Deep Water Exploration Market: Overview and Challenges

Deepwater drilling is a mechanical technique that involves drilling a deep wellbore to a depth of more than 300 meters. Only recently has the technology existed to make deep water exploration commercially viable, but with improved technological development and rising demand for oil exploration, well intervention services like PRT Offshore and many others have lately invested in deep-sea projects to explore reserves buried extremely deep under the sea bottom.

Deep Water Exploration Market: Overview and Challenges

Deep Water Drilling Market Landscape

During the 2020-2027 period, the deepwater drilling market is predicted to expand at a CAGR of more than 7.8%, driven by rising offshore oil and gas development activities. 

During the forecast period, factors such as increased deepwater oil and gas activity, particularly in the Gulf of Mexico, Brazil, and the North Sea, enhanced viability of deepwater and ultra-deepwater projects, and narrowing supply-demand gaps are projected to drive the market.

Petrobras, Shell, Total, BP, Equinor, Exxon, and Statoil are among the major companies taking advantage of deepwater drilling’s potential, with some of the most preferred locations being off the shores of Brazil, East Africa, Cuba, the eastern Mediterranean, China, and the Gulf of Mexico.

Market Dominance

Before 2025, investments in deepwater projects are projected to remain limited. Because of their distant location, these resources are often more costly to develop, take longer to achieve full production, and need significant infrastructure investment. 

The majority of the projects now under development, on the other hand, are likely to continue operating.

Offshore deepwater oil projects produce enormous production volumes at generally low per-barrel operating costs across the reservoir life cycle, despite high fixed costs and extended lead periods from project conception to the first production.

Challenges facing Deep Water Drilling

Even the most seasoned operators face a variety of problems when it comes to deepwater projects. Despite the fact that the oil industry has gone through a long learning curve and that technological developments have helped bring down the costs of deepwater production, companies still face a slew of hurdles, resulting in deepwater project development durations of up to twelve years.

  • Logistical and infrastructural Challenges: Understanding future production profiles and appropriately designing the infrastructure to transport the hydrocarbons is difficult, especially in new places where pipeline infrastructure is lacking.
  • Project Management Issues: Deep-water projects are particularly vulnerable to project delays and cost overruns, which may swiftly deplete investor returns.
  • Fiscal terms from the host country: The host country’s tax and royalty regime heavily influences the economic viability of a deepwater investment.
  • Regulatory aspects: Delays in obtaining licenses and obtaining regulatory approvals cause projects to take longer and cost more. These concerns are especially more pressing in developing deepwater areas, where authorities are still catching up with business actors.
  • Environmental risks: Following the BP Horizon rig catastrophe, more stringent maintenance and safety regulations have raised the relative costs of deepwater production. Environmental sanctions may be expensive, as Chevron learned after a leak of fewer than 4,000 barrels in Brazilian waterways, which could cost the company up to $17 billion in penalties.
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About Dequiana Jackson

Dequiana Jackson, Founder of Inspired Marketing, Inc., helps overachieving women entrepreneurs conquer limiting beliefs and create marketing plans that grow their businesses. This includes one-on-one marketing plan development, digital product creation, web design and content marketing. Dequiana is the author of Know Your Business: How to Attract Ideal Clients & Sell More and runs the award-winning blog, Entrepreneur-Resources.net.

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