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ANALYTICS
ast year was challenging for many industries around the world due to the continued COVID-19 pandemic and the realization of many its impacts on the global economy. This year, the oil & gas industry has been further impacted by geopolitical instability – namely the conflict in Ukraine. Demand for hydrocarbons continues to be reduced compared to pre-pandemic levels, while production capability has been met with difficulties imposed by pandemic measures and additional pushes by governments around the globe towards renewable energy sources. As a result, submarine fiber activity in this market has been brought almost to a halt since 2019. The immediate impacts are concerning, but the long-term effects of the global pandemic may yet result in a boon for the submarine fiber industry. Global production cost and regulatory uncertainty faced by the oil & gas industry drives the need to reduce costs to remain profitable. Additionally, COVID-19 forced many industries to expand their remote work and automation capabilities – all of which need the capacity and reliability that only fiber can provide.
BY THE NUMBERS
Before 2019, there were several new systems added around the world, as various offshore energy companies began to realize the benefits of fiber systems for their offshore facilities. However, a dip in oil prices in late 2018 through early 2019 and an overall global economic downturn slowed – or flat out halted – progress on systems starting in 2019 and car-
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SUBMARINE TELECOMS MAGAZINE
BY KIERAN CLARK
ried through into 2021. As prices and the economy began to pick back up through the latter half of 2021, several systems were announced for 2022 and beyond – making it seem like things were back on track. General economic uncertainty caused by aftereffects of the COVID-19 pandemic measures in 2021 continued to lower demand. Additionally, efforts to move from reliance on fossil fuels by changing energy policies around the world further reduced long-term outlook. Due to these circumstances, no systems entered service in 2021. However, as the industry focuses on utilizing new technologies to increase efficiency and automation as a key strategy to reduce cost and maintain margins – especially considering the new reality brought on by a post-COVID economy – demand for new offshore fiber systems should increase through 2024 compared to the previous 3 years. Unfortunately, due to the ongoing conflict in Ukraine that has affected global availability and distribution of petroleum products alongside continued pushes for renewable energy, there is still a large amount of uncertainty for the future of offshore facilities. The growth that had been expected for 2022 has shifted to 2023 or later due mainly to several projects being delayed. However, multiple projects currently planned for 2023 are 1,000 kilometers or more in length. As a result, the projected amount of cable added rises significantly in 2023 Looking forward, another sharp reduction in planned systems is observed in 2024 and beyond. As costs rise across all industries and regulation
on fossil fuels continues to get more stringent, the commercial viability of new offshore development will continue to be less attractive. This is becoming more apparent as companies like ExxonMobil announce selling of stakes ( Johnson, 2021) and the decommissioning of existing facilities. ( Jahic, 2022)
THE OIL BENCHMARK
Looking at the average quarterly price of a barrel of oil over the last five years via the West Texas Intermediate benchmark, oil prices reached their peak in the third quarter of 2022 as the impact of the geopolitical instability in Ukraine on energy prices became apparent. Prices have started to trend downwards once more as distribution adjusts to the new normal and new energy policies are adopted worldwide. However, it is very likely that prices will rise in winter as these new policies and distribution processes are tested – especially in Europe. Additionally, if the United States slows down or discontinues its usage of the Strategic Oil Reserve this will further inflate prices. While 2023 is currently predicted to have a respectable increase in system activity, this increase is largely due to delayed systems rather than the price of oil. Further, with the continued uncertainty surrounding the fossil fuels industry in general even the growing need for automation and remote monitoring may not be enough to justify investment in telecoms assets for offshore facilities.
DEDICATED VS. MANAGED
Dedicated systems are those built primarily by one or more Oil & Gas