Big Oil’s Deepwater Delight: New Finds Stoke Exploration Enthusiasm”
As the oil and gas industry convenes in Houston for its annual offshore energy showcase, the spotlight is on deepwater discoveries in regions like Guyana, Namibia, and the U.S. Gulf Coast. After a period of decline due to factors such as the U.S. shale boom and cost overruns, deepwater exploration is experiencing a resurgence driven by discoveries and improved project economics.
According to Pablo Medina of Welligence, deepwater projects now offer attractive attributes for oil and gas companies, including longer-term production, lower breakeven costs, significant resource potential, 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 increase significantly by 2027.
Matt Hale of Rystad Energy highlights that with oil prices above $70 per barrel, energy producers can expect a relatively short payback period of around six years for multi-billion-dollar deepwater projects. Additionally, deepwater resources generally have lower carbon emissions intensity than shale and other tight oils, making them appealing to investors amid tightening environmental regulations.
Recent technology breakthroughs and discoveries, such as Namibia’s Mopane field and Chevron and TotalEnergies’ Anchor project in the Gulf of Mexico, have fueled enthusiasm for deepwater exploration. The Stabroek block off the coast of Guyana, operated by ExxonMobil, has particularly showcased the potential for low-cost production, with breakeven prices comparable to some of the best deepwater fields globally.
This renewed interest in deepwater exploration has also benefited offshore drilling contractors, with demand and rates for drilling vessels rising. Rates for some vessels have exceeded $500,000 per day, and contract durations are extending as vessel supply becomes limited. Overall, the deepwater market is expected to stabilize in the coming months, signaling a promising offshore exploration and production future.
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