Investment in Subsea Oil Operations Expected to be $13.9 Billion this Year

Oil producers are working in ever more challenging environments as they continue to develop newer fields. Deepwater operations are becoming more common, with some oil being extracted in as a much as two miles of water.

This is producing a number of technical challenges related to the drilling, safety, maintenance, and extraction of the oil to the surface, and this all increases the operating cost of the rigs in such fields.

One solution that is growing in popularity is to relocate as many of the surface activities as possible to the seabed, this reduces the maintenance required and the down-time from weather disruptions, which according to Martin Craighead, chief executive officer at Baker Hughes Inc., can cost companies billions of dollars. Being able to improve oil recovery efficient by just one percent can translate into an extra $3.2 billion for some projects.

Purchases of subsea valves, pipelines, and cables needed to develop underwater extraction and processing plants are estimated to reach $13.9 billion this year, up 66% from last year.

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Equipment makers specialising in subsea paraphernalia that can withstand the huge pressures and freezing temperatures experienced at extreme depths, such as FMC Technologies Inc. and Cameron International Corp., are the most likely to gain from the large increase in investment expected in the sector.

James Crandell, an analyst at Cowen Securities, said that, “a powerful wave of orders has begun to affect subsea equipment providers that in our opinion will last for at least the next five years and probably more. We believe no one will benefit more from this wave than FMC Technologies.”

The ultimate aim for oil companies is to move all current surface activities down to the sea bed, including well flow controls, basic processing, and the transportation of oil and gas to onshore markets.

David Eyton, head of technology at BP, explained that there “is a balance to be struck here between the capital savings that you can achieve, in theory, from putting more and more of it on the seabed, and operating costs and reliability and safety of what you’ve created.”

For more detailed reports on the investment opportunities within the Subsea Sector please visit the following links:

Deeper & Smarter: The Subsea Oil & Gas Growth Outlook

Subsea Processing: Cutting out the Expensive ‘Middle Man’

By. Charles Kennedy of Oilprice.com