WorldOil

Deepwater statistical report

With international oil companies facing stiff competition for resource capture opportunities, Wood Mackenzie looked at discovery trends in deepwater basins to examine whether deepwater continues as the most exciting opportunity in global exploration. Explorers continue to find volumes in excess of a billion barrels in deepwater basins; however, the biggest finds no longer deliver top-level returns. Since 2002, full-cycle Internal Rate of Return (IRR) on new billion-barrel resources in deepwater have fallen to near 15% from around 25%. Cost inflation is the most directly identifiable reason. Higher day rates for specialist rigs increase both finding and development costs. This has been evident since 2004. On top of this, a mixture of higher prices for input materials has pushed costs up further. Development costs have also been affected by shortages in floating equipment and subsea installation markets. The increasingly uncertain environment around deepwater costs and returns means that projects are taking longer to sanction.