Lloyds List: A whale of a year for offshore energy: “In Nigeria, Shell finally got its Bonga FPSO project under way with first oil in late November from a technically challenging project.”: Dec 29, 2005

IT HAS been a cracking year for the offshore sector with contractors reaping the rewards from oil companies increasing their spending levels, writes Martyn Wingrove.

Charter rates for drilling rigs, subsea construction vessels, seismic acquisition ships and offshore support vessels have climbed to new highs this year, so earnings are storming.

Ever-increasing oil prices led to companies flexing their financial muscles to ramp up exploration activity and develop more hydrocarbon fields.

The year will also be known for its hurricane-induced damage to Gulf of Mexico installations, and discussions on high oil prices and tight supply issues.

Hurricanes Katrina and Rita crashed through the Gulf of Mexico in September, causing complete havoc for offshore operations, severely damaging platforms and grounding rigs. Worst hit were Shell's Mars tension leg platform and Chevron's Typhoon TLP, which was found upside down after the storms.

BP almost lost its newbuild production semi-submersible Thunder Horse after a hurricane when faults in the ballast system left it tilting almost 20 degrees. This platform was righted, but the project is more than six months delayed.

Oil company investments have risen to record levels this year as more projects were pursued.

Oilfield equipment and service costs also rose as availability of key components, including rigs and process systems, tightened. High steel prices also pushed up project costs.

For rigs the problems of finding an available unit have become so bad, oil companies are booking rigs many years in advance and dayrates have doubled.

Deepwater regions of West Africa, the Gulf of Mexico and Brazil saw the largest portions of offshore expenditure, but new deepwater markets in Asia are also showing signs of increased spending.

In West Africa, ExxonMobil started production from its second mammoth oil project, Kizomba B offshore Angola.

Here another floating production storage and offloading vessel and TLP were brought on-line over the summer, joining last year's start-up of sister project Kizomba A.

In Nigeria, Shell finally got its Bonga FPSO project under way with first oil in late November from a technically challenging project. The Dalia and Erha FPSO were also built this year ready to start production in 2006.

In Brazil, international oil companies are making more headway with Chevron, Norsk Hydro, Shell and Devon Energy having projects in the pipeline. State group Petrobras has increased its forward investment levels and started production from the Barracuda and Caratinga fields. It expects Brazil to become a net exporter of oil next year.

Also in South America, French major Total started production from the most southerly offshore fields off Tierra del Fuego.

In Russia, ExxonMobil started production from the Sakhalin I project and Gazprom shortlisted companies to help develop the huge Shtokman project.

Investment in the North Sea picked up this year with far higher exploration levels in the UK sector, but lower in Norway and the Netherlands. The biggest discoveries off Europe were in Norway.

As earnings continue to climb, the oil industry will be spending more and contractors gaining more cash in 2006

Click here to return to ShellNews.net HOME PAGE