No one in the offshore business needs telling that deep water is the fastest growth market. As new oil and gas plays continue to emerge – such as those in previously inconspicuous areas like East Africa or the eastern Mediterranean – the majority almost immediately involve exploration and development activities in deep water.

This is a testing challenge for companies entering these areas for the first time or those who have had low levels of activity there previously, stretching the technical and logistical capabilities of even the biggest super-majors. Remote locations, little or no infrastructure, and minimal local expertise nearly always result in heavy investment.

Italy's Eni is a case in point. To develop its massive Mamba North and South gas discoveries in Block 4 offshore Mozambique, where it has around 70 Tcf of gas in place, it will have to invest up to US $50 billion as a whole, including possibly up to three gas liquefaction plants and essentially the building of an entire town with around 40,000 workers.

Despite the cost, however, deep and ultra-deep water remains a booming market. Drilling programs continue to materialize, with activity expected to rise further and deeper and more complicated wells requiring more rig years and new units to deal with them. For rig players this is translating into stable and improving day rates, along with longer-term contracts – the market is essentially sold out for 2013.

Offshore discoveries hotspots — the vast majority of giant oil finds in the last six years have been found in more than 2,000 m (6,560 ft) of water. (Chart courtesy of Goldman Sachs)

For floating production specialists, the demand is expected to equate into orders for at least 60 FPSOs within the next three years, according to SBM Offshore. By 2016 there will be around 220 FPSOs in production.

A recent report by Bernstein Research highlights that global deepwater production has leapt from under 500,000 b/d 15 years ago to 5.5 million b/d this year (about 7% of the world's oil supply). The shift has caused a decline in oil produced onshore worldwide from 90% in 1970 to 70% today, with that figure likely to continue falling.

About 70% of the discovered reserves have been found in more than 1,000 m (3,280 ft) water depth, and 50% of the discoveries have been found in frontier areas in the past three years alone. Report co-author Rob West also noted that deepwater acreage, specifically frontier deepwater acreage, resulted in the largest discoveries over the last five years. The average size was 600 MMboe in water depths greater than 1,500 m (4,921 ft).

Fellow analyst company Wood Mackenzie sees the same trend, forecasting that the deepwater US Gulf of Mexico is experiencing long-term growth that will see $70 billion invested in the sector by 2030.

This continued increase in activity will further expand demand for product lines such as subsea equipment and infrastructure, infrastructure installation, marine well testing, wireline, directional drilling, LWD, and completion equipment.

By its very nature deep water demands advanced technology solutions, so this long-term spend trend is a curve from which we can all take comfort.

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