The number of global upstream projects reaching final investment decision (FID) could double to 25 in 2017 from 12 last year, research and consulting firm Wood Mackenzie Ltd. says in a new report.
During the first half of this year, 15 projects were sanctioned, representing 8 billion boe in reserves. For all of last year, 12 projects and 8.8 billion boe in reserves were greenlighted overall.
“Eleven of the 15 project sanctions year-to-date are either brownfield expansions on existing fields, satellite developments, or subsea tiebacks,” explained Angus Rodger, WoodMac research director, Asia-Pacific upstream. “Not only are these projects less risky than greenfield developments, they also tend to be less capital-intensive and are quicker to bring onstream, offering a quicker payback and better returns on development dollars.
“This is reflected in lower development capex per barrel and stronger project returns,” Rodger continued. “For example, on average, project capex is down to $11/boe vs. $15/boe in 2015 and [internal rate of returns are] at 15% in 2017 vs. 11% in 2015.”
Eight of the 15 projects sanctioned thus far in 2017 are operated by majors. Of the 35 mid-to-large projects sanctioned since the start of 2015, or those with 50 million boe or more of commercial reserves, 19 were operated by majors, representing just less than 14 billion boe of the 22 billion boe total of commercial reserves sanctioned. WoodMac estimates these projects for the majors would comprise 1.6 million boe/d of net new production by 2024, which is 6% of total output from the peer group.
On the other hand, national oil companies have been noticeably inactive on new project investments during the period from 2015 to this year’s first half. WoodMac says NOCs should be on the lookout for investment opportunities as many face large production declines post-2020.
“The second half of 2017 could see another 11 billion boe of reserves hit FID and again we expect strong activity from the majors,” Rodger noted. “However, it is also important to note that last month ExxonMobil [Corp.] sanctioned the first phase of development on the 1.5 billion-boe Liza oil field (OGJ Online, June 16, 2017). This goes to show that it is not just about short-cycle investments—the best greenfield opportunities are also moving forward to commercialization.”
