There have been radical changes in perceptions of global oil and gas market futures in the last ten years. These changes in expectations of reserves, demand, prices and supply sources have triggered revolutions in technological and commercial practices in the offshore business. These new concepts are designed to protect and enhance oil company profitability in their upstream activity, but they also bring daunting challenges for service and contracting companies and for their investors and shareholders.

This paper looks at the reasons for these changes, the evidence of the pace of change, examines some of the consequences and explores where the changes may lead in the future. The evidence used to illustrate these themes is drawn from the work of Petrodata Research which has been carrying out analysis and forecasting in global offshore markets for more than 13 years

New Wars, New Weapons

The battle for shares of oil company capital spending in the offshore market in the decade to 2005 will be fought across a technological and contractual landscape radically different from the familiar terrain of the last 20 years. The winning companies will therefore be quite different too, whether they have the same names as the players of the last decade or not. It is no foregone conclusion that the leaders in offshore contracting in the 1970s and the 1980s will also be the main players in the year 2000.

The evidence is that the market for new field development contracting which has already changed dramatically, will change further still and that the companies which dominated the business in the last ten years are finding it hard to adapt quickly enough and more difficult still to make money.

If there is one single factor which is forcing more change more quickly than at any time in the last 20 years of offshore contracting, that factor is the oil industry's huge and very rapid achievement in squeezing much more oil out of every dollar spent during the last five years or so. The subsea revolution plays a big role in that achievement. The North Sea is the front line in that revolution but the changes are moving fast worldwide, especially in water depths of 70 metres and more. Indeed, production in very deep water is likely to spread beyong Brazil to the US Gulf of Mexico, to the West of Shetland play and elsewhere.

The winning contractors which will lead the market through the next ten years will be those which follow and match the changing mix in capital expenditure on new offshore production systems. The capital spend profile of the 1970s and 1980s was shaped by fixed platforms and their topsides and their associated installation and hookup techniques and equipment. The profile of the winning contractors was naturally the same.

The profile for the next ten year is different. There is a much wider spread of field development categories. There are many more projects, mostly much smaller in size, shorter in lead time and deliveries

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