Outlook for Offshore: 2023


Article retrieved from Air and Sea Analytics

As the festive season fades and we enter a new year it’s an ideal time to reflect on the year gone by and wonder what might be to come in the year ahead. 2022 began with some cautious positivity for the offshore rotorcraft sector – the oil price started the year at $78/bbl (Brent spot) (compared to an annual average of $45/bbl in 2016 and not to mention $42/bbl during 2020 as the world faced the Covid-19 crisis) and investment plans tabled by major oil companies showed promise of some material recovery in the oilfields services and logistics sectors that had suffered 7 years of downturn.

By early March, when the rotary business came together at the annual HAI Heli Expo event in the USA, the oil price hit $133/bbl on the conference's opening day. The invasion of Ukraine by Russia on 24th February had put a significant ‘risk premium’ on oil prices which translated into a genuine supply issue after a series of sanctions, moves to diversify away from Russian hydrocarbons, and sabotage of export infrastructure.

Inflationary pressure was present in many areas of the world prior to the Ukraine invasion (mostly as a result of economic stimulus measures during the Covid crisis) and efforts to curtail inflation, specifically tighter monetary policy, look set to moderate economic growth in 2023.

This is the backdrop for oil prices cooling off in the late summer and autumn of 2022. We have $82/bbl on the screen here as we enter 2023, $4/bbl higher than the same time a year prior.

It is impossible to accurately forecast oil prices given all the unknown factors that can (and do) emerge but that fact rarely deters anyone from having a go…. Reviewing oil price forecasts from a number of market commentators and investment banks made in the last month (Dec 2022) we can see that the outlook for 2023 is very bullish with the US Energy Information Administration and many investment banks forecasting oil prices of over $90/bbl. The most bearish outlook, from Citi, would see oil prices only $6 lower than today’s levels. Even at this level, oil prices would be higher than any other year in the preceding eight apart from 2022.

Why the bullish outlook for oil prices? In December 2022 a report from the International Energy Agency remarked that “recent oil consumption data have surprised to the upside” and forecast a 2.2 million barrel per day demand increase in global demand. There are number of key supply side and demand side drivers:

China: Few expect the reopening of China following the relaxing of its ‘zero-Covid’ policy to be a smooth process, but it is reasonable to expect that 2023 will eventually see a return to pre-Covid ‘normality’ or at least near-normality. Critically this will involve a sharp increase in oil demand as regional and international travel recovers. A number of observers expect more than a million bpd of additional oil demand as a result of the reopening.

India: India is seeing rapid economic expansion which according to a Morgan Stanley report in October 2023 has averaged 5.5% annual GDP growth in the last decade and could see the country’s energy demand increase by 60% over the coming decade. The investment bank expects India to be world’s third-largest economy by 2027. A recent OPEC report put India at the top of the table for growth in demand for petroleum products in 2023, with a 7.7% increase expected.

Russia Sanctions: EU Sanctions on Russia that come into effect in February 2023 (for refined products) combined with the seaborne crude ban in December 2022 are likely to take some supply out of the market. The International Energy Agency (IEA), based in Paris, have suggested this could be as much as 1.4 million bpd of crude oil output whilst Russian Deputy Prime Minister Alexander Novak stated that a cut of 0.5-0.7million bpd of output was possible.

US Strategic Petroleum Reserve: The USA released crude from its strategic reserve (SPR) in 2022 at an equivalent rate of 0.49 million bpd averaged over the year. It has now stated that there will be no further releases and it will seek to start replenishing the SPR at a prices between $68 and $72, meaning that not only will there be not be this additional source of crude on the market in 2023, there may also be price support if the oil price falls to these levels and the SPR becomes a material buyer.


Air & Sea Analytics’ review of platform projects with expected sanction (Final Investment Decision or ‘FID’) dates in 2023 suggests there is potential for over $50 billion of commitments to new offshore platform projects in the next twelve months which could see an additional 134 platforms added to the backlog.

Not all of these will be sanctioned in 2023 as offshore contracts are known for a certain element of unpredictability in terms of timing of sanction and execution. Some of the projects on the list are in fact projects that were (at this time last year) expected to be sanctioned in 2022, including Santos’ Dorado FPSO in Australia and Shell’s Gato do Mato FPSO in Brazil. That said, the volume of visible projects is a healthy indicator for the sector and explains why some platform fabricators have in recent months been scrambling to secure shipyard capacity ahead of some of these awards being made. Supply chain constraints could well be a determining factor on which projects are able to successfully move forward, particularly for the larger platforms and FPSOs.

Notable mega-projects include the P-84 and P-85 FPSOs in Brazil - each expected to feature 225,000 bpd oil processing capacity, 10 million cubic metres per day of gas processing, and an ‘all electric’ efficient power system designed to cut emissions. In Guyana, the Uaru FPSO is expected to be sanctioned by Exxonmobil whilst across the border in Suriname Repsol mulls an FPSO for its Block 58 project, although it will likely await the results of delineation wells before proceeding.

In Mexico international operators Repsol and Woodside may move forward with the Polok and Trion projects whilst NOC Pemex is expected to sanction a small offshore LNG project known as Lakach using a converted drilling rig to host a 1.4MMTPA liquefaction unit. In the US GoM Shell has its Sparta deepwater high-pressure development which was formerly known as ‘North Platte’.

Norwegian operator Equinor has a number of major overseas projects on the starting blocks, not only in Brazil (Pao de Acucar FPSO and Bacalhau Phase II FPSO) but also in Canada where it is targeting a huge resource in the Flemish Pass, 500 km east of St John’s, with the newbuild Bay du Nord FPSO. Its Rosebank FPSO project in the UK is also located in challenging waters west of the Shetland Islands and will no doubt come under the political/environmental microscope in the same manner as the nearby Siccar Point Cambo development.

In Norway, Aker-BP has tabled an interesting development concept for its Yggdrasil development - a normally-unmanned remotely operated platform with no helideck. All maintenance and personnel access is planned to be undertaken via vessels.

In the Middle East, we expect to see some substantial fixed-platform sanctioning with major expansion projects underway in Qatar, Saudi Arabia, and the UAE whilst in Africa the Angolan market is returning with three FPSO projects moving to FID in 2023 and the continued exploration and appraisal efforts in Namibia where the Orange basin will no-doubt see some future floating platform installations (not currently expected to see FID in 2023, however).

As always, it is impossible to have a perfect ‘crystal ball’ view of what will unfold, however, we can say that the outlook for 2023 looks surprisingly positive from a macroeconomic perspective and similarly so from a ‘bottom-up’ assessment of visible upcoming activity.

To view the complete list, click here