Manup Industry Roundup - W1023: NEWSL -02
Friday, 10 March 2023
Good morning!
The offshore oil and gas (O&G) sector is set for the highest growth in a decade in the next two years, with $214 billion of new project investments lined up. Rystad Energy's research shows that annual greenfield capital expenditure (capex) will break the $100 billion threshold in 2023 and in 2024 – the first breach for two straight years since 2012 and 2013.
Below are the oil and gas stories and news that made headlines this week carefully curated by?Manup
Summary of the news
Workforce Watch
Offshore Oil & Gas Is Back With More Than $200 Billion In New Investment
The offshore oil and gas sector is back and is set for the highest growth in a decade in the next two years, with $214 billion of new project investments lined up.
According to Rystad Energy, the annual greenfield capital expenditure (capex) will break the $100 billion threshold in 2023 and 2024 – the first breach for two straight years since 2012 and 2013.
As global fossil fuel demand remains strong and countries look for carbon-friendly production sources, offshore is back in the spotlight.
Offshore activity is expected to account for 68% of all sanctioned conventional hydrocarbons in 2023 and 2024, up from 40% between 2015-2018.
These new investments will be a boon for the offshore services market, with supply chain spending to grow 16% in 2023 and 2024, a decade-high year-on-year increase of $21 billion.
Offshore rigs, vessels, subsea, and FPSO activity are all set to flourish
Rystad sees the sizable expansion of offshore activities in the Middle East as one of the leading global drivers. — For the first time, offshore upstream spending in the region will surpass all others, lifted by mammoth projects in Saudi Arabia, Qatar, and the UAE. The area’s offshore spending growth looks set to continue at least for the next three years, growing from $33 billion this year to $41 billion in 2025
Although the Middle East is leading the way, South America, the UK, and Brazil are just slightly behind
Investments in the North Sea from the UK and Norway will rise in the next two years.
UK offshore spending is set to jump 30% this year to $7 billion, while Norwegian investments will hit $21.4 billion, an increase of 22% over 2022.
Brazilian upstream spending is projected to approach $23 billion this year, with Guyana investments totaling $7 billion.
In North America, spending on offshore in the US will top $17.5 billion and $7.3 billion in Mexico.
Brazil state giant Petrobras plans to deploy 16 FPSOs across six fields before the end of this decade, while growth in the Guyanese Stabroek Block will also contribute to regional expansion.
In long-term forecasts, Middle Eastern growth is set to continue, if not accelerate, while South American spending will slow in 2025.
Oil & Gas Industry Costs To Rise By Another 10% In 2023
The latest analysis from McKinsey & Co. reveals that oil and gas industry costs could increase between 6% and 10% in 2023 due to labor uncertainties and raw materials inflation.
The analysis finds that primary operation tasks, such as regular inspections and maintenance, are becoming more expensive as labor rates grow upwards of 9% per annum and costs for steel casings and tubing also rising at 5% per annum. This, coupled with spiraling marine and aviation logistics prices, is causing increasing operating expenditure rises.
According to McKinsey, the study examines how oil and gas companies are grappling with the business fallout of sustained global inflation, geopolitical developments in Europe and Asia and increasing economic headwinds.
The analysis details how the supply chain risk caused by these factors is affecting field operations and project delivery, with traditional mitigation strategies proving inadequate.
McKinsey notes that organizations that are taking measures to secure their supply chain and avoid market volatility are seeing significantly less inflationary pressure, saving ~15% on costs.
The study details key high impact levers that can mitigate supply chain reliability risks that could be used to pivot away from the typical cost-reduction mindset, including:
领英推荐
EIA: US Q1 2023 Natural Gas Consumption To Be Lower Than Any Q1 Since 2018
The U.S. Energy Information Administration (EIA) estimates an average of about 99 billion cubic feet per day of natural gas will be consumed in the United States during the first quarter of this year—the least for any first quarter since 2018.
This year, January and February are likely to be among the warmest on record, which led to significantly lower heating demand and, therefore, lower natural gas consumption.
Low natural gas consumption will lead to lower natural gas prices and more natural gas in storage, according to EIA’s March?Short-Term Energy Outlook?(STEO).
EIA expects average 2023 wholesale natural gas prices to be half of the 2022 average, and it expects natural gas inventories at the end of the first quarter to be 23% more than the five-year average.
Other key takeaways from the March 2023 STEO forecast include:
EIA: US Crude Inventories Down 1.7 million bbl
US crude oil inventories for the week ended Mar. 3, excluding the Strategic Petroleum Reserve, decreased by 1.7 million bbl from the previous week, according to data from the US Energy Information Administration.
At 478.5 million bbl, US crude oil inventories are 7% above the 5-year average for this time of year, the EIA report indicated.
EIA said total motor gasoline inventories decreased by 1.1 million bbl and are about 3% below the 5-year range for this time of year. Finished gasoline inventories increased, while blending component inventories decreased last week.
Distillate fuel inventories increased by 100,000 bbl and are about 7% below the 5-year average for this time of year.
Propane-propylene inventories decreased by 500,000 bbl and are about 34% above the 5-year average for this time of year,
US refinery inputs averaged 15.0 million b/d for the week ended Mar. 3, about 12,000 b/d less than the previous week’s average. Refineries operated at 86.0% of capacity.
Gasoline production decreased, averaging 9.6 million b/d. Distillate fuel production decreased, averaging 4.5 million b/d.
US crude oil imports averaged 6.3 million b/d, up 63,000 b/d from the previous week. Over the last 4 weeks, crude oil imports averaged 6.3 million b/d, 1.4% more than the same period last year. Total motor gasoline imports averaged 446,000 b/d. Distillate fuel imports averaged 141,000 b/d.
Workforce Watch
Energy Shortages Are Set To Persist Through 2023
Energy shortages are likely to persist this year in various parts of the world because of project delays resulting from continued supply chain challenges – the legacy of the pandemic lockdowns – as well as lower Russian gas supplies to Europe and extreme weather.
This is according to management consultancy Brunel, which just published its 2023 Energy Outlook Report. The Netherlands-based company partnered with oilandgasjobsearch for the survey, which collected more than 24,000 data points between August and November 2022 for a glimpse into the dominant attitudes in the energy industry.
According to the study, 56% of energy industry managers and leaders expect tight energy supply this year. Interestingly, more workers from the industry expect these energy shortages to be most severe in North America, at 65%, than in Europe, where 59% expect the most severe shortages.
Shortages are also expected for South America, which has been hit by lower hydropower generation because of droughts.
In addition to the expectations of energy shortages, the industry appears concerned about a talent shortage: an aging workforce and skills shortages are spelling trouble for the future of energy.
Brunel notes in its outlook that the energy transition will drive an influx of workforce from other sectors, notably technology, especially after the massive layoffs Big Tech recently announced.
Companies from the industry would also likely address the causes of that expected workforce shortage: inadequate succession planning for knowledge transfer and skills retention, education and training, and better motivation.
Challenging as these may be, the biggest concern of energy industry managers appears to be inflation. Some 43% of respondents in the Brunel survey saw higher costs as the top problem for the next five years. “Economic uncertainties” rank second among the top concerns, with 37% of respondents naming these as a concern.
The final big concern for the industry is the looming skills shortage coupled with an aging workforce.
Other stories we are following…