Drilling offshore to depths beyond 1,000 metres is a complicated and costly pursuit, with fewer than ten energy companies accounting for the majority of the exploration. But the deepwater drilling sector continues to gather momentum this decade, and 2025 looks as if it will be another strong year—helped by new breakthroughs in geology and technology.
Just follow the money. Some $43b of oil and gas project capex was committed to deep and ultra-deepwater fields in 2024 via project FIDs, according to Clarksons research. This was the highest capex commitment on deepwater since 2013. The deepwater share of capex was 53% in 2024, which is the highest on record, although overall capex commitments to all water depths ($81b in 2024) was, however, still 60% below the peak of the 2013 boom, the data showed.
Also, keep tabs on the news flow: there are plenty of success stories. Portugal’s Galp Energia has already announced this year an additional oil and gas find in Namibia’s Mopane field, which is estimated to hold more than 10b bl oil. It is hoped the southern African country will repeat Guyana’s journey, given the similar geology. The Latin American producer saw oil output go from 15,000b/d in 2019 to 608,000b/d in 2024 and could head above 1m b/d in the next couple of years or so.
Huge sums are being invested in E&P across the Orange Basin geological areas, with Namibia at the forefront. Elsewhere, Chevron in mid-January announced the start of oil production from the Whale semi-submersible platform in the deepwater US Gulf of Mexico, which brings the company closer to reaching 300,000 net boe/d in the region by 2026.
Also, the area known as the Atlantic Margin—spanning the coastal basins of western Africa and eastern South America—is drawing increasing upstream spend due to rising prospectivity. Both frontiers such as Sao Tome and Principe and Uruguay, along with producers such as Angola and Brazil, have seen rising levels of interest. But deepwater stretches far and wide. Other hotspots include Malaysia, Norway (namely the Norwegian Sea), the Eastern Mediterranean and Indonesia. There are more than 6b boe waiting to be discovered in Malaysia's deepwater, with the highest potential in Sabah. In 2022, TotalEnergies discovered oil and gas at the Tepat-2 well in Sabah, and Hess discovered a new gas reservoir at the Bergading Deep-4 well in the North Malay Basin. In the Norwegian Sea, OMV announced the discovery of gas in a deepwater well last year. The estimated recoverable volumes are 30–140m boe.
Tech breakthroughs
There is also technological innovation. Last year, Chevron announced a breakthrough called ‘20K’. This refers to a pressure rating of 20,000psi, typically used to describe high-pressure, deepwater drilling operations where specialised equipment is needed to handle extremely high reservoir pressures.
This tech could extend the production lifespan of the US Gulf of Mexico—and potentially bring billions of additional barrels of oil and gas within reach of producers globally. The Anchor deepwater project is now using specialised equipment that can operate at ultra-high pressures, about a third higher than previously deployed in the industry.
Chevron sees production rising by 50%, to 300,000b boe, in the next couple of years. Three other Gulf of Mexico projects under development are expected to deploy similar 20K deepwater technology: BP’s Kaskida, Shell’s Sparta and Beacon Energy’s Shenandoah. Overall, 20K capability will help unlock six or so discoveries that have been waiting—some for more than ten years—to be exploited, with an estimated up to 6b boe recoverable if exploration is successful.
The Gulf of Mexico accounts for about 15% of US crude production. Production from the basin has plateaued since reaching a peak of 2m boe/d in 2019. The technology also provides a proving ground for other parts of the world—including the North Sea, Thailand and even Kazakhstan.
But the industry still faces challenges and setbacks. Shell will write down around $400m over an oil discovery offshore Namibia that it deemed commercially unviable. CEO Wael Sawan told analysts late last year that Namibia's acreage was "very challenging", and that the lower permeability of the rock made extracting oil and gas harder.
Economics still drive the market. It is still a game for a few due to the expertise, cost and economics involved. Saying that, some companies that have wound down high-impact exploration exposure in recent years may be thinking deepwater is the perfect way to boost upstream portfolios.
There are also looming deepwater decommissioning bills—with Brazil, the US Gulf of Mexico and Angola having hefty charges to pay unless the life of the fields can be extended.
And questions over long-term oil demand cast a long shadow, but for now there seems strong arguments to make the most of new and existing areas of fertile exploration.
Ultimately, deepwater is taking a much larger share of the upstream sector, and it remains the top geologic setting for large discoveries and new superbasins, and that is likely to continue. This may not be a boom or a last hurrah, but a confident and robust next chapter in an industry that continues to evolve and succeed.
Gulf Energy Information’s Deepwater Development Conference will take place at Madrid’s Hotel Melia Castilla between 25 and 27 March 2025.
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