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Total expenditure on ROV operations 2013-2017 to be worth USD 9.7 billion: study

cover of Total expenditure on ROV operations 2013-2017 to be worth USD 9.7 billion: study

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Market Briefing
Published: November 2013
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At the end of October the auction for production rights to Brazil's 12 billion barrel Libra field dominated the trade-and-technical press. This development is significant. Such that energy analyst firm Douglas-Westwood (DW) has raised the small matter of whether Petrobras' has given sufficient thought to how much of global industry resources might be required to develop the field.

In a note circulated to clients it suggested that over the next five years the Brazilian national oil company (NOC) will account for 35% of the global demand for deepwater subsea construction vessels and more critically 60% of the dedicated flexlay vessels for its deepwater pre-salt developments.

The question is whether the supply chain can support this level of development, as DW note there simply are not sufficient vessels in the market at the moment.

Petrobras has placed a tranche of orders for new craft to work on long-term construction contracts with the recently announced USD 1.6 billion deal with Subsea 7 for three dedicated flex layers (Technip and SapuraKencana have similar arrangements).

The long-term nature of these contracts will provide the needed security of utilisation, but there is some concern that the length and relatively limited service scope may inhibit the earning potential of these very expensive assets.

In 2009-2012 Brazil was widely regarded as a major ray of hope for the deepwater service industry. However, with most analysts now projecting a rapid return to prominence for African-based activity, options are opening up, and with them the promise of increased profitability for Engineering, Procurement, Construction and Installation (EPCI) contractors.

Douglas-Westward notes that with a new supply crunch for deepwater construction vessels expected in 2016 the challenge facing Petrobras appears to be providing the commercial incentive to continue attracting those largest contractors who are willing to invest heavily in the long term whilst also managing their internal costs to avoid further development delays.

Certainly in the period from 2013 to 2017 DW put total expenditure on ROV operations at some USD 9.7 billion, up by nearly 80% over the previous five-year period (USD 5.4 billion) in its sixth edition of the 'World ROV Market Forecast'. Visiongain incidentally put the actual value of the market for ROVs in the oil & gas industry in 2013 at some USD 2,458 million in its report earlier this year.

Kathryn Symes, author of 'World ROV Market Forecast' noted: "Drilling support accounts for three-quarters of expenditure between 2013 and 2017, and is expected to increase over the period by 13%. DW forecast almost 527,000 days of ROV drilling support in the next five years, of which the majority is made up of work on exploration & appraisal wells. Expenditure on construction support accounts for a fifth of ROV operations, with repair and maintenance accounting for the remaining".

"Africa is forecast to experience strong demand from subsea development (DV) wells, driven by the discovery of new deepwater provinces offshore East Africa, and will remain the largest region, followed by Latin America and then Asia. The Middle East has the lowest ROV spend, and along with Norway will see decline in spend. Latin America is set to show the strongest growth of all regions" (for readers interested in tracking Africa, check out the 5-issue no-obligation free trial to the 'African Energy' market update service here).

Report editor, John Westwood, concluded: "As operators look to increase the profitability and efficiency of their subsea developments, there will be a surge of demand for exceptionally powerful work-class ROVs, able to perform the support work needed in an industry where new technologies and processes are vital. "The move to ever deeper waters will drive demand for work-class ROVs and manufacturers will have to produce high specification models capable of performing at greater depths. Smaller manufacturers may find there are opportunities for them to move from the production of inspection class and light work-class ROVs into the market for heavy-duty work-class ROVs."

Ben Pollard, Managing Director IKM Subsea AS, in an interview with Visiongain noted that as well as vehicles, finding qualified personnel with regard to piloting and maintenance is also a difficultly. Pollard noting that IKM is now focused on 'employing persons with the correct technical background (skilled workers within electronics or mechanical) and then having extensive in-house ROV training'. A potentially bigger role for ROVs in offshore oil & gas projects exists for where ROVs 'can do a better or safer job than divers and of course we are now moving into deeper and deeper waters'.

Certainly, as expenditure in deepwater areas and on subsea infrastructure around the world increases, ROVs will become an increasingly critical aspect of offshore oil and gas development. The positive growth forecast for the development of the deepwater market and subsea infrastructure market along with the increased focus on safety and security mean that ROVs will take on an even more important role in the oil and gas business throughout the coming decade.


Keith Wallace

Further reading:

World ROV Operations 2013-2017 market study
Published by Douglas-Westwood in October 2013
Douglas-Westwood (DW) forecast the market for the operation of work-class ROVs through to 2017 in this sixth edition of the World ROV Operations Market Forecast. Results forecast total ROV operations expenditure of $9.7 billion, an increase of nearly 80% over the previous...(more)

ROVs in the Oil & Gas Industry 2013-2023 market study
Published by Visiongain in February 2013
Report Details The global ROV market has been growing rapidly over the last years. The primary reason for this development has been the advancement in offshore technologies which has lead to the introduction of more complex subsea infrastructure and to an increase in...(more)

African Energy
Published by Cross-border Information Ltd with 23 issues per year
Claim your 3-issue risk-free trial subscription to Africa Energy! For more than a decade, African Energy has been the definitive publication analysing and breaking news on the continent’s energy industries. What you get in African Energy African Energy provides the...(more)


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