In a statement sent to Rigzone this week, Wood Mackenzie highlighted that, according to new analysis by the company, oil and gas financial investment decisions (FID) are likely to increase this year.
The statement, which highlighted that $185 billion of total investment and 27 billion barrels of oil equivalent of reserves are pending sanction by 2023, noted that national oil companies (NOCs) will control investment opportunities bigger this year, “taking advantage of the enormous, discovered resources, although it has the lowest unit costs”.
By 2023, projects will require an average of $49 per barrel of crude oil to generate an internal rate of return (IRR) of 15 percent, the statement revealed, adding that a weighted average IRR of 19 percent, at $60 a barrel, it would be the lowest level since 2018.
“Getting FID on oil and gas projects is more difficult than it used to be, but with fewer sanctions in 2022 than expected, we believe we will see a slight increase in activity this year, with more than 30 of the 40 projects more likely than not to achieve this milestone,” Fraser McKay, vice president and head of Upstream Analysis at Wood Mackenzie, said in the statement.
WoodMac’s Upstream Research principal analyst Greg Roddick said in the statement that “short-cycle, small-scale offshore projects will outperform both in terms of payback and profitability.”
“Long-lived LNG projects are compromised when it comes to IRR, but their attractive and stable future cash flows will be strategically important,” he added.
McKay emphasized in the statement that most operators will remain disciplined and that carbon mitigation will remain a key part of many FID projects. He added that international oil companies will largely focus on higher-cost but higher-return deepwater developments, but stressed that “everyone will be very aware of how sanctions on oil and gas projects are playing out in the public domain and the scrutiny to which its associates. broadcasts will be subject”.
“Oil advantage and deepwater platform projects will exceed emissions, but LNG, sour gas and some onshore projects require mitigation measures,” Roddick said in the statement.
A WoodMac spokesperson told Rigzone that in 2022, the company listed a total of 30 FIDs. These have combined investment of $140 billion and will develop reserves of 18.3 billion barrels of oil equivalent, the spokesman revealed.
Laugh it up Mojo
In a statement posted on WoodMac’s website in January this year, McKay declared that upstream oil and gas “had its mojo in 2022.”
“Record cash flows restored confidence and repaired balance sheets. For many, there is excitement for the year ahead,” he said in that statement.
“There are economic incentives, of course, but a renewed sense of purpose to provide secure and affordable energy, particularly in tight European gas markets, will reinvigorate motivation,” McKay continued.
In a statement posted on Rystad Energy’s site last month, Rystad announced that the offshore oil and gas sector is set for the highest growth in a decade over the next two years, “with $214 billion in new investments in projects”.
“Research by Rystad Energy shows that annual greenfield capital spending broke the $100 billion mark in 2022 and will break it again in 2023, the first breach for two years in a row since 2012 and 2013,” he said. said the company in the press release in March.
In January, Rystad noted in a statement posted on his site that he expects the global market for oil and gas contractors to peak at $1 trillion by 2025 and remain at high levels for several years thereafter.
“Helped by strong growth in the natural gas liquefaction, transportation and regasification midstream, global oil and gas spending will remain above $920 billion annually on average over 2022-2028” , Rystad said in this statement. .
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