More FIDs are expected to be taken on offshore projects this year after a backlog built up in 2025. This build-up has come about as a result of factors including rising supply chain costs and a lower-than-expected oil price last year. Operators held off on sanctioning projects to pursue cost-cutting and project optimisation, but developments that were at an advanced pre-FID stage will now be ready to move forward. Meanwhile, if oil prices remain elevated for the longer term, that could also have an impact on future offshore activity.
Against this backdrop, the offshore rig market is consolidating. In February, Transocean announced it was acquiring Valaris in an all-stock transaction that was valued at $5.8b at the time of the announcement. The transaction, which is expected to close in the second half of 2026, is set to result in a combined company with an enterprise value of $17b and a fleet of 73 offshore rigs. This marks the biggest move in the offshore rig market to date. It follows Noble’s $1.6b acquisition of Diamond Offshore in September 2024, upstream-focused market intelligence firm Welligence commented, also pointing to the pending merger between Saipem and Subsea7 in the offshore installation space.
As deepwater continues to be a major growth pillar for E&Ps in both production and activity, Welligence sees the continued consolidation of offshore services as increasingly raising concerns among operators. “E&Ps will be concerned about day rates—these are a key input to overall drilling capex, so any increase obviously has a negative impact on project economics from the E&Ps’ perspective,” said Ruaraidh Montgomery, head of energy trends and analysis at Welligence. “While the market will always eventually find the balance, that correction is not always a smooth process, and it is plausible that companies could delay or scale back plans if rates become too high.”
According to Montgomery, for a new deepwater development—including a new facility—E&Ps are typically looking for at least a 15% return.
The Transocean-Valaris deal points to rig contractors’ positive expectations about future offshore activity.
“A notable characteristic of this deal is that it was a value positioning move, rather than consolidation forced by financial pressures,” said Montgomery. “This means that Transocean/Valaris want to position themselves to take advantage of the expected increase in deepwater activity, particularly as the sector moves into deeper and deeper waters.”
Consultancy Wood Mackenzie also anticipates an upcoming uptick in offshore activity towards the end of this decade and sees Transocean and Valaris as opting to consolidate ahead of this.
“Consolidation gives contractors more pricing power to hold day rates and protect margins,” said Leslie Cook, a principal analyst for upstream supply chain at Woodmac. “In the long term, it will position contractors to more efficiently capitalise on the offshore rig upcycle, which we forecast [for] 2028–32. This will be a concern for producers sticking with capital discipline and planning for long-term drilling programmes.”
Cook noted that the Transocean-Valaris deal would move the deepwater market towards an effective duopoly, with Transocean and Noble in control of 60% of the globally marketed fleet.
Activity expectations
Future day rate movements are something operators will have to bear in mind as they plan for offshore work in the years ahead. However, while activity upticks in the coming years can be projected, there are plenty of unknowns when it comes to market dynamics beyond 2028, and in the meantime, there is plenty for operators to focus on, both on the exploration and the production side.
As far as production goes, intelligence firm Westwood Global Energy Group said in a recent webinar focused on offshore energy services that it had recorded 49 FIDs on offshore projects in 2025, whereas at the start of the year it had anticipated 61 FIDs. Given delays to projects that were considered close to FID in 2025, Westwood estimates project sanctioning could rebound to 67 this year. Indeed, Westwood noted the first few weeks of 2026 had marked a strong start for the industry.
However, the crisis in the Middle East could result in some delays in the region compared with previous projections. Beyond regional risk-related disruptions, though, the offshore is not seen as being particularly sensitive to short-term price fluctuations, though it could see an impact if oil prices remain elevated over the longer term and if the risk profile of certain regions changes.
“In the short term, we do not see any impact on offshore activity—companies are not going to change their investment plans just because prices have spiked,” said Montgomery. “However, we do expect to see changes in the longer term as companies reassess their portfolios in terms of risk. Under this scenario, we do expect to see increased emphasis on the offshore in the longer term.”
According to Montgomery, this could include the potential acceleration of project FIDs, the reinforcement of exploration plans and increased competition for assets on the M&A market.
“Offshore is less reactive and has much longer project durations,” agreed Cook. “Assuming $75/bl for the longer run, we would see fundamentals returning to early 2024 levels with mid-single-digit inflation for supply chain.”
Projects to watch
In the short term, Welligence expects a number of FIDs this year, including new phases of development being sanctioned by ExxonMobil at Longtail in Guyana, Italian IOC Eni at Baleine in Cote D’Ivoire and Brazilian NOC Petrobras at Buzios in Brazil.
“The most high-profile FID should be TotalEnergies at Venus in Namibia, and we expect Ithaca will sanction the long-awaited Cambo project in the UK,” said Montgomery. Welligence also anticipates a number of subsea tieback FIDs in the US Gulf as companies take advantage of the region’s abundant infrastructure. These include Talos Energy’s Daenerys, Kosmos Energy’s Tiberius, Shell’s Fort Sumter and Gettysburg projects, Harbour Energy’s Who Dat East and Who Dat South developments and Beacon Offshore Energy’s Tabasco, according to Montgomery.
However, Montgomery added that the concerns over cost inflation and supply chain capacity that had resulted in a number of expected FIDs being delayed in 2025 had not yet been resolved. He therefore believes it is possible that some of the expected 2026 FIDs could slip into 2027.
Woodmac, for its part, tracks offshore project FIDs differently from Westwood, and Cook said the consultancy expected the number of FIDs specifically for major projects this year to be around 25. This would be a similar number to 2025 and a fourth year of a flat number of FIDs, Cook said. She added, however, that total committed capex was likely to exceed $100b for the first time in three years, with five $10b+ projects set for approval in 2026 compared with only two sanctioned in 2025.
The FIDs expected by Woodmac in 2026 include 18 distinct operators spanning across 19 countries. Cook also highlighted projects offshore Brazil and Guyana as being among the top projects to watch in 2026.
“There are four large LNG projects up for FID in 2026, which supports our view that gas will expand its share in the energy mix to a quarter of global energy demand by 2050,” Cook added.
Welligence anticipates that offshore activity will remain focused on the Atlantic Margin for both exploration and production, with some prolific areas continuing to see further activity.
“The Atlantic Margin, on both sides of the ocean, is the primary engine of deepwater activity,” said Montgomery. “Petrobras will continue to aggressively develop its pre-salt resource in Brazil, likewise ExxonMobil offshore Guyana at its giant Stabroek project—we may also see TotalEnergies kick off development drilling work at its GranMorgu (Block 58) project in Suriname,” he continued. “On the African side, we expect Shell to kick off development drilling on the Bonga North (OML 118) incremental project in Nigeria, while Azule will complete development drilling on Block15/06 Agogo in Angola—it may also fast-track its recent discovery (Algaita) as a tieback to the Olombendo FPSO,” he said.
“There will also be significant exploration activity across Atlantic Margin with wells from Petrobras, ExxonMobil, TotalEnergies, Chevron, Azule Energy, Murphy Oil and Shell, as well as others,” Montgomery said.
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