Tuesday 11 July 2017

The number of projects reaching a final investment decision is on the rise this year, according to research by consultancy group Wood Mackenzie.

Wood Mackenzie claims the number of projects reaching FID in 2017 could more than double to 25, compared to just 12 last year.

The number of projects progressing to FID has already surpassed last year’s figure, with 15 projects sanctioned in the first half of the year.

However, the sanctioned projects have been smaller in size overall, equating to about 8 billion barrels of oil equivalent of reserves compared to 8.8 billion boe over the 12 projects sanctioned last year.

However, Wood Mackenzie believes up to another 10 projects could reach FID before the end of the year which represent another 11 billion boe of reserves.

Wood Mackenzie Asia Pacific research director Angus Rodger said there were positive signs the upstream industry was continuing to recover as more competitive conventional projects were moving down the cost curve sufficiently to attract new investment.

"Eleven of the 15 project sanctions year-to-date are either brownfield expansions on existing fields, satellite developments or subsea tiebacks,” he added.

“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.”

Roger noted project capital expenditure was down to $11 per boe compared to $15 per boe in 2015.

Wood Mackenzie also found that oil majors were the largest players in the FID scene, with eight of the project sanctions so far this year operated by majors.

It added that of the 35 mid-to-large projects sanctioned since the start of 2015, 19 were operated by oil majors and accounted for just under 14 billion boe of the 22 billion boe total of commercial reserves sanctioned.

National oil companies meanwhile have been less active, operating less than 1 billion boe of the sanctioned commercial reserves since 2015.

Wood Mackenzie warned NOCs needed to be on the lookout for new investment opportunities or face the risk of “significant production declines” from 2020 onwards.