Offshore services costs and rig rates will continue to fall until 2018 when the resulting lower breakeven will boost the sanctioning of new projects by oil companies back to average levels according to Rystad Energy.

In terms of approval of new oil and gas projects globally 2015 and 2016 have approved projects only equivalent to 19bn barrels of oil and gas, most of this was gas, and this was the lowest level since 1967, Jarand Rystad, managing partner of Rystad Energy, told a seminar in Singapore on Tuesday.

The figure of 19bn barrels of approvals for the last two years compares to an average of 30bn barrels annually, and a peak of close 80bn barrels in 2009, over half of which came from offshore.

With higher oil prices in the first half of this year Rystad believes start driving final investment decisions on projects in the second half of 2017, with the levels of approvals returning to the $30bn mark in 2018.

There is a large backlog of deepwater discoveries not sanctioned for development globally, and with oil majors not well positioned to grab a slice of the shale oil market, they will look to develop deepwater discoveries as costs decline yet further over the next two years.

With service industry and the rig costs continuing trending down for another two years these projects will be very competitive versus the breakeven prices in a very hot market for shale, Rystad stated. So basically this will create a global investment curve.

The analyst sees the offshore platform and EPC market hitting the bottom in 2018 with new growth then being seen. Meanwhile the SURF and subsea markets are probably seeing the bottom in 2017 followed by a flattish market with steep growth in 2020.

The overall breakeven for offshore projects would fall from $70 per barrel to around $50 a barrel globally with many at significantly lower levels. Rystad noted a Barents Sea field which had a breakeven of $65 per barrel a year ago and now was $35. Statoil is quite determined it will develop this field and bring it into production by 2020.

If we look at the regions driving this, in the short term it will be Egypt with the Suez development and Norway, and also from 2018 Gulf of Mexico, while Brazil with all the issues we had there, and Angola and Nigeria are not contributing to this growth in the short term, he said.

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Offshore service and rig market to hit bottom in 2018, then rebound on new projects: Rystad Energy - Seatrade Maritime News