Onshore vs. Offshore

Developing Onshore Resources vs. Offshore Resources

Offshore oil and gas resource developments are significantly different from onshore developments, particularly when they are new “frontier” developments in locations without existing infrastructure or mature regulations. In general, offshore developments require very different technology for drilling, production, transportation and operation. Companies must use cutting-edge technology to develop the resources, which requires extensive planning times. The infrastructure to bring oil and gas resources to shore are expensive investments that needs to be built, and complex commercial agreements need to be established for these projects to come to fruition

What makes the offshore developments different?

Offshore resource developments require different and cutting-edge technology to develop the resources, and require very long planning times.

  • Offshore resource developments in the Black Sea are significantly more complex than onshore developments and require the use of the latest technology and experience involving specialist equipment to be applied in a deep corrosive environment with complex topography.

  • Offshore resource developments have much longer project lead-times from the start of seismic activities until the start of production. Therefore, the projects are more exposed to changes in the business environment and the legal framework in Romania than onshore developments.

Offshore oil and gas resource developments require significantly higher investments than onshore developments prior to first production.

  • Drilling an offshore well in shallow waters can cost 10 times more than a conventional onshore well, whereas drilling an offshore well in deep waters can cost 100 times more than a conventional onshore well.

  • Drilling one deep water well may cost US$150 million – $200 million.

  • Total commitments before a final investment decision for offshore developments are significantly higher than for onshore developments and may reach one billion dollars.

  • The significant investments require multiple partners and joint ventures to manage the financial risk to explore and produce the resources. International oil companies’ involvement are critical to project success as they typically have the financial strength and project expertise to successfully oversee such large projects.

Contrary to onshore developments, investors into offshore resource developments in Romania must also develop extensive offshore infrastructure to transport and process gas to shore, connect it with the national gas transmission system of Transgaz, and establish a complex chain of sales and transportation agreements to secure market access.

  • If offshore oil and gas resources are developed, their size typically implies an expansion of the national gas transmission system, which needs to be supported by significant financial commitment from the offshore oil and gas investors.