Offshore exploration is back in the spotlight as Big Oil returns to Houston for the industry’s annual showcase of offshore energy projects and equipment. Deepwater discoveries off Guyana, Namibia, and the U.S. Gulf Coast are taking center stage, signaling a resurgence in deepwater drilling.
After a period of dimmed offshore exploration due to the U.S. shale boom and past cost overruns, newer deepwater projects are attracting oil and gas companies with their longer-term production, lower breakeven costs, big resource potentials, and lower carbon emissions. Capital spending on all-new deepwater drilling is expected to reach a 12-year high next year, with investments in new and existing deepwater fields projected to hit $130.7 billion in 2027.
With crude oil prices above $70 a barrel, energy producers can expect a return on their multi-billion-dollar deepwater projects in just six years, a relatively short period considering the wells’ longer lives compared to shale. Additionally, deepwater resources offer lower carbon emissions intensity than shale, making them an attractive option for investors as environmental regulations tighten.
Excitement for offshore drilling has been fueled by recent discoveries and technology breakthroughs, such as the ultra-high pressure environment breakthrough by Chevron and TotalEnergies in the Gulf of Mexico. The Stabroek block off the coast of Guyana has also shown potential for low-cost production that rivals the best deepwater fields elsewhere.
Overall, the renewed interest in deepwater exploration has boosted demand and results for offshore drilling contractors, with rates for vessels surpassing $500,000 a day and contract durations lengthening. The industry is expected to reach a crescendo in the next 18 months as the deepwater rig market levels out, signaling a promising future for offshore energy projects.