By Marek Grzybowski
Offshore wind energy has been treated as the best business under the sun since the beginning of the 21st century. But for the last two years, offshore oil and gas production has been highly profitable. Rystad Energy forecasts that the offshore oil industry can expect capital expenditures of around USD 200 billion in 2024 and 2025. This is twice the expected investment in offshore renewable energy sources. Investment projects at sea exceed the value of oil projects on land by approximately 50%.
Polish shipyards and steel structure manufacturers have a chance to join the division of the growing pie. CRIST and Nauta, shipyards from the Remontowa Group and Mostostal Gdańsk have their chance before the offshore wind energy market really takes off.
Over the next two years, the offshore oil and gas (O&G) sector will experience its highest growth in a decade. Today, expenditure on new investments in offshore oil and gas is estimated at USD 214 billion. Rystad Energy research shows that annual capital expenditures exceeded the USD 100 billion threshold in 2022 and will exceed it again in 2023. This is the first time the USD 100 million threshold has been broken. annually from 2012 and 2013
Global demand for fossil fuels remains and prices ensure the profitability of investments in the offshore oil and gas sector. Companies with concessions on the shelves are looking for environmentally friendly production sources at sea. Offshore O&G is back in the spotlight.
USD 500 million in investments by 2030
A broader perspective is provided by the “Horizons” report prepared by Wood Mackenzie. Many countries and companies have announced investment activity in O&G in 2023. The value of USD 500 million (according to information from 2023) will be achieved by investments in the development of global oil and gas assets. This is sufficient to meet peak demand in the 2030s.
According to the report “More for Less: Is there enough investment in the mining segment?”, current spending on the mining segment is just over half of the 2014 peak of $914 billion (2023 estimates).
“This apparent shortfall has led to widespread belief that the industry is under-investing and that a supply crunch is inevitable, sooner or later,” warned the authors of the Wood Mackenzie report, based on market information.
“This has never been Wood Mackenzie’s opinion,” said Fraser McKay, Wood Mackenzie’s director of mining analysis. He stressed that: We have long held the view that spending and supply will increase to meet growing demand, and that the mining industry will not and cannot repeat the shameful years of peak inefficiency of the early 2010s.
Shell – 5 times more in oil than in wind
New analysis shows that Shell invested 5 times more in oil and gas in the third quarter than “Renewable Energy Solutions” reports the company. Payouts to shareholders totaled $5 billion. The company also announced an increase in share repurchases next quarter to $3.5 billion, bringing the total announced shareholder payout for 2023 to approximately $23 billion.
Payouts to shareholders were 7 times higher than for investors operating in the “low-emission” segment in the third quarter of 2023. An analysis by the Common Wealth think tank shows that in the results for the third quarter of 2023, Shell recorded profits of USD 6.2 billion .
Payouts to shareholders totaled $5 billion. The company also announced an increase in share repurchases next quarter to $3.5 billion, bringing the total announced shareholder payout for 2023 to ~$23 billion.
Oil is better than before the pandemic
– Offshore activities are expected to account for 68% of all conventional hydrocarbons in 2023 and 2024, compared to 40% in 2015–2018, says Rystad Energy.
Comparisons with the period from 5 years ago are cautious because it precedes the Covid-19 pandemic and the related decline in oil prices. In terms of total number of projects, offshore investments will account for almost half of all projects in the next two years. In the years 2015–2018, this share was only 29%.
New investments will be a significant support for the offshore services market, as it is assumed that supply chain expenses will increase by 16% in 2023 and 2024. This will be the highest increase in the costs of handling offshore oil and gas production in a decade.
Fees for services in the 0&G maritime sector are expected to increase by PLN 21 billion within a year. Thanks to this, companies operating drilling platforms, ships, undersea installations and entities providing services related to the storage and unloading of gas and oil will be able to develop and modernize.
One of the leading global factors is the significant expansion of offshore activities in the Middle East. For the first time, offshore upstream spending in the region will outpace all others, thanks to giant projects in Saudi Arabia, Qatar and the United Arab Emirates.
Saudi Aramco – USD 300 million over 10 years
The growth in offshore spending in this region looks set to continue for at least the next three years, rising from $33 billion in 2023 to $41 billion in 2025. These countries are using their vast offshore resources to meet the growing global demand for oil, with the support of the necessary capital and infrastructure to stay ahead of other producers.
This is confirmed by the announcements of leading companies from a few years ago and their investment activity today. For example, Saudi Aramco, well known in Poland, is currently the most profitable company in the world with an investment potential of USD 3.2 trillion by 2030. Already 5 years ago, Saudi Aramco announced that it would invest USD 300 billion in oil and gas projects in the coming years. 10 years.
– In the coming decade, we plan to invest over USD 300 billion to strengthen our leading position in the oil sector, maintain oil production capacity and implement a large exploration and production program focusing on conventional and unconventional gas resources – announced Amin Nasser, CEO a few years ago Saudi Aramco at a conference in Istanbul, quoted by MEED.com.
Aramco’s CEO stressed that processing crude oil into petrochemicals will be a key priority for the oil company in the coming years. He also said that the company will continue to pursue a number of initiatives to include solar and wind energy in its development program.
While Nasser reaffirmed Aramco’s commitment to investing in the kingdom’s hydrocarbon sector, he warned that oil markets could face a shortage of oil supplies in the future as a result of a global decline in investment and new exploration efforts.
Windfall profits from oil and gas
It turned out that the profitability of the offshore O&G business meant that these predictions did not come true. “Offshore oil and gas extraction is not going anywhere, and the sector is probably more important now than ever before,” says Audun Martinsen, head of supply chain research, Rystad Energy.
As one of the lower-carbon methods of hydrocarbon extraction, offshore operators and service companies should expect windfall profits in the coming years as the world’s superpowers try to reduce their carbon footprints while accelerating the energy transition
The undoubted investment leader is the Middle East. South American countries, including Brazil, are less active. Based on the launched contracts, Rystad Energy predicts that “investments in the North Sea on the shelves of Great Britain and Norway will increase over the next two years.”
UK offshore spending is expected to increase by 30% to $7 billion in 2023. Last year, Norwegian investments reached USD 21.4 billion, which means an increase of 22% compared to 2022. Brazil’s offshore O&G spending in 2023 reached $23 billion. In Guyana, $7 billion was spent on the offshore maritime sector and its services. In North America, offshore spending reached $17.5 billion in the US and $7.3 billion in Mexico.
Petrobras plans to deploy 16 FPSOs on six fields on the shelf operated by the Brazilian giant. The installations are scheduled to be launched before the end of this decade. Stabroek in Guyana will be developed.
Norway will spend 240 billion kroner. A chance for Poland
Reuters reported last December that oil and gas companies operating in Norway are expected to invest 240 billion kroner ($21.85 billion) in 2024, up from 220.5 billion in 2023.
A new investment forecast was published by Offshore Norway. it is based on a survey of members. A year earlier, operators operating in the maritime O&G business reported that investments in oil and gas in 2024 would amount to NOK 194.3 billion. The increase in investment expenditure results from new developments on the oil and gas trading market and the increased scope of ongoing projects. The value of the new contracts was also verified taking into account the inflation rate and the weakening of the Norwegian currency.
The increase in investment expenditure in the maritime O&G sector is also good news for the Polish ship production and repair industry, as well as companies participating in the supply chain of steel structures for mining platforms and associated installations. The beneficiaries of activity on the mentioned market may be the CRIST and Nauta shipyards, Grupa Remontowa, or companies such as Mostostal Pomorze.
There is also disturbing information. The demand for qualified employees will certainly increase in the offshore business and its surroundings. Polish companies can expect to be sucked out of the poor Polish labor market. Undoubtedly, the offshore O&G market may constitute an interesting piece of the cake for the Polish maritime business.