This year has seen a climate of optimism grow throughout the oil and gas industry. The year began with industry leaders upbeat about prospects for the sector, with capital expenditure expected to increase and the resumption of many projects that were previously deferred due to the oil price slump. Investment is pouring into many capital-intensive projects across the globe.

This welcome resurgence in levels of activity in the oil and gas sector has had a beneficial flow on effect on the remotely operated vehicle (ROV) market. The oil and gas sector is the largest single market for the ROV industry, with underwater vehicles currently being used for a wide spectrum of activities across all life-of-field phases in the offshore arena: the drilling and development of wells; installation and construction of production facilities; inspection, repair and maintenance; and decommissioning. It follows, therefore, that the fortunes of ROV manufacturers and contractors is intrinsically linked to those of the wider energy industry.

The increasingly optimistic outlook is, of course, linked to the spectacular recovery in oil prices witnessed over the last year. Levels of development spending and activity in the oil and gas industry are overwhelmingly congruent with oil prices. The relationship can be seen as relatively simple: a high oil price leads to increased spending and development, while low prices tend to depress activity. Therefore, any recovery in oil prices witnessed throughout the last year bodes well for ROV demand.

Total ROV demand by region (%) for 2011-2015 (Image courtesy of Infield Systems)

ROV demand trends upward

It is against the backdrop of high oil prices and optimistic spending plans that Infield Systems expects that this upturn will continue, with an increase in overall ROV demand over the next five years of 43% in comparison to the previous five-year period. This is equivalent to demand for more than 1.25 million ROV days between 2011 and 2015.

This demand will be shaped by a number of key areas that will combine to propel demand upward during this period. Companies have to move into deeper water to find new sources of hydrocarbon production. The extreme nature of deep water increases the importance of the role that ROVs play in drilling support and new installations. At the same time, existing oil and gas infrastructure is subject to more exacting inspection, repair, and maintenance routines in which ROVs perform many pivotal tasks.

In recent years, the trend of increasing offshore development in oil and gas has led to many operators growing their work class fleets to meet demand. The worldwide fleet of light, medium, and heavy work-class ROVs servicing global energy requirements totaled 887 ROVs at the end of 2010, with approximately 210 of these falling into the light work-class category suitable for inspection duties. The remaining 667 medium and heavy work-class vehicles tend to be electro-hydraulic and have a higher power rating than the smaller light work-class units.

The largest operator in the market, Oceaneering has expanded its fleet from approximately 100 ROVs in 2000 to more than 250 in 2010 – a rise of more than 150%. This number includes a rise of almost 50% from the 170 ROVs the company operated in 2005. Other operators have made similar, if less prolific, investments in new vehicles in recent years. Fugro, for example, has increased the number of ROVs it operates by around 116% over five years to a fleet totaling 130 in 2010.

The lull in ROV demand seen in 2009 and 2010 had the effect of stymieing growth in operator fleets somewhat over this period. The downturn in demand coincided with a high number of ROVs in the market, which led to a drop in utilization rates among some of the large operators. Infield predicts that any slack in regional markets will be squeezed by the increasingly robust demand expected through 2011 to 2015.

Deep and ultra-deepwater activity will be an important source of demand for ROVs in the coming years. A large proportion of expected growth in deepwater activity will be concentrated in Africa and Latin America, where rises in ROV demand of 126% and 157% are forecast respectively until 2015. Nigeria and Angola in West Africa and Brazil in Latin America will be largely responsible for such increases in demand. Brazil, in particular, exemplifies the nature and profile of deepwater demand, and it is therefore useful to look at the country’s ROV market in a little more detail.

Historic oil price (yearly average) vs. ROV demand from 2006-2011(estimated)

ROVs offshore Brazil

New deepwater discoveries in areas such as the Santos and Campos basins offshore Brazil have led to significant development in the past five years. This activity has made Brazil a major center for ROV operations and companies. Large-scale offshore projects have drawn the big fish of the ROV world in great numbers. Mostly operating out of Brazil’s oil capital Macae, companies such as Subsea 7, Fugro, DOF Subsea, and Oceaneering have established new bases in the region in the last five years.

There has been a flurry of large orders and contracts. Last year Petrobras awarded a contract in excess of US $400 million to Subsea 7 for the provision of ROVs and intervention tooling services on up to 30 drilling rigs. This in turn spawned an order for UK-based manufacturer SMD for between 20 and 30 work-class ROVs. Fugro, which has approximately 14% of its global fleet in the country, has a number of drilling rig support contracts with Petrobras as well as a significant presence in the IRM market. Oceaneering has around 35 ROVs in the country.

Innovation

The unique demands placed on ROVs by the offshore industry have seen manufacturers refining their products to meet requirements for specific areas of operation. Many ROVs now are capable of working in ultra-deep water. The premium placed on space onboard deepwater drilling rigs has led to ROVs with a smaller profile. The high cost of downtime has led to better reliability and ease of maintenance being a feature of most new models entering the market. Modularization has increased the functionality of many ROVs, allowing single vehicles to be deployed, where in the past multiple units may have been necessary. The functionality of smaller intermediate work-class ROVs also has expanded to the extent that many now can perform tasks that were previously the exclusive domain of larger units. In the future, ROVs will be developed with the ability to perform inspection and construction tasks autonomously.

While demand may fluctuate in line with rises and falls in oil price, it is clear that the offshore industry is likely to rely on underwater vehicle technology more as exploration and development moves into deeper offshore environments.