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Subsea Hardware Market exposed to Oil Price Downturn as Backlog Declines, Expenditure to total $94.3 Billion over 2016-2020 Period
Douglas-Westwood (DW) expects subsea hardware Capex to total $94.3 billion (bn) over 2016-2020. This represents a 19% decline compared with the preceding five-year period. Capex and subsea tree installations are not expected to return to 2014 record levels during the forecast period. This is due to a sustained decline in the number of subsea tree orders, following record order levels in 2013. Historically high backlog levels have cushioned the market against the decline in order activity. However, DW does not expect this to be sufficient to counteract a further decline in orders in the near-term, exposing OEMs (original equipment manufacturers) to the impact of the oil price downturn.
Despite these near-term concerns, the long-term fundamentals of the subsea hardware industry are strong as they continue to benefit from continued increase in hydrocarbon demand, declining onshore and shallow water reserves and technological improvements. Despite concerns over deepwater project economics, subsea expenditure continues to trend towards deeper water, which accounts for 48% of total expenditure over the forecast period – an 8% increase compared with the hindcast. This growth is supported by projects in water depths greater than 1,000metres. Over the next five years, development activity in the established deepwater provinces, coupled with the start of field development in frontier areas such as East Africa, will support expenditure.
Overall, subsea hardware expenditure will be highest in Africa, Asia and Latin America, which will account for a combined 47% of total Capex over the forecast period. The largest proportion of expenditure will be attributed to pipelines (41%), whilst subsea production and SURF will account for 33% and 26% respectively. Pipeline kilometres to be installed over the 2016-2020 period will remain relatively high. This market is heavily dependent on a handful of major projects, and as a result, the cancellation or stalling of any of these projects will have a negative impact on the market size over the forecast period.
Over the forecast period, subsea hardware Capex will be constrained as the prolonged low oil price hits numerous projects on a global scale. This will have a negative impact for both operators and subsea manufacturers, as the impact of delayed projects is likely to last long into the forecast period even as oil prices start a slow recovery. However, some projects are expected to be sanctioned once development concept has been redefined and equipment costs lessen.
The World Subsea Hardware Market Forecast 2016-2020 details specific subsea hardware trends by region and component supported by analysis, insight and industry consultation, and includes:
- Key drivers – discussion of factors affecting deepwater activity, including: sustained low oil & gas prices; deepwater production to offset declining production from onshore and shallow water basins; E&P spend of international operators; and Petrobras’ activity in Brazil.
- Supply chain – detailing the key players within the subsea hardware market and analysis of top manufacturers’ subsea orders and backlog.
- Regional forecasts – forecast Capex within each region, including examples of notable projects and operators within the region and countries with most activity. Each regional forecast is broken down by water depth category.
- Component forecasts – forecast by subsea production hardware (trees, controls, templates & manifolds, flying leads, jumpers), SURF and pipeline Capex and units/km installed.
Why purchase the World Subsea Hardware Market Forecast?
DW’s market forecasting is trusted by sector players worldwide, with clients including the world’s top-10 oil & gas companies, top-10 oilfield services companies and top-10 private equity firms.
The report is relevant for financial institutions, equipment manufacturers, offshore construction companies, drilling operators, oilfield services companies and oil & gas companies wanting to better understand where and when to make investment decisions.
Our proven approach includes:
- Unique and proprietary data – updated year-round from published sources and insight gained from industry consultation.
- Detailed methodology – the report uses research from DW’s ‘Oil & Gas Database’, an in-house information system exclusive to DW. Our global analyst team is involved in the gathering and analysis of deepwater market data through primary research and professional networks. A project-by-project review of development prospects drives a data-rich market model and forecast.
- Comprehensive analysis – examination, analysis and 10-year coverage of expenditure by region, depth and hardware type: subsea production hardware, SURF and pipelines.
- Concise report layout – consistent with DW’s commitment to delivering value for our clients, all our market forecasts have a concise layout consisting of industry background and supporting materials condensed to enable quick review with ‘speed-read’ summaries of key points throughout.