World Wood Mac: Offshore oil looks promising, but bottlenecks remain

Wood Mac: Offshore oil looks promising, but bottlenecks remain

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Brazilian President-elect Luiz Inacio Lula da Silva shown here waving to supporters during a visit to France last year. Analysis from Wood Mackenzie finds his country is a standout in terms of deep-water crude oil production. File photo by Christophe Petit Tesson/EPA-EFE

Nov. 29 (BP) — Crude oil production in global deep water is accelerating, though supply-chain issues could put a lid on the potential, analysis from Wood Mackenzie found.

Wood Mackenzie in a research note published Tuesday found that global deep-water production is on pace to increase by more than 60% from current-year levels by 2030. Of that, ultra-deep-water production, classified for depths greater than 4,900 feet, close to a mile, is expected to accelerate the fastest through 2030.

Brazil is the leader in terms of deep-water production, accounting for about 30% of the total output, according to the analysis. Production in the lucrative Santos Basin started in 2009, when total liquids production stood at 2.5 million barrels per day. That level is around 3.8 million bpd today and the statistics office at the U.S. Energy Department estimates production will increase by another 400,000 bpd next year.

Brazil’s prospects could be tested by the return of Luiz Inácio Lula da Silva to the Brazilian presidency. Known simply as Lula, the former union leader led Brazil through a period of growth from 2003 to 2010,during which he introduced social programs to combat poverty and revitalized the nation’s oil industry.

But he was later ensnared in a sweeping investigation on corruption- dubbed Operation Car Wash – and was convicted in 2018 of accepting more than $1 million in bribes from Petróleo Brasileiro, the oil company better known as Petrobras.

Guyana is another standout in Wood Mackenzie’s assessment of deep-water production. John Hess, the CEO of U.S. oil and gas explorer Hess Corp., described the potential there as “massive” when in 2018 the company estimated the total recoverable reserves in the deep-water Stabroek block at more than 4 billion barrels of oil equivalent.

Guyana produced around 230,000 bpd in May and Wood Mackenzie estimates that could reach the 1 million mark within the next five years.

Nevertheless, Wood Mackenzie’s report cited supply-chain issues as an inhibiting factor. Service companies like Schlumberger and Baker Hughes have cut their fleets, limiting the availability of essential systems such as floating production rigs. Cost for offshore rigs, meanwhile, have doubled compared with year-ago levels, with parts of Brazil among the hardest hit.

“With activity levels growing, equipment and services availability will be a constraint,” analysts wrote.

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