, being quite stable after a decade
of high growth, while Nor way production is stay-
ing at a stable level with year-to-year volatility.
This results in Iran climbing up to the largest
offshore producer in 2022, ramping up produc-
tion after the sanctions against the country were
lifted in 2015. The forecast assumes that there
will not be any new sanctions imposed on the
country which would have a deleterious impact
on oil production.
Split into gas and liquids, we see offshore gas
production also performing strong moving for-
ward, while liquids have a peak in 2019 before
experiencing some decline. The production
growth starting in 2013 is due to the sanction-
ing of many projects in 2009 and onwards, when
the oil price increased from $40/bbl to $128/
bbl at the peak. However, offshore production
is significantly more complicated than onshore
production, requiring large investments in
equipment that take a long time to construct.
Therefore, the results of these increased invest-
ments are first visible on production profiles
several years after the investment decision.
This is also why we have seen strong produc-
tion during the industry downturn, as several
projects sanctioned before the price collapse
have come online. Kashagan Phase 1, Hasbah
and South Pars phases 17-18, 19 and 20-21 are
all such assets, and these five alone increase
yearly global offshore production with an esti-
mated 615 MMbbl from 2014 to 2019.
The same relationship is also the cause for the
decrease in forecasted liquids production after
2019, namely the impact of the aforementioned
decline in investments after 2014. There will sim-
ply not be enough new projects coming online
to cancel out the natural decline in production.
We can clearly see the dynamics in the industry
between investments and production, where production follows the investments profile, but with
some years lag. Due to this evident relationship,
we expect the production will quickly recover
again after 2022, as the estimated increased
investments post-2018 will result in new assets
and thereby new production.
Based on this analysis, Rystad Energy sees
higher investments going for ward, as activity
increases and companies improve the capital
efficiency of their projects. Therefore, we believe the global offshore oil and gas market
outlook is strong and healthy, and offshore
production will be an important part of the
future total production. •