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Challenges and Opportunities in Offshore Industry: Testing Times for EPC Players
Energy
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Challenges ahead: Offshore Industry
The last few years have been challenging for the offshore oil and gas industry due to several factors. The offshore exploration activity has been stalling since the fall of oil prices in 2014. Also, growing competition from North American shale oil projects have made it difficult for the offshore activity to improve. Based on McKinsey’s medium to long-term offshore rig outlook, offshore project development CAPEX should pick-up after 2020. However, now the industry is facing even more challenges for at-least next few quarters due to recent oil demand and supply uncertainty which is exacerbated by the Covid-19 pandemic.
This difficult phase for the whole industry has caused several oil and gas players to reduce their CAPEX expenditure or delaying of projects. It is recently noted that Shell has delayed projects in the UK North Sea including the start-up of the Shearwater gas infrastructure hub, Jackdaw. In Nigeria, ExxonMobil, Shell, Chevron, and other IOCs are delaying investment worth $58.4 billion in oil and gas projects. This entire situation is putting a lot of pressure on EPC players whose majority of earnings depends on the oil and gas industry.
Even during this difficult time, EPC players can find an opportunity in the offshore industry, and several have already started making changes in their DNA. Acquiring new capabilities in the near future based on its existing expertise in offshore applications and best utilizing the assets can change the ball game.
Offshore Geothermal Exploration
Offshore geothermal energy sources can be a better option compared to onshore geothermal in several aspects. For one, no detailed environmental or land assessment is necessary for offshore. The good quality of heat recovered from offshore geothermal can also be considered as a major positive point. Moreover, EPC players can service this area based on their already developed expertise in offshore drilling which can be used for geothermal energy capture.
Offshore Seafloor Mining
Seafloor plains are home to poly-metallic nodules that were discovered about 150 years ago. Ocean mining sites can also found around active and extinct hydrothermal vents. The availability of vast quantities of critical metals has driven the advancement of technology towards the sampling of prospective mine sites, which is followed by setting up of mining ship or station to mine the seafloor. The existing technical know-how of EPC players in the offshore industry can be utilized in deep-water drilling. Their assets like drillships can be deployed with minimum modifications for sampling and collection of poly-metallic nodules from the ocean floor and transport them to shore.
Offshore Aquifers
Recently, scientists have been looking at reports of vast amounts of offshore freshwater reserves as a source of drinking water as well as for it to be used in offshore oil extraction. Seabed aquifers can be crucial for oil companies. Several recent studies have shown that injecting low-salinity water into oil reservoirs can significantly increase oil recovery. Apart from this application, offshore freshwater can mitigate water shortages in coastal cities around the globe.
Other potential applications where EPC players can provide its expertise are subsea cable laying, infrastructure for shallow water floating cities, and projects related to cross country bridges and underwater tunnels.
Core competencies for Potential Utilization of Opportunities
EPC players can benefit by stepping into ventures other than oil & gas and help in overcoming some of the challenges faced by the industry. However, not all of them have the required set of technical and business competencies like subsea heavy lifting capabilities, explosion-proof operations, operations in harsh oceanic conditions, assets enabled with a dynamic positioning system, etc.
Advancements so far
In 2017, Icelandic company North Tech Energy received a license for geothermal research and exploration. The two offshore areas included in this license are in the southwest of ReykjaÂnestá and the north between TröllaÂskaga and MelÂrakaÂsléttÂur. When ready in the future, such offshore geothermal plants could provide CO2 free electricity and expected to encounter less opposition from the general audience as compared to onshore geothermal plants.
For sea mining, DeepGreen and Allseas have recently formed the Seafloor Mining Alliance, where Allseas’ offshore expertise will help in the completion of a feasibility study targeted for 2023. As suggested by Allseas CEO, ocean polymetallic nodules captured from seafloor could help provide critical metals required for various applications including the green transition. Allseas expects the ultra-deepwater drillship it acquired for seabed mining to be operational for pilot nodule collection tests by mid-2021.
In 2019, a massive offshore reservoir was discovered near New England, almost twice the volume of Lake Ontario and stretching for hundreds of kilometers. Continued research can determine if similar reservoirs exist in other offshore regions as well.
Interestingly, future expansion in the above field could become a major solution to mitigate climate change. However, there are also suggestions that such endeavors can cause the biggest change to ocean habitat (offshore geothermal, seafloor mining) or have adverse impacts on onshore (offshore aquifers).
Overall, in the longer-term, EPC players need to find ways to better leverage offshore-related technology and know-how towards handling of harsh conditions and apply it to other ventures.
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