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North Sea ‘falling behind’ as global offshore investment returns to pre-pandemic levels

© Espen Mills, Greenpeacecambo
.Greenpeace Norway activists in kayaks confront Siem Day loading drilling infrastructure for the Cambo oil field

The North Sea is one of just a handful of regions “falling behind” as offshore oil and gas investment returns to pre-pandemic levels around the world.

Analysis from Westwood Global Energy Group shows that year-on-year growth for the global offshore rig market at the close of 2021 was up 200% from 2022.

This has been bolstered by significant engineering, procurement and construction (EPC) spending, closing at $41.7 billion (£30.8m), while global rig contract fixtures, including extension options, totalled 142 in Q4 2021, representing nearly 55,000 rig days. That’s up 155% on the previous quarter.

However, global industry investment is uneven with the North Sea, along with Africa and Southeast Asia, falling behind due to the pausing of major drilling projects in response to “political and legal uncertainty”.

Westwood cited the example of the controversial Cambo project, which Shell pulled out of in December, in the West of Shetland.

The development, expected to produce 170 million barrels over 25 years in its first phase, had become a battleground for climate campaigners around the COP26 climate conference.

Operator Siccar Point Energy, with a 70% stake, has said it cannot proceed with the development on its original timescale due to Shell’s exit and has put it on pause, although licences are due to expire in March.

Senior market analyst at Westwood, Alex Middleton, said: “For these regions, contracted rigs have been on a downward trajectory, hitting rock bottom at the close of 2020.

“Drilling projects have been halted amidst uncertainty, however there are several major projects on the horizon that, if picked up, could help drive a recovery.”

In contrast, South America has enjoyed a surge in orders, with over 12,000 rig days contracted in 2021 and a backlog of nearly 11,500 days so for this year, up from nearly 9,400 in 2019.

Middleton added: “Several major drilling regions, including North America, South America and the Middle East have experienced minimal fall out. In fact, South America has fared particularly well, ending last year in better shape than before the pandemic.

“Brazil remained particularly buoyant, with high EPC spend coupled with no instances of contract cancellations resulting in continued drilling throughout the period.”

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