From Financial Times
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n the depths of the ocean off the coast of Uruguay, more than two miles below sea level, the oil industry is continuing to push back the frontier.
Last month a drillship operated by AP Møller-Maersk of Denmark began the Raya 1 well in 3,411 metres of water, breaking the record for sea depth previously set in 2013.
Drilling in such extreme conditions is a remarkable feat, but wells such as Raya 1 are becoming increasingly rare. Technology makes them possible, but economics militates against them.
The impact of low oil prices is often depicted as a battle between Saudi Arabia and the onshore shale producers of the US. But other relatively high-cost sources of supply around the world have also been hit, and for offshore oil the effect is likely to last longer.
The latest data for offshore oil and gas production still look healthy. Last year output from the UK sector of the North Sea rose 7 to 8 per cent, while crude production in the US waters of the Gulf of Mexico rose 10 per cent.
That growth is the result of decisions taken years ago, however. Matt Cook of Douglas-Westwood, a consultancy, says that because offshore projects take years to develop, the impact of falling oil prices is felt only after a lag.
“This hasn’t yet got as bad as it could well be,” he adds. “Some of the positive moves we have seen in drilling are the result of decisions that were committed to before the downturn. It’s quite possible that the worst is yet to come.”
