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Oil companies look offshore to deepwater opportunities to grow production

Tight capital and long-cycle returns have seriously challenged the deepwater oil production industry for the last couple of years, however with some deepwater markets now being more cost effective, exploration and production companies are once again looking to expand their deepwater portfolios.

Deepwater activity makes up 20% of Exxon Mobil Corp..'s growth strategy to 2025 behind unconventional drilling in the Permian Basin, which at 40% is the largest growth driver, ExxonMobil Exploration Company President Stephen Greenlee said during CERAWeek by IHS Markit in Houston on March 12.

Exxon executives outlined their bold growth strategy at the company's Investor Day on March 6 that includes increased spending in a bid to ramp production. Exxon plans to spend $30 billion this year, $33 billion to $35 billion in 2020 and $30 billion to $35 billion from 2021-2025. By comparison, the company spent almost $26 billion in 2018.

Although the Permian focus is key to its growth strategy, the 20% growth in deepwater markets provides an added opportunity for Exxon, Greenlee said during a CERAWeek panel discussion.

From the deepwater development and production standpoint, Exxon is primarily focused on Guyana and Brazil, he said. For exploration and production, the low level of interest in deepwater activity and a significant reduction in the cost structure from five years ago have supported opportunities to grow the company's portfolio over the last several years, Greenlee said.

"The risk-reward for the deepwater has changed substantially," he said. Taking advantage of the market, Exxon reloaded its portfolio in places like Brazil, but also in West Africa, Asia Pacific and the Eastern Mediterranean. "That forms an opportunity for us to be really active over the next four or five years drilling deepwater opportunities," he said. "It is a big part of our exploration focus."

Malaysia's state-run integrated oil and gas company Petroliam Nasional Bhd., or Petronas, was also able to capitalize on the downturn as the company continued its investment in exploration, particularly in growing its petroleum assets, the company's vice president for exploration and upstream, Emeliana Rice-Oxley, said during the conference.

Petronas is looking to shift its portfolio into more deepwater opportunities to help it meet "huge" production targets for 2025-2030, Rice-Oxley said. At the same time, the company is extending its exploration efforts in deepwater beyond its regional goal in Asia Pacific, also looking to West Africa and into the Americas, she said.

Total SA also took advantage of the period of low oil price and low capture costs, taking the time to rebuild its inventory as well as its approach to exploration, Senior Vice President of Exploration Kevin McLachlan said.

Boasting about the company's "very long history in deepwater," he said Total is working hard to make deepwater developments. This exploration portfolio that Total will start to test in 2019 is really important for the company's exploration program as it positions for medium- and long-term growth, McLachlan said.

"When it comes to the development side, we have very high expectations that we can deliver profitable developments in deepwater, and in fact, in the ultra-deepwater, that will be competitive to the other parts of our businesses," he said.

"It is really about trying to make the portfolio, mature it, grow it, and then hopefully deliver the long-term growth that the company expects in terms of resource replacement, production growth and profitability," McLachlan said.