Where next for deepwater projects? Report

Insight 16 March 2017

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Report summary

Is deepwater back after nearly three years in the wilderness? A flurry of FIDs and commercial discoveries appears to be reviving a sector starved of new investment during the downturn. But has it really turned the corner? Deepwater project costs are over 20% lower than mid-2014, but for many this is still not enough. Far greater volumes of US tight oil breakeven at a lower price if compared on a like-for-like basis. However, we see considerable scope for further cost cuts in deepwater, while cost inflation in tight oil has returned with a vengeance. The playing field is about to get a lot more level, and this will strengthen the deepwater value proposition.

Summary
A slow recovery ahead, but a recovery nonetheless
- The high grading effect – the pre-FID deepwater cost-curve
Deepwater costs need to keep falling
- Where to go next – the Q4 2016 greenfield deepwater project cost-curve now, and minus 20% capex
Big fish in a smaller pond
A levelling playing field?
More hunger please
- Further data and analysis