Going to ever greater lengths in the depths.

Deep (>500M) and Ultra-deepwater (>1500M) activity continues to provide one of the key drivers to the overall expansion of offshore activity around the world. But while the growth in exploration activity of the past five to seven years manifests itself into record breaking levels of expenditure it is important to see through this fog of activity and effort and look
at where this sector is heading.

In relative terms the deep and ultradeepwater regions are still under-explored and hold considerable potential but the industry has to face the reality that, without diminishing the
inherent risks and challenges, deepwater is not the frontier zone it was five years ago. This particular point was made by the Nigerian authorities in their latest licensing round and
begrudgingly accepted by the major operators.

The reality is that within the Golden Triangle of Brazil, the US GoM and West Africa considerable infrastructure is in place in terms of facilities and lines that will act as the key to many of the future fields under development and in prospect.

A raft of new deepwater facilities and facility expenditure that averages over $3bn per annum will continue but it is expected that most major operators will take a truly two-pronged approach, one targeting new facilities but with a second of equal effort concentrating on maintaining the production profiles of the behemoths that have been developed over the
past few years.

One exception to this prognosis is the continued growth and development of ultradeepwater activity and expenditure. While still regarded as a niche area and with activity heavily concentrated in the US GoM, the five facilities installed over the past five years will expand threefold over the next five years.

Beyond the record breaking peak of $5.2bn of deepwater facility expenditure forecast for 2006, beyond the next five year window this sector will maintain its position as one of the bedrocks of expansion of the offshore industry. Within this picture, regions such as Asia and Australasia are likely to contribute an increasing percentage of both units and
expenditure as the lessons and experience of the Golden Triangle are applied throughout the world.

In conjunction with the global expansion of deepwater activity, there is an increase in the number and mix of both operators and field partners. The deepwater club is no longer the
exclusive domain of a select band of major operators as the number of players with exposure to this sector grows exponentially.

As the number of players has grown, the international skills and experience base has continued to develop and is actively
contributing to the globalization of deepwater activity.

Source: Global Perspectives Deep and Ultra-deepwater Market Update 2005/09

This article is reproduced from the OTC05 Wednesday 04/05/2005 Show Daily with kind permission of the Offshore Engineer.

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