Oil and gas companies have boosted offshore drilling in recent months, finding large resources in the newest exploration hotspots and aiming to develop huge low-cost, low-emission oil and gas fields that will yield decades of high returns.
The majors are investing more in deepwater exploration as they are doubling down on their pledge to continue delivering oil and gas to meet global demand. The high offshore drilling activity is already showing in the rising profits and backlogs of the world's top oilfield services providers and rig charterers.
The oil and gas majors-ExxonMobil, Chevron, Shell, BP, TotalEnergies, and Eni-are winning more acreage in frontier basins for deepwater drilling in the Atlantic Margin, the Eastern Mediterranean, and Asia, with Namibia and South America standing out, according to estimates by consultancy Rystad Energy. Related: Russia's Oil Revenues Doubled in April Compared to a Year Earlier
Next year, capital expenditure (capex) on new deepwater drilling is set to jump to the highest level in 12 years in 2025, Rystad Energy reckons. At the same time, capex on all-new and existing deepwater fields could surge by 30% in 2027 compared to 2023, to $130.7 billion, per the consultancy's estimates cited by Reuters.
There have been some major recent exploration successes in offshore areas. These include Guyana's Stabroek block, where Exxon and partners have already made discoveries estimated at a total of 11 billion barrels of oil equivalent in place, as well as Namibia, where Shell, TotalEnergies, and Portugal's Galp have announced major oil discoveries in the past two years, including one giant find just last month.
At the end of April, Galp Energia said that the first phase of its exploration in the Mopane field offshore Namibia could contain at least 10 billion barrels of oil.
Namibia is a key exploration target for Shell, TotalEnergies, and Portugal-based Galp.
TotalEnergies and Shell have already made large discoveries offshore Namibia, kicking off the Namibian oil rush in 2022.
TotalEnergies made a significant discovery of light oil with associated gas on the Venus prospect in the Orange Basin in early 2022. Venus in Namibia could be a "giant oil and gas discovery," the French supermajor said in an investor presentation in September 2022.
Over the past two years, Shell has made four oil and gas discoveries in the Orange Basin offshore Namibia.
TotalEnergies and QatarEnergy are also expanding their efforts to explore for oil and gas in the Orange Basin offshore Namibia by acquiring a nearby license in the basin in South African waters.
"Following the Venus success in Namibia, TotalEnergies is continuing to progress its Exploration effort in the Orange Basin, by entering this promising exploration license in South Africa," Kevin McLachlan, Senior Vice-President Exploration of TotalEnergies, said in March.
Just last week, a BP-Eni joint venture, Azule Energy, announced an agreement to take 42.5% in an offshore block in Namibia, which Azule Energy CEO Adriano Mongini described as a "highly prospective hydrocarbon region."
Despite still uncertain development designs, timing, and production levels, Wood Mackenzie estimates that Namibia's oil economics could be robust, with net present value (NPV) remaining positive even at oil prices as low as $40 per barrel.
Namibia and other deepwater offshore drilling hotspots are pushing demand for offshore rigs and drilling services, as evidenced by the most recent financial results of major service providers.
A rebound in offshore drilling and continued demand for oil and gas helped SLB, the world's largest oilfield services provider, boost first-quarter earnings and offset a weaker North American market.
Valaris, a top offshore rig provider, raised its total contract backlog to more than $4.0 billion as of April 30, 2024-the sixth consecutive quarter of backlog growth and a 43% increase from twelve months ago.
"We see strong customer demand for work that is expected to commence in 2025 and 2026, highlighting the longevity of this upcycle," Valaris's president and CEO Anton Dibowitz said.
By Tsvetana Paraskova for Oilprice.com
Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More
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