Payara, ExxonMobil’s 3rd development at the Stabroek Block offshore Guyana, has made way for the award of the largest subsea contract in the oil and gas industry since 2014. This comes in a year which one industry analyst describes as ‘bleak’ for deepwater operations due to the impact of the global pandemic on oil demand.
Although the third-quarter earnings show mixed results in terms of revenue generation for key oilfield service players, this quarter was a big test of service companies’ cost control, according to a new report from Rystad Energy.
“The cost reduction measures initiated at the start of the crisis seem to have proven successful, especially within the big three players – Schlumberger, Halliburton and Baker Hughes,” Rystad Energy said. “All three have improved their adjusted operating margins in this quarter. However, these margins still trail below the 2019 numbers.”
On revenues, Schlumberger at -2%, Halliburton at -7% and NOV also at -7%, recorded sequential declines in the third quarter, with all three pointing to lower drilling activity in North America as one of the drivers. On the other hand, Baker Hughes managed to grow revenues by 7% sequentially, thanks to its LNG-focused Turbomachinery and Process Solutions segment’s good performance. Other key players TechnipFMC, Saipem and Aker Solutions, also recorded sequential revenue increases. TechnipFMC led the pack with its third-quarter 2020 revenue matching a year earlier, while all other players witnessed double-digit declines compared to their 3Q19 revenues.
“Except for three major subsea awards, including OneSubsea’s Sangomar contract win at the beginning of the year, Aker Solutions’ Breidablikk contract from Equinor and TechnipFMC’s contract for ExxonMobil’s Payara project in Guyana, 2020 has been bleak in terms of subsea awards,” Rystad Energy said in a new report.
These three projects make up 85% of the subsea trees awarded for 2020.
“Payara, the largest subsea tree award since 2014, includes 41 enhanced vertical deepwater trees, six flexible risers and ten manifolds along with controls and tie-in equipment,” Rystad Energy stated, pointing out that this contract has boosted TechnipFMC’s order intake for Q3 2020.
“TechnipFMC is also working with ExxonMobil on the Liza Phase 1 (30 subsea trees) and Liza Phase 2 (17 subsea trees) projects, having secured the subsea scope for both,” Rystad Energy said.
While the third-quarter earnings indicate that the services market has hit rock-bottom and may be ready for a gradual recovery, service companies should prepare themselves for another challenging year in 2021, according to Rystad Energy. “Continued uncertainty in the near-term oil price will likely cause the offshore market to stay suppressed into next year and activity levels will probably not start to recover before 2022.”
The Payara Development will see approximately 35-45 wells being drilled from 10 subsea drill centres, consisting of a combination of producers and injectors to support oil production.
The project will utilize onshore infrastructure which include shorebases, warehouses, storage and pipe yards, fabrication facilities, fuel supply facilities, and waste management facilities in Guyana.