March 2000 Vol. 221 No. 3  Offshore

Robert E. Snyder,  Editor

Have work, need people

Speaking at the Seabed Mapping and Inspection Conference in Norway on February 4, John Westwood of oil and marine analysts Douglas-Westwood Associates gave a forecast of growing demand for offshore industry services over the next five years.

He said, "The most important driver will be increasing oil demand driven by improvements in the SE Asian economies, coupled with an outbreak of reality from OPEC, which means that oil prices have a greater probability of staying above $20 than below $10. Oil company investment in new projects, although slow to build after the downturn, will begin in 2000 and should result in a strong return of business in 2001. One major factor impacting on this will be the growth of cash in oil companies resulting from higher-than-expected oil prices."

Westwood noted that one of the most problematic offshore regions is NW Europe due to its high costs. "However," he said, "This is being addressed, and costs will fall and activity grow. And there is a lot to go for, with the region having a very large number of small fields in prospect.

"New technology such as AUVs will make a major impact on seabed surveying, in part driven by the need to survey in deeper waters. But in the longer term, contractors will increasingly enhance the efficiency of survey vessels in conventional hydrographic surveys.

"Other important markets are also developing for underwater contractors in areas such as telecom cables – and government hydrographic surveys will be increasingly contracted out to survey companies. The result is that contractors will continue to diversify their business to depend less on the offshore oil industry, and their financial stability will improve in the longer term.

"But for many of the commercial contractors involved, ocean surveying is now a market that is too small to meet their shareholder objectives. Therefore, we expect the on-going diversification into associated business areas to continue. For example, within the UK, about one-third of survey contractors’ revenues now originate from ROV operations."

On a cautionary note, Westwood concluded that, "There is a strong possibility that personnel shortages will develop as the offshore industry again grows, due in part to people leaving the industry following the oil price downturn and not returning. Added to this is the fact that much of the industry is populated by ‘grey-haired, over-50s’ approaching retirement. The other factor is that, as the technology boom continues in other industries, the offshore industry will have a growing problem in competing for personnel."

Record UK production. While drilling levels would not indicate it, UK oil and gas production reportedly reached record levels in 1999, according to the Royal Bank of Scotland, as noted in The Offshore International Newsletter. Oil production was up 3.2% from 1998 levels, reaching the highest production level since Royal Bank records began in 1983. The average 1999 oil price was $17.88/bbl, a 40% increase from 1998.

According to the Royal Bank report, the outlook for 2000 remains substantially dependent on actions of OPEC and its allies. Continued output restriction could move prices higher in the short-term, but the gap between current higher prices and lower production costs for the area is such that only a lower price is sustainable in the longer-term, according to the report.

$2.5 billion Campos development. Halliburton Co. has reached an "advanced stage" toward a conclusion with Barracuda & Caratinga Development Corp. for development of both Barracuda and Caratinga fields in Brazil’s Campos basin, in 2,600 and 3,400-ft water, respectively. Final contract negotiations were scheduled to be completed in late February, with a late March contract signing, subject to the completion of project financing.

The contract is valued at more than $2.5 billion and will be performed by both Brown & Root Energy Services and Halliburton Energy services business units. The work will be on a full engineering, procurement, installation and construction (EPIC) basis, including construction of 51 wells, fabrication and installation of flowlines and risers, construction and installation of two FPSOs, and commissioning, start-up and operations support for both fields.

A minimum of 40% of the value of the FPSO work will be done in Brazil. The drill rigs and certain drilling management will be provided by Petrobras EP as part of the contract scope. Dave Lesar, Halliburton’s president and CEO said, "We are excited to move forward with this integrated project. We believe this will be the largest offshore EPIC project ever awarded to a single contractor."

Well-deserved recognition. The U. S. Coast Guard, in December, honored Paul L. Kelly, senior vice president, Rowan Companies, Inc., with a Public Service Commendation, in recognition of his seven years of sevice on the National Offshore Safety Advisory Committee. Mr. Kelly, who served on NOSAC from January 1993 to November 1999, actively participated in numerous subcommittees.

The commendation, presented by the Commandant of the USCG, notes that, "Most notably, he served as chairman on a standing subcommittee that produced a report on ‘Impact of IMO/ISO issues on the U.S. offshore industry.’ This report has become an industry textbook on the structure and workings of IMO and ISO."

Another working group chaired by Mr. Kelly produced a comprehensive report on the "International safety management code implementation for U.S. flag offshore vessels."

The commendation states, "Mr. Kelly’s expert knowledge of the offshore industry and his dedication to NOSAC served to inspire others with a genuine willingness to work with the Coast Guard in promoting safety in the offshore and marine industry."

We at World Oil know Paul for his editorial contributions as a long-time member of our Editorial Advisory Board. And we always see him around the halls and the working committee groups at the National Ocean Industries Association meetings, a group that has benefited greatly over the years from his contributions.

Copyright © 2000 World Oil
Copyright © 2000 Gulf Publishing Company