DEPARTMENTS • OIL & GAS MARKETS
Latin America’s natural gas
deficit forecast to grow, lead
to need for more imports
With rigs continuing to leave, utilization in the Asia Pacifi c region has risen. Drill-
ships are fully utilized, and the jackup segment is close to selling out, at 97%.
Westwood analysis show rig supply is shrinking
in Asia Pacific while dayrates continue to rise
Offshore rigs continue to leave the Asia
Pacific (APAC) for other markets , accord-
ing to recent analysis by Westwood
Energy’s Senior Rig Analyst Paul Ezekiel.
A total of 14 units have left the region in
the past year, although there is one more
semi in APAC now compared with the
same period last year. In Singapore, only
six jackups remain , but they’re all bound
for the Persian Gulf.
At the same time, Mr Ezekiel pointed
out that utilization and dayrates have
increased significantly even though
Brent prices dropped by approximately
25% between May 2022 and May 2023.
The lower supply, especially in the
jackup and drillship segments, has aided
utilization recovery across most rig types
over the year. The jackup segment is now
close to sold out at 97%, while drillships
are fully utilized. Tender-assist utiliza-
tion dropped by 5% year-on-year, while
increased supply and lower demand
in the semi segment has resulted in
decreased utilization of around 22 % com-
pared with a year earlier.
Dayrates are trending upwards, with
rigs typically being secured at higher
rates than their previous commitments .
Jackups have been fixed at as much
as $67,000/day more than their previ-
ous or current deals, while one drillship
was fixed at $240,000/day more than its
12 previous contract. Semis have also wit-
nessed the same trend, with new fixtures
being secured at up to $113,000/day more
than prior deals.
Meanwhile, between May 2022 and May
2023, Westwood recorded a 10% increase
in average rolling jackup dayrates, 28%
increase in drillship dayrates and a 7%
increase in tender-assist rig dayrates.
Another indicator that market dynam-
ics have changed is reduced contract
award activity. Between January 2022
and May 2022, there were 34 contract
awards in the APAC region for all rig
types . For the same period in 2023, there
were only 13 awards. This reduced pace
naturally occurs when there is less avail-
ability and operators want to lock in rigs
on longer deals before prices rise further.
Westwood’s RigLogix currently holds
21 requirements in Southeast Asia or
Australia already at a tender stage, total-
ling over 14 years of potential demand.
Of this total, 73% is for jackup campaigns
and the remaining tenders are for semis.
Westwood expects current utilization
levels to hold steady or rise further in the
next 12 months. Dayrates have not pla-
teaued yet, according to Mr Ezekiel, but
the pushback on rates from operators will
continue. In this environment, operators
will be considering further rig-sharing
campaigns and more direct negotiations.
Wood Mackenzie is forecasting that the
gas supply in Latin America will be unable
to keep up with demand in the next decade
due to challenges with gas development.
This will drive the need for expanded
imports .
Over the next 10 years, natural gas
demand in the region is expected to rise
by an average of 1.4% per year , stabiliz-
ing at approximately 25 billion cu ft/day .
Within the same time frame, gas supply is
expected to decline at a rate of 5.6% .
“There are significant challenges with
infrastructure restrictions and unfavor-
able exploration incentives. The likely
result will be a steady increase of imports
in the region,” said Adrian Lara, Principal
Research Analyst, Latin America Upstream
Oil and Gas for Wood Mackenzie.
Imports could range between 7 to 12
bcfd by 2035 to meet demand. In 2022,
net imports were 4.9 billion cu ft/day, and
Wood Mackenzie’s 2023 forecast projects
5.2 billion cu ft/day.
Countries in the mid-continent will be
most challenged with gas integration,
while countries like Argentina, with its
strong reserves, may find opportunities to
supply neighboring countries.
“Colombia’s gas production needs to off-
set declines of at least 300 million cubic
feet per day by 2030, or else it will require
a higher level of gas imports,” Mr Lara said.
“Venezuela has a significant amount of
undeveloped gas resources in the Mariscal
Sucre offshore assets, estimated at 13.6
trillion cu ft, and some of which could
be jointly developed with Trinidad and
Tobago. Peru also has discovered unde-
veloped resources in the Camisea region,
accounting for approximately 3.7 trillion
cu ft. The question remains which of these
resources can become more attractive to
operators and whether the infrastructure
and market restrictions can be overcome
in a timely manner.”
“As many countries shift away from
oil and coal in favor of gas to support the
energy transition, demand will continue
to grow in the next decade,” Mr Lara said.
“For Latin America countries, the chal-
lenge will be meeting this demand while
their own production declines.”
J U LY/AU G U ST 2023 • D R I L L I N G C O N T R AC T O R
OIL & GAS MARKETS • DEPARTMENTS
Energy Council’s 2023 Global Industry Survey finds
energy transition at top of strategic priorities list
The energy transition topped the list
of strategic priorities for the next year,
according to an Energy Council survey
of more than 500 people. M&A, financing
and cost reduction followed as the next
priorities in the 2023 Global Industry
Survey. More than 40% of participants in
the survey were from oil and gas com-
panies, while other participants came
from a mix of consultancy/law firms,
non-financial service providers, inves-
tors, power/utility companies, and gov-
ernment/NOC. One question the survey asked was
whether participants were expecting any
revenue from green initiatives in 2023.
Nearly 50% said no , while approximately
35% said less than half of their revenue
will come from green initiatives and 10%
said they expect more half will be from
green initiatives.
When it comes to growth inhibitors
for their organizations, the biggest per-
centage of participants (25%) said it was
lack of access to capital, while the next-
largest percentage (21%) said regulatory
change. Additionally, 15% of people cited
talent as an inhibiting factor .
Oil and gas companies were also
asked where they were most likely to
get their financing from in 2023, and
31% said private equity. The next top
answers were debt financing and insti-
tutional lenders.
When it comes to exploration, the sur-
vey also found that approximately 65%
of respondents believe exploration will
What are your strategic priorities
over the next 12 months?
10% 3%
Digital technologies
Other 21%
11% Exploration
Explor ation
Ener gy TrTrTransition
ansition Energy
16% 12%
JV /Str ategic
JV/Str Allian ces
ce s
Alliance 13%
Cost r eduction
M&A/ A&D
Activi Activitytyty
14% Raising
Finance e
Financ The largest percentage of respon-
dents (21%) cited the energy transition
as a strategic priority for their organi-
zation over the next year.
play a key role in their businesses. That’s
an increase of 13% compared with the
2021 survey and up 6% compared with
2022. For the third year in a row, West
Africa and South America were the top
spots where respondents saw the biggest
E&P opportunities.
Looking at the future of oil prices,
the biggest percentage of respondents
(nearly 60%) said they expect pricing to
stay between $75-100, up from about 50%
last year. Fewer people this year (13%)
said they believe prices will exceed $100,
compared with nearly 25% last year.
Europe may need 55 bcm cut
in gas demand to avoid risks
from supply reductions
Failure to immediately reduce gas
demand by 55 billion cu m (bcm) could put
Europe at substantial risk from a rebound
in Asian demand or reductions in Russian
imports, according to McKinsey & Co. A
total cessation of Russian imports could
reduce Europe’s supply by 25 bcm, and
renewed Asian LNG demand could soak
up 35 bcm of supply while a colder winter
in 2023 could boost demand by 15 bcm.
The research indicates that 57% of EU
manufacturers would not be able to further
reduce gas consumption while maintain-
ing output over the next two years, indi-
cating that further gas rationing measures
could substantially impact the economy.
Even if Europe meets targets to reduce
gas consumption , volatile gas prices and
potential supply disruptions still pose a
risk to many economic sectors. McKinsey
projects that Europe may need to delay the
phase-out of coal, extend the lifetime of
nuclear plants and accelerate the expan-
sion of renewable energy sources to reduce
reliance on gas as a baseload .
“Our analysis shows there is little
bandwidth to further reduce Europe’s gas
demand without substantial economic
damage,” said Namit Sharma, McKinsey
Senior Partner . “ The many variables at
play will produce significant uncertainty,
and Europe’s businesses may need to pre-
pare to mitigate these risks. This may
require businesses to consider diversify-
ing their energy sourcing and managing
demand, investing in natural gas substi-
tutes or storage, and closely monitoring
movements in the energy market.”
Texas Petro Index down amid weak oil and gas pricing, falling value of production
The Texas Petro Index (TPI) declined for
the third straight month in April, retreat-
ing to 176.9 for the month. This is down
from 177.8 in March, but up by 12.3% com-
pared with the April 2022 TPI of 157.6.
Weak pricing for crude oil and natural
gas are largely responsible for the decline,
with downward pressure on the index
coming from prices themselves, as well as
the falling value of crude oil and natural
gas production. Drilling permits also reg-
istered year-over-year negatives for April .
Nominal (unadjusted for inflation) crude
oil prices averaged $75.22 for the month.
This is down 23% compared with year-ago
levels. In real ( inflation-adjuste d) terms,
the April crude oil average is down by
nearly 27% year-over-year. Nominal natu-
ral gas prices are down a sharp 71% in
April compared with year-ago levels, and
in real terms were off by close to 73%.
That means that, even though production
continues to climb, the real value of that
production is down by over 20% for crude
oil and nearly 60% for natural gas through
the first four months of the year.
“Declining prices, followed by a decline
in drilling permits, suggests that the rig
count will weaken in the coming months ,”
said Karr Ingham, creator of the TPI analy-
sis. “At some point, employment will fol-
low suit. We can hope that the economy
shrugs off a recession and that growing
domestic and global demand will begin to
stabilize prices and return some optimism
to the oil patch in 2023.”
D R I L L I N G C O N T R AC T O R • J U LY/AU G U ST 2023
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