2018 Offshore Technology Yearbook

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28 | December 2017 | 2018 OFFSHORE TECHNOLOGY YEARBOOK | EXPLORATION An additional eight wells were drilled across the South China Sea, testing a range of targets, with the results laying the foundation for next year's drilling program. Nearshore drilling hits oil in Western Australia Offshore Western Australia, Norwest Energy Ltd. Group saw success with the group's Xanadu-1 wild- cat on inshore permit TP/15 in the north Perth basin, drilled as a directional well from an onshore coastal location. Plans are now underway for an up-dip sidetrack appraisal from the Xanadu-1 cas- ing shoe. According to Norwest, the first well in the Cliff Head oil field discovery farther offshore identified a 4.8-m oil column at the top of the Irwin River Coal Measures—the same stratigraphy encountered in Xanadu-1. The company is evaluat- ing acquiring more seismic data with a mini-survey of short infill lines over the Xanadu discovery prior to drilling Xanadu-2. Winds of change Analysts at Wood Mackenzie have taken a look at the reasons behind the move to more exploration in 2017 and evaluated the impact it could have on future exploration drilling, asking hundreds of senior leaders, NOCs, majors and independents about their plans in the coming years. In its "Future of Exploration Survey 2017," the company gath- ered data from across the industry, interpreted the results, and used that information to construct the industry's collective outlook for exploration. After reviewing the data, vice president of Exploration Research at Wood Mackenzie, Andrew Latham, offers valuable insights. Among these is the fact that operators believe exploration is a better investment at present than mergers and acquisitions (M&A). Survey results reflect the belief that drilling offers better returns than M&A, which introduces the challenge of how to create value in a competitive, acquisi- tive environment. Key performance metrics also have changed since the preceding survey, Latham says. In 2017, the most important criterion identified by survey participants is value creation, followed by invest - ment returns and capital efficiency. "This is quite different to several years ago when volume and cost performance were the primary focus," he said. The data suggest there is reason for optimism, but it is important to take a look at the num- bers, which paint a somewhat less rosy picture. According to the McKinsey Energy Insights report, "Offshore drilling market outlook to 2030," rig utilization is still very low—around 65% relative to 2014 levels—and day rates have dropped to approximately 50% of 2014 levels. With fewer active rigs, newbuilding delays continue. Fortunately, McKinsey analysts believe activity has reached bottom, which indicates things are looking up. The "good" news, according to the report, is that with demand recovery and a balanc- ing of supply, utilization levels will be back up by 2022. Pragmatically speaking, however, the indus- try is looking at five more years before reaching parity with 2014 utilization levels. McKinsey expects the demand for jackups to hit bottom this year, followed by 2% growth per year through 2030. Expectations are for utilization rates to exceed 80% by 212, with a lot of old, low- spec rigs leaving the market and fewer high-spec units entering it. It appears that 2017 marked the beginning of the end of depressed exploration activity. If oper - ators follow through with their current drilling plans, 2018 will be an even better year. n Asia and Europe saw most of the shallow-water discoveries in 2017 while in the Gulf of Mexico, the biggest successes were in deep and ultra-deep water. (Source: Clarksons Research) Offshore Discoveries Made Through Q3 2017 16 14 12 10 8 6 4 2 0 No. Fields Offshore field discovery data as of start of October 2017 Asia Pacifi c NW Europe North America n Latin America Mediterranean West Africa Middle East/IS C Ultradeep Water (1,500m+) Deep Water (500 - 1,499m) Shallow Water (<500m)

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