Westwood Insight – Key offshore themes from 1Q 2022

Westwood Global Energy Group has released its latest tranche of comprehensive quarterly offshore market reports and with it can reveal a few interesting themes and positive indicators that emerged from the first quarter of 2022. Within offshore field development, higher than expected commodity prices since late 2021 is driving an anticipated rebound in subsea EPC spend, as 2022 E&P upstream capex guidance increases 28% year-on-year (YoY). 

Higher prices driving rebound in subsea EPC spend

Higher than expected commodity prices since the start of 4Q 2021 is driving an anticipated rebound in subsea engineering, procurement and construction (EPC) spend, as 2022 exploration and production (E&P) upstream capex guidance increases 28% YoY but still lags by 3% on 2019 levels. 

kilden: Westwood

The significant increase in E&P 2022 planned upstream capex is expected to directly impact subsea investment as several announced field development timelines get to a final investment decision phase, with 77 offshore fields expected to be sanctioned this year – a 20% increase compared to 2021. Given this, Westwood anticipates a 97% increase in derived EPC subsea spend from selected E&Ps in 2022, as E&Ps shift focus to prolific capital intensive projects.

The planned increase in upstream spend could provide some respite to the offshore EPC supply chain, as subsea OEM 2021 order intake still lags by 36% on 2019 levels.