A flurry of news this week in the offshore oil and gas industry. Showing that this key energy sub-sector is going through some unprecedented challenges — which are quietly providing some great opportunities.
Much of the recent news in this space centered on the U.S. Gulf of Mexico (GOM). With this go-to offshore play seeing not one, but two major companies pull back from drilling.
The first was ConocoPhillips. Which announced it has made a strategic decision to stop all exploration in the GOM — cutting some $800 million in spending here.
That was quickly followed by fellow major Marathon Oil announcing it will sell its interest in several Gulf of Mexico producing fields. The buyer wasn’t named, but the interest are significant — being valued at $205 million.
Both of those deals are a “sign of the times” in the Gulf right now. With many U.S.-based firms pulling back from higher-risk offshore exploration, to re-focus on onshore shale plays.
In fact, the CEO of Gulf-based offshore drilling firm Hercules said this week that exploration and development activity across the play is “lower today than at any time since the early days of the offshore drilling industry.” Hercules itself has just emerged from Chapter 11 bankruptcy, triggered by a steep fall in drilling business.
But that may create some opportunities for still-standing offshore E&Ps. In places like Colombia — where the government said this week it will cut income taxes by 25% on offshore oil and gas projects, and offer a complete exemption from value-added taxes, in order to spur drilling.
It’s also an important note that not all offshore plays are seeing a lack of drilling interest. Officials in Ireland said this week they have been forced to delay awarding of offshore licenses in the Atlantic — after a bid round drew higher-than-expected interest.
Ireland’s Department of Communications, Energy and Natural Resources said that more than half of the 291 blocks offered in the round were subject to more than one bid — by “some very big names” in industry. Officials had been hoping to award licenses by year-end, but now say they will be forced to wait until Q1 2016 to sort through all of the bids.
All showing that things are still active in the right places in the offshore business. Which may offer some great opportunities, as governments offer better terms and competition gets leaner amid the current downturn.
Here’s to offshoring,