"Trillion-dollar opportunities in the 'deep sea'"

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For investors seeking the next structural growth opportunity, the "deep sea" 200 meters underwater is opening a new era worth trillions of dollars.

According to WindChasing Trading Desk, on November 7th, UBS released a report stating that the deep-sea economy is a long-term investment theme worth trillions of dollars, driven by "short-term focus on FPSO oil and gas equipment, long-term on deep-sea mining equipment". The core insights of this report can be summarized in three points:

Enormous resource value: The deep sea contains mineral resources worth up to $177 trillion (base scenario), including $81 trillion in metals and $95 trillion in oil and gas resources.Two main pillar industries: The deep-sea economy is mainly driven by two pillars—offshore oil and gas extraction and deep-sea metal mining. The former is a mature market, entering a new capex upcycle due to energy security and land resource depletion; the latter is an emerging market, where technological breakthroughs are turning commercialization from "impossible" to "possible".Trillion-level capex wave: In the next decade, capital expenditure for offshore oil and gas exploration and development alone will reach about $2.5 trillion. Expenditure on deep-sea mining equipment is expected to surge from $150 billion over the next decade to $1.5 trillion during 2036-2050.

According to UBS analysis, the rise of the deep-sea economy is not a distant vision but an already launched, decades-long investment theme. For investors, this means a clear roadmap: In the short term, focus on the offshore floating production storage and offloading (FPSO) supply chain; in the long term, deploy in the emerging track of deep-sea mining equipment.

Sleeping Treasure: Why is the Deep Sea becoming a new focus?

In the past two decades, due to technology and environmental restrictions, deep-sea resources have generally remained undeveloped. However, according to the UBS report, three main drivers are now pushing the deep sea into the global industrial and capital market spotlight:

Bottleneck in terrestrial resource supply: After centuries of mining, terrestrial key metals are facing depletion. The report estimates that at current demand rates, terrestrial reserves of nickel, cobalt, and copper can only last 20-30 years. At the same time, the emergence of clean energy transition and high-tech industries (such as electric vehicles and data centers) is intensifying demand for these metals. Under geopolitical tensions, the risks of highly concentrated supply chains in producing countries are highlighted.Staggering reserves and grades in the deep sea: The deep sea is a true resource treasure trove. According to the report, reserves of some key deep-sea metals far exceed those on land, even several times the terrestrial reserves. Even more attractive is the higher grade. For example, the average nickel grade in polymetallic nodules in the Clarion-Clipperton Zone is much higher than the average on land. The US Geological Survey estimates that by 2065, about 35-45% of key metal demand will come from the deep sea.Policy tailwind and regulatory breakthroughs: 2025 will be a key turning point for deep-sea development. According to Chinese reports, China for the first time included "deep-sea technology" in the government work report; the US government has also signed an executive order to accelerate the approval for deep-sea mining. Meanwhile, the International Seabed Authority (ISA), which manages international seabed resources, is stepping up to formulate exploitation regulations and is expected to update the mining code in 2026/27. This paves the way for commercialized mining.

Offshore Oil & Gas: The "Second Spring" of a Mature Market and Trillion Capex

Although deep-sea mining is an emerging field, offshore oil and gas extraction is already a mature industry, and becoming more important than ever. UBS estimates that by 2035, the global oil supply-demand gap may reach 13 million barrels/day. Offshore resources are key to closing this gap.

Economic and reserve advantages: Report data shows that from 2010 to 2020, newly discovered deepwater oil and gas reserves were 16 times those on land. In terms of cost, offshore continental shelf ($37/bbl) and deepwater projects ($43/bbl) are the most economic new supply sources besides Middle Eastern onshore oilfields ($27/bbl).Trillion-dollar Capex kicks off: The report forecasts that in the decade from 2026 to 2035, cumulative global offshore oil and gas exploration and production (E&P) capex will reach an astonishing $2.5 trillion.Short-term investment focus: FPSO: In this round of offshore oil and gas investment boom, offshore floating production storage and offloading (FPSO) is the most worthy subindustry to watch. As deepwater oil and gas production increases (especially in Latin America), FPSO is entering a new upswing. Based on the current pipeline of 96 FPSO projects in bidding, planning, and evaluation, the report estimates a market size of $300 billion over the next decade. This means FPSO operators, EPCI (engineering, procurement, construction, and installation) companies, and suppliers of hull construction and core modules will benefit directly.

Deep-Sea Mining: The "Sea of Stars" Going from Zero to Trillions

If offshore oil and gas is for the present, then deep-sea mining is undoubtedly the future. The proprietary cost model built in the UBS report reveals the enormous potential of this track.

The ultimate opportunity of $177 trillion: The report estimates that, under the base scenario, deep-sea metal resources are worth $81 trillion, while oil and gas plus natural gas hydrates are worth $95 trillion, for a total value up to $177 trillion.Cost parity in sight: Currently, unit costs of deep-sea mining are about 25% higher than on land. But the report projects that with technological advances (assuming opex optimized by 3% annually, environmental costs down 3%, and 1% savings in capex), by 2033 deep-sea mining could reach cost parity with terrestrial mining—potentially the singularity for industry growth.Long-term investment focus: mining equipment: Cost parity will trigger large-scale equipment investment. The report forecasts that deep-sea mining equipment capex will jump from $150 billion in 2026-2035 to $1.5 trillion in 2036-2050 after cost parity is achieved. 84% of the capex will concentrate on underwater equipment, mainly collectors, riser systems, and subsea robots (such as ROVs, AUVs). This provides long-term, high-certainty growth space for equipment manufacturers with relevant technology.

Investment Roadmap: Short-term Focus on FPSO, Long-term on Mining Equipment

Overall, the deep-sea economy offers investors a clear investment path from short to long term. According to the UBS report,

Short-term (the coming decade): Focus on the more certain and already upward-cycling offshore oil and gas industry chain. Core beneficiaries include:Global FPSO supply chain: From operators (such as MODEC) to hull manufacturers (especially Chinese shipyards, whose market share is rising) and core module suppliers, all will share a $300 billion market pie.Deepwater drilling service providers: Growing demand for deepwater drilling platforms (semi-submersibles and drillships) will keep day rates high.Offshore oil service and equipment companies: The entire $2.5 trillion capex will benefit the full industry chain that provides exploration, drilling, completion, and engineering services.Long-term (2030 and beyond): Prepare in advance for the upcoming deep-sea metal mining equipment track. Key beneficiaries include:Subsea equipment manufacturers: Companies capable of producing collector vehicles, riser systems, subsea robots, and sensors will be the biggest winners. The report names European mining and offshore engineering equipment makers, as well as Chinese machinery manufacturers.Special materials suppliers: Such as suppliers of high-pressure and corrosion-resistant titanium alloys, coatings, and sealing materials.Metal processing enterprises: In the early stage of deep-sea mining, mining operators are inclined to cooperate with onshore smelters, creating new growth opportunities for metal processors with advanced processing capacity (such as Indonesian nickel companies).

It should be noted that deep-sea mining, especially metal mining, faces severe ESG (environmental, social and governance) challenges, which could cause irreversible damage to marine ecosystems. This is both a risk and could also give rise to new technological needs (such as more environmentally-friendly mining technologies). When evaluating related opportunities, investors must consider regulatory trends and technological progress as key factors.

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The above wonderful content comes from WindChasing Trading Desk.

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