Despite two major price crashes within the last 10 years, the offshore oil and natural gas markets remain healthy. The world’s energy demand continues to rise, and fossil fuels like oil and natural gas remain an integral part of most of the world’s energy policies. However, global discussions and regulations regarding management of carbon emissions have picked up the pace in the last year which could impact new exploration and overall production of hydrocarbon fuels.
By 2040, natural gas is expected to rise to make up 26 percent of the total energy market – up 1% from a year ago – as it is a relatively cheap and low emission alternative to coal. Natural gas is projected to overtake coal as the second largest source of global energy by 2040. On the other hand, demand for oil is expected to rise only slightly through 2030 then plateau and even fall slightly until 2040. (BP, 2019)
This projection is highly dependent on how quickly renewables continue to be adopted and assumes that adoption rates remain relatively the same through 2040. Government energy and environmental policies will be key factors influencing future demand including, but not limited to, investment in renewable energy infrastructure, regulations reducing carbon emissions and reductions or outright bans on single use plastics. Any policies of this nature will naturally reduce demand for offshore hydrocarbon production.
Currently, renewables and natural gas account for 85% of energy growth through 2040. (BP, 2019) If renewable energy adoption greatly accelerates, then expect demand for oil and natural gas to fall more quickly. Conversely, if adoption of renewables measurably slows compared to current rates, expect demand for oil and natural gas to remain high through 2040. Several other related scenarios are possible, but beyond the scope of this report.
Based on current market activities and trends it is reasonable to predict the short to mid-term outlook – 5-7 years – is expected to be strong; especially for U.S. based oil-exploration efforts as the U.S. continues to work towards energy independence. Additionally, energy consumption from industrializing countries like China and India will keep demand for new offshore platforms high, and thus continue to drive demand for new fiber telecoms systems.
Past 2030 market predictions become more challenging and less reliable but based on current projections there no signs of a large or sudden drop off in demand. In addition, the adaptation of alternate energy sources is likely to be a gradual process, providing time for the industry to adapt and adjust their strategies to meet new market trends. Natural gas should continue to keep offshore expansion healthy, due to its affordability and low emissions. (ExxonMobil, 2019) It will be the hydrocarbon of choice in the transition from carbon-based energy output to low or zero emission alternatives and is the only fossil fuel that is expected to greatly increase demand through 2040 and beyond. Production of natural gas will still require construction of additional offshore facilities.
Renewables like solar and wind power combined with alternative energy sources – like nuclear – are by far the biggest factors in reducing demand for oil and natural gas. Wind and solar energy are expected to grow rapidly through 2040. (BP, 2019) (ExxonMobil, 2019) While offshore wind and solar farms are a very different markets, they will look to leverage technology to create efficiencies and reduce costs and therefore provide fiber telecoms an opportunity to support this evolution.
As the industry focuses on utilizing new technologies to increase efficiency and automation as a key strategy to reduce cost and maintain margins, it is expected to drive up the demand for new offshore fiber systems. Worker tracking and safety, remote monitoring, improved seismic mapping, big data analytics and more all require higher bandwidth and lower latency than traditional satellite and O3b connections can provide. The push for efficiency to reduce costs and increase production help to offset weaker oil price when times are tough and maximize revenue when prices are high. As these techniques and processes become more widespread, new submarine fiber optic systems will be required.
This edition of the Submarine Telecoms Market Sector Report was authored by the analysts at SubTel Forum Analytics, a Division of Submarine Telecoms Forum, Inc. It provides submarine cable system analysis for SubTel Forum’s Submarine Cable Almanac, Cable Map, Industry Report and Industry Newsfeed. SubTel Forum Analytics utilizes both interviews with industry experts and its proprietary Submarine Cable Database. The database tracks some 400+ current and planned domestic and international cable systems, including project information suitable for querying by owner, year, project, region, system length, capacity, landing points, installers, etc.
The Submarine Cable Database is purpose-built by SubTel Forum Analytics’ database administration team, which is powered by SQL and retained on a Microsoft Azure platform. Data is collected from the public domain and validated through interviews with industry experts in order to provide the most accurate, comprehensive and centralized source of information in the industry. At present, SubTel Forum Analytics’ Submarine Cable Database chronicles the work of some 18 financiers, 477 cable owners, 22 system suppliers, 12 upgraders, 15 system surveyors and 25 system installers. In addition, it manages data for some 400+ projects, across seven regions and 840+ landing points.
To accomplish this report, SubTel Forum Analytics conducted continuous data gathering throughout the year. Data assimilation and consolidation in its Submarine Cable Database was accomplished in parallel with data gathering efforts. Trending is accomplished using known data with linear growth estimates for up to three following years.
SubTel Forum Analytics collected and analyzed data from deriving from a variety of public, commercial and scientific sources to best analyze and project market conditions. While every care is taken in preparation of this report, these are our best estimates based on information provided and discussed in this industry.
List of Figures
Figure 1 – Worldwide Map of the Submarine Cable Database
Figure 2 – Brent Crude 30-Year Monthly Price History
Figure 3 – WTI 30-Year Monthly Price History
Figure 4 – Brent Crude & WTI Combined 30-Year Monthly Price History
Figure 5 – WTI 5-Year Monthly Price History
Figure 6 – Brent Crude 5-Year Monthly Price History
Figure 7 – Brent Crued & WTI Combined 5-Year Monthly Price History
Figure 8 – Henry Hub 5-Year Monthly Price History
Figure 9 – Typical Offshore System Design
Figure 10 – Future System Type
Figure 11 – Current System Owners
Figure 12 – Current System Investment
Figure 13 – Number of Systems by Year, Current
Figure 14 – Number of Systems by Year, Future
Figure 15 – Systems by Region, Future
Figure 16 – System Supplier Activity, Current
Figure 17 – System Installer Activity, Current