Looking for recovery

An upbeat mood is expected at the Offshore Technology Conference.

Explorers of deep-sea oil fields will touch down in Houston this week seeking new technologies and strategies to rebuild the offshore drilling industry after the oil bust.

At the Offshore Technology Conference, the industry’s largest annual summit, thousands of these oil and gas professionals will fan out across a trade show the size of 10 football fields, navigating hallways lined with giant blowout preventers, car-sized robots that dive into the ocean and the flashy displays of more than 2,400 exhibitors.

Engineers plan to show off new project designs in a marathon of presentations focused on how to reduce expenses, wring profits out of deep-water fields and compete with lower-cost onshore shale drillers.

The conference, known as OTC, is expected to draw a more upbeat crowd to Houston’s NRG Park this year as oil companies regain their footing amid higher, more stable oil prices. Last year, during the worst of the oil market collapse, the crowd shrank to its smallest size since the Great Recession.

“The price of oil will certainly help their mood,” said Joe Fowler, the OTC chairman.

Over the past half-century, attendance at the conference has ebbed and flowed with the fortunes of the oil patch. In 2014, at the height of the recent oil boom, the crowd surged to its largest size ever, hitting 108,300 to edge out the previous record in 1982. In 2016, after prices fell to less than $30 a barrel, the crowd shrank dramatically, to 68,000, as it had through the mid-1980s oil bust.

Last year, virtually everyone knew someone who had lost a job. Many came to the conference looking for a new one. Conference organizers let in nearly 1,000 unemployed oil professionals, free of charge, on one day of the weeklong

conference, offering programs on how to approach potential employers. Stacks of résumés piled up at companies’ display booths.

“It was very depressed,” said Ramanan Krishnamoorti, a professor of petroleum engineering at the University of Houston.

OTC will offer similar programs for unemployed workers this year, but they face a slightly better outlook. Oil futures are hovering near $50 a barrel — about double their low in February 2016 — and some analysts believe commercial oil inventories will begin to shrink later this year, possibly lifting prices.

In recent months, offshore drillers have paid millions for rights to the Gulf of Mexico, on both sides of the U.S. maritime border. On dry land, they’ve put rigs and roustabouts back to work. Bankruptcies and layoffs have slowed to a trickle.

Another reason for optimism: Efficiency gains and falling drilling costs have allowed offshore operators to adapt to lower energy prices. The costs of deep-water projects have come down by about one-fifth over the past three years, adding some 5 billion barrels of oil that can be extracted profitably, according to energy research firm Wood Mackenzie.

“We’re lean and mean,” said Frank Mullins, general manager at oil equipment supplier Seminole Services in Houston. “There’s a lot of optimism now.”

Squeezing profits from expensive projects will be one of the major themes of the conference, Fowler said. For example, BP will explain how it reworked a major deep-water project in the Gulf of Mexico to cut costs in half. France’s Total will highlight powerful underwater pumps and new drilling technologies at a West African offshore platform. Royal Dutch Shell will talk about how oil companies have worked with services providers to standardize oil equipment.

“Costs really have come down,” said Mark Shuster, associate director at the Bureau of Economic Geology at the University of Texas. “At $50 oil, there’s a lot more focus on projects that will be profitable at lower prices.”

Still, new deep-water projects can cost between $1 billion and $5 billion and take at least three years to assemble and fire up.

Any major recovery in the offshore industry will take time and likely won’t start until much later this year. Even then, it will be slow going while the industry refills jobs it had cut.

A Rystad Energy report said it has seen energy job ads pick up in North America, but doesn’t expect a similar improvement in offshore jobs until much later in the year.

“The problem is, there’s a lot of talent that’s been lost,” Mullins said.