Subsea market surging forward

Oslo-based consultancy Rystad Energy is very positive about the prospects for the subsea services market going forward. According to analyst Henning Bjørvik, the subsea services market is one of the top performers in terms of oil and gas operations.

Demand for maintenance and operations of offshore vessels globally from 2019–2024 grew by a compound annual growth rate (CAGR) of 13% in Europe, reports Rystad Energy. Offshore drilling contractors are also expected to find a favourable business climate with CAGR of 13%, while subsea equipment sales are forecast to climb 11%, and subsea services by 8%. Seismic and geophysical services are anticipated to increase by 10% CAGR.

‘We expect the subsea market to outpace other market segments, and see annual growth of up to 13% CAGR, which is pretty remarkable growth actually,’ Bjørvik told a group of industry journalists, including Petroleum Review.

In 2018, global demand for oilfield services was $610bn, of which subsea equipment and installations accounted for 4% at $23bn. Back in 2014, before the oil price slump, the subsea equipment market had about $46bn of revenues. ‘Even though we predict a pretty steep growth in terms of CAGR of about 13% between 2108 and 2023, we think that the rate of recovery will be a bit long. 100% recovery to 2014 levels is unlikely before 2026, with 80% recovery in four years’ time,’ he said.

Rystad Energy breaks down the subsea sector into three main markets:

• Subsea equipment – subsea wellheads, subsea trees, manifolds, control modules, etc.
• Subsea services – inspection, maintenance and repair (IMR), ROV (remotely operated vehicle) drill support, flow assurance services, etc.
• SURF – subsea umbilicals and flow lines, and installation.

‘Typically, SURF are greenfield-driven markets, while subsea services are more brownfield and have longer time-frame agreements, and tend to be a more sluggish market,’ Bjørvik explained. However, the subsea services market was the first to return to growth around 2016-2018. While the subsea equipment and SURF markets began rising from 2018 (see Figure 1). ‘Some of the growth is driven by inflation. Demand for subsea trees is also a prime driver for subsea development.

The subsea market started booming in the mid-1990s. By 2000 there were about 350 subsea trees, then the market went flat to 2011, and started increasing with about 400 installed in 2013. Then the downturn came. About 250 subsea trees were installed in 2017 and the market has been recovering since. ‘Now we expect a lot of new trees to be installed going forward, with 7% CAGR between 2017 and 2023. The same is happening with manifold installations (mostly for greenfield sites) which are expected to double from 2017 to 2021,’ he said.

Demand for SURF lines are also expected to show the same pattern, apart from the peak due to development of Egypt’s massive Zohr field in the Eastern Mediterranean, which accounted for 30% of SURF plant in 2017.

‘Lots of subsea installation FIDs (finance investment decisions) are coming. We expect a lot of subsea tie-backs to come into play and have already seen a shift in 2017/2018 on both the UK Continental Shelf and Norwegian Continental Shelf,’ Bjørvik said. ‘Moreover, FID in 2019/2020 will largely be driven by offshore Brazil developments. Norway and the UK are driving up subsea installation growth to 2021. Then it will be driven by countries such as Brazil and major developments like ExxonMobil offshore Guyana.’

Figure 1: Subsea production systems (SPS) and subsea umbilicals and flow lines (SURF) are to drive market growth 
Source: Rystad Energy