The Potential for Offshore Energy Exploration
- March 25, 2019
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As the world's population and its economies grow, global energy demand will increase. The U.S. Energy Information Administration (EIA) projected that global energy use will grow by 28 percent between 2015 and 2040. World energy production is already at more than 13.8 million tons of oil equivalent (Mtoe).
A significant portion of the world's energy is produced offshore, namely by oil and natural gas facilities. As energy demand increases, offshore energy exploration and production presents a compelling opportunity for the energy industry. It's likely to grow in the coming years.
Offshore Oil and Gas
According to the International Energy Agency's World Energy Outlook, global offshore oil production equaled 26.4 thousand barrels of oil equivalent per day (mboe/d) in 2016. Seventeen and a half mboe/d of offshore natural gas was produced.
The International Energy Agency (IEA) forecasted the growth of offshore energy using two scenarios. One scenario, called the New Policies Scenario, considered a future in which the energy market continued to evolve in line with current policy frameworks and announced intentions. The other, called the Sustainable Development Scenario, looked at a future in which policies and activities change to attain the world's climate, energy access and air quality goals.
Under the New Policies Scenario, IEA projected that offshore oil production would increase slightly to 27.4 mboe/d by 2040. It forecasted that offshore natural gas production would increase to 29.6 mboe/d, surpassing offshore oil.
Under the Sustainable Development Scenario, offshore is forecasted to decrease to 18.7 mboe/d. Natural gas production is expected to increase to 23.5 mboe/d.
According to an analysis by McKinsey & Company, production from shale oil and OPEC will likely keep offshore oil and gas from expanding in the near term. Over the long run, however, McKinsey analysts expect that shale production will level off, making room for increased offshore production.
By 2026, the global offshore drilling market is expected to reach $152.47 billion, up from $79.53 billion in 2018, according to forecasts by Orian Research Consultants. Discoveries in the Arctic are expected to be a major opportunity.
Offshore Wind Energy
Today, there are 18,814 megawatts (MW) of offshore wind capacity installed in 17 markets around the globe, according to the Global Wind Energy Council. Approximately 84 percent of offshore wind facilities are sited off of the European coast. That compares to 600 gigawatts (GW) of onshore and offshore wind capacity installed worldwide.
In its World Energy Outlook, IEA projected that offshore wind would increase to 583 terawatt-hours (TWh) in 2040 under the New Policies Scenario from 45 TWh in 2016. In this scenario, offshore natural gas would be the largest source of offshore energy.
In the Sustainable Development Scenario, IEA expects offshore wind production to increase significantly more to 1,217 TWh. In this scenario, offshore oil, natural gas and wind would receive similar levels of investment, and wind would provide four percent of global energy generation.
According to forecasts from Global Market Insights, Inc., the offshore wind market will increase to more than $60 billion by 2024. China is expected to install especially large amounts of offshore wind. It's on track to install 13 GW between 2017 and 2026, increasing its capacity by more than 10 times. The United States is also expected to become more of a significant player in the coming years, although it will likely still not have as much capacity as Europe and China.
Another kind of offshore energy could start having an impact in the coming decades. Marine energy technologies, which include wave energy, tidal energy and current energy, are still young. These technologies are in various phases of research, development and deployment. Their future is uncertain, but they have significant potential.
In 2017, there was more than 25 MW of ocean energy capacity installed worldwide. Tidal power made up 17 GW of that total, while wave energy made up 8 MW. According to IEA world energy outlook, marine energy would provide 53 TWh under the New Policies Scenario and 85 TWh under the Sustainable Development Scenario.
As offshore energy expands, more companies may also integrate different types of offshore energy. Companies may able to share equipment and resources between offshore wind and oil and gas facilities to reduce costs. Wind turbines could also help to electrify offshore oil and gas operations, and decommissioned oil and gas platforms could act as bases for performing maintenance on other offshore facilities.
As energy demand continues to increase, offshore energy exploration and production presents a significant opportunity. Offshore oil and gas, offshore wind and, eventually, marine energy will all likely expand in the coming years.