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Lessons learned from 2014’s oil price collapse

Zane Berry from MCA Consulting identifies how the offshore industry has transformed over the past decade.

I was interested to understand what happened in 2014 when the oil price collapsed and the offshore oil industry, my industry, was halved overnight. Clearly supply outstripped demand at that point but what happened during the near 10 years that followed and to the trillions of dollars of assets, oil wells and jobs that service the worlds oil and gas demand.

The statistics around this subject are fascinating and lead me down unexpected paths, two particular items stand out as being of interest; throughout this period global oil production has continued to increase over the last 10 years and that the USA has gone from a distant 3rd place to the global leader in oil production.

Even without any serious investment in new offshore oil and with a reduction in maintenance spending on existing production the global output remained basically solid up until 20/21 which is more or less when the investment boom of the early 2000’s ran out and it’s absence started to hurt production and the need for serious upkeep and renewals started to takes it’s toll. As a service provider in the industry we saw our figures start to increase during this time as oil companies started to reactive the global offshore fleet from the early 2020’s.

The story in USA must surely be related to shale and it is curious not to be featuring in much in the news but the oil price has remained above the Shale threshold for a while and we have seen USA near double production from around 7,000BBL/D in 2013 to over 12,000 BBL/D in 2022. This can’t be doing the treasury department any harm and so I would imagine it’d be a circumstance that they would like to maintain in the coming years.

Global energy demand has been impacted by the difficulties and uncertainty of the last two years but the longer trend cannot be ignored and a sustained bounce back seems to be what those numbers point at. Without looking at Geopolitical influence, I am interested in whether the Offshore sector can mobilse to meet increased demand even though the global offshore infrastructure has gone a decade without effective maintenance and investment.

Now, a decade on from the 2014 crash, the offshore oil industry seems to have survived but it cost hundreds of thousands of jobs and the mothballing of large percentage of the global fleet, some of which has become unrecoverable in the ensuing years, the same could be said of the workforce.

Renewables provide a tiny fraction of the global power supply and sadly cannot meet energy demands in the foreseeable future but in the longer term must provide a meaningful segment of the energy supply.

The upsides for the offshore industry is that both oil and renewables will be needed to meet the ever growing global energy demand and so there is room for massive for growth in renewables but also continued demand for fossil fuels.

As we cycle back into undersupply the usual the choke points for delivering the resurgence of offshore infrastructure and production needed for the growth are, of course manning and offshore hardware availability. The over capacity that has been lying in wait for the last years is fast being pressed back into service and is likely to put back pressure on the supply of services during 2023 and 2024.

Offshore operators who in preceding years have had to suffer financial restructuring under chapter 11 and streamlining and may not be particularly ready to ramp up and go back in to a faster pace of operation, placing pressure of networks and individuals not accustomed or reaccustomed to promotions or new companies and projects.

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