Offshore oil is booming and the shipping market is at an all-time high

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The US oil and gas sector has started the new year on the back foot and market sentiment remains as bearish as a year ago. Commodity analysts at Standard Chartered said demand pessimism was once again taking over, with traders worried that oil demand in the US and Europe will weaken. A portion of Wall Street remains bearish, with analysts warning of a challenging risk/reward landscape for the sector in the near term, with the risk of a mild recession rising.

Despite the recession, investors are still betting heavily on one corner of the market: offshore oil and gas.

Full year 2023 data points released by Clarksons Research paint a picture of a sector in healthcare with strong growth across the board. Global offshore oil and gas markets posted impressive growth in 2023, with the proprietary Clarkson Offshore Index which tracks rig count as well as offshore support vessel (OSV) and subsea day rates, climbing 27% to a multi-year high of 106 points. Reached the highest level.

Even better for the bulls, the Clarksons Offshore Index is projected to reach an all-time high in 2024. The rig, OSV and subsea markets are particularly strong, with oil and gas vessel rates in most sectors/regions now above 2014 levels. Activity remains particularly strong in the Middle East, Brazil and West Africa.

The Clarksons report showed that high-spec jacked-up awards of more than $160,000 per day are becoming common, while 'leading edge' floater rates are set to exceed the $500,000 per day mark in the fourth quarter of 2023. The demand for OSV is continuously increasing, the number of which is increasing.

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Offshore crude oil production in 2023 stood at 25.5 MMbpd (27% of global oil production), up 3.0% year-on-year, while offshore gas production stood at 129 Bcfgd (32% of global gas supply), up 1.9% year-on-year.

Meanwhile, investment interest in the global offshore oil and gas sector remains high, with offshore oil and gas capex reaching $116 billion FID (final investment decision), 49% above the 10-year average. Clarksons predicts that global offshore oil and gas capital expenditure will reach $125 billion in the current year.

With these kinds of numbers, it's little surprise that stocks of offshore oil and gas drillers and producers have been able to reverse their seven-year slump and outperform other oil and gas subsectors.

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The ongoing offshore boom is characterized by a notable trend: a large increase in deepwater and ultra-deepwater drilling. Last year, China National Petroleum Corporation (CNPC) began ultra-deepwater exploratory drilling for oil and gas, in which it aims to drill test boreholes up to 11,000 meters (36,089 ft), which is equivalent to Qatar's petroleum well depth of 12,289 meters (40,318 ft). ) is not far from the world record. Which was drilled in Al Shaheen Oil Field in 2008.

Last year, Norway's Aker BP (NYSE:BP) (OTCQX:AKRBF) made an extremely deepwater discovery at a total depth of 8,168 metres, the longest exploration well drilled offshore Norway.

Wood Mackenzie predicts that deepwater oil and gas production will increase by 60% by 2030, and contribute 8% to total upstream production. Ultra-deepwater production is expected to grow at a rapid pace, accounting for half of all deepwater production by 2030.

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