Subsea Market Poised to Experience Significant Influx of Capital

The subsea market segment is poised to experience a significant influx of capital, Rystad Energy said in a release sent to Rigzone by the Rystad team recently.

“Driven by rising operator expenditure on equipment and installation services, Rystad Energy projects a 10 percent annual compound growth rate (CAGR) from 2024 to 2027, with total spending anticipated to exceed $42 billion by the end of this period,” the company stated in the release, which highlighted that the segment includes companies involved in production and processing systems.

Deepwater developments are set to dominate the sector, according to the release, which projected that these will account for 45 percent of the market from 2024 to 2028.

“Significant greenfield projects include Barracuda Revitalization in Brazil, Johan Castberg and Breidablikk in Norway, and Golfinho in Mozambique,” Rystad highlighted.

“Key brownfield initiatives include Balder Future, Gullfaks South and Schiehallion in Norway and the UK,” it added.

Ultra-deepwater projects, driven by major floating production, storage and offloading (FPSO) initiatives in Brazil and Guyana, are projected to capture 35 percent of the market, Rystad noted in the release.

“South America is expected to lead globally with 500 subsea tree installations over the next five years,” Rystad forecast.

“Upcoming ultra-deepwater greenfield projects (beyond 1,500 meters) include Yellowtail, Tilapia and Redtail in Guyana, alongside Buzios VIII, Buzios IX, Sepia and Atapu in Brazil. Notable brownfield projects are Trion in Mexico, Egina in Nigeria, and Argos (Mad Dog Phase 2) in the United States,” it added.

Cumulative spending is expected to reach $32 billion by the end of 2024, the release stated, pointing out that this represents a 6.5 percent increase from the previous year.

“This growth is driven by strong activity across services, equipment and SURF, largely fueled by significant investment in deep and ultra-deepwater projects,” Rystad noted in the release, adding that the subsea sector is also expanding beyond traditional oil and gas applications.

“The push for carbon capture and storage (CCS) is creating new opportunities for suppliers and spurring research and development in this emerging market,” Rystad said.

“Consequently, suppliers are leading the way in developing more efficient subsea production systems, which are set to see broader adoption,” it added.

In the release, Sanwari Mahajan, an analyst at Rystad’s supply chain research branch, said “the subsea market has rebounded robustly from the impacts of Covid-19, which caused a significant 20 percent drop in expenditure in 2020”.

“By 2021, the industry began to recover, with spending increasing by five percent to reach $23 billion. Looking ahead, we anticipate steady growth in the subsea sector, fueled by advancements in deepwater exploration and carbon capture and storage,” Mahajan added.

“This recovery highlights the industry’s resilience and suggests a promising trajectory of consistent progress,” the Rystad analyst continued.

In a statement sent to Rigzone back in March 2023, Rystad Energy said “offshore is back”, adding that “the offshore oil and gas sector is set for the highest growth in a decade in the next two years, with $214 billion of new project investments lined up”.

In that statement, Rystad noted that offshore activity is expected to account for 68 percent of all sanctioned conventional hydrocarbons in 2023 and 2024. It outlined that this figure would be up from 40 percent between 2015-2018.

“Comparisons against this period are prudent as it predates the Covid-19 pandemic and related oil price crash,” Rystad highlighted in the statement.

“In terms of total project count, offshore developments will make up almost half of all sanctioned projects in the next two years, up from just 29 percent from 2015-2018,” it added.

“These new investments will be a boon for the offshore services market, with supply chain spending to grow 16 percent in 2023 and 2024 , a decade-high year-on-year increase of $21 billion,” it continued.

“Offshore rigs, vessels, subsea and floating production storage and offloading (FPSO) activity are all set to flourish,” Rystad went on to state.

In a release posted on its website back in January 2023, Rystad said it expects the global market for oil and gas contractors to rise to a peak of $1 trillion in 2025 and remain at high levels for several years thereafter.

“Helped by strong growth in the midstream part of the industry to liquefy, transport, and re-gasify natural gas, overall oil and gas spending will stay above $920 billion annually on average for the 2022-2028 period,” Rystad stated in that release.

“Despite the risk that another downturn cycle in oil and gas may occur after 2025, oilfield service suppliers should be able to balance out the downturn by branching out into other parts of the wider energy market – and in so doing, expanding the overall target market for contractors,” it added.

“The key for suppliers is to continue chasing obvious opportunities within geothermal energy, hydrogen, offshore wind, and carbon capture, utilization and storage,” it continued.

In that release, Audun Martinsen, a partner and head of research at Rystad, said, “global oil and gas suppliers look set to echo the biblical story about the Egyptian pharaoh’s dream of seven years of feast and seven years of famine – only in the opposite order”.

“All signs point towards 2022 being the start of another super cycle for the energy services sector,” he added.

To contact the author, email andreas.exarheas@rigzone.com