Speaking at the Hart Energy conference, senior associate for Infield Systems Ltd., Adrian Dorsch, flagged up the latest forecast for subsea tree orders as part of his presentation.

He first pointed out that the impact of persistently low oil prices has been felt throughout the offshore supply chain. Global offshore engineering, procurement, installation and construction (EPIC) capex is anticipated to fall by 9% this year from $91 billion in 2014 to $83 billion in 2015, followed by a further decline to $78 billion in 2016.

The number of subsea tree orders is, of course, considered a barometer for activity in the offshore industry.

Tree orders specifically for the Gulf of Mexico (GoM), he said, have collapsed from 85 in 2014 to 36 in 2015, but Infield projects the number will recover strongly by 2017 to about 100 units or so. Subsea will account for 47% of future capex demand (2015 to 2020) in the GoM, driven by the region’s deepwater focus. A significant amount of this future capex estimate relies on Shell’s Walker Ridge, Mississippi Canyon and Alaminos Canyon projects, added Dorsch, who also stressed that forecast activity post-2016 was still at risk of further project deferrals.

Worldwide, about 2,500 subsea trees are expected to be awarded between 2016 and 2020, with the growth mainly attributed to large developments offshore Africa in the short term, and Brazil in the longer term.

According to his presentation, about 200 subsea trees will be ordered in 2015, with that figure expected to rise to more than 300 in 2016, led largely by the African market. In 2017, the global figure is forecast to recover to about 500, according to Infield.

“At an average sanction cost of around $35/bbl, the offshore industry remains competitive compared with unconventional resources,” Dorsch said.

He continued, “We all know that the oil price drop and the volatility that we are seeing have created significant uncertainty. We do, however, see signs of stabilization. We see a reduction in oversupply and also depleting assets not being replaced. This leads the potential for stabilization in 2016.”

Today most operators are focused on existing fields to maintain margins, he said, or bidding on fields with low geographic risk and known reserves at high prices. Deepwater GoM acreage in particular has been highly susceptible to oil price due to the more complex economics.

But when the recovery arrives, Infield believes it will be led by deepwater activity. Given the expected recovery in oil prices and cost cuts, “We do believe the Gulf of Mexico will be critical for the deepwater industry going forward,” said Dorsch. But its recovery “depends on a stabilization of oil prices probably happening in 2016, potentially in 2017.”

(Additional reporting by Velda Addison, Leslie Haines and Erin Pedigo)