LONDON – Wood Mackenzie’s Global Upstream Outlook 2022 predicts a 9% increase in investments next year to more than $400 billion.
The consultants expect more than 40 projects with resources of more than 50 MMboe to be sanctioned, with low-breakeven, low-carbon deepwater projects dominating greenfield final investment decisions.
Fraser McKay, vice president upstream research, said: “Companies will allocate more capital to upstream decarbonization. Value-accretive solutions, which increase product sales, will continue to lead the way, but CCS [carbon capture and storage] projects will gain momentum and attract new participants.”
Electrification should remain top of the decarbonization agenda.
Despite the growth in new projects, the service sector could struggle, the consultants believe. While operators look set to experience inflation of between 4%-10% next year, the impact on service companies will depend on the pace of the increase in activity.
Global supply chain disruptions, labor costs and increasing commodity prices appear unlikely to support service sector profit margins.
In fact, pressure will likely intensify on an already weak supply chain, adding project execution risk and increased costs, with hotspots such as Norway impacted first.
As for exploration in 2022, Wood Mackenzie anticipates total expenditure in the $20-$25 billion range, with the majors and larger NOCs leading on wildcat drilling. Collectively they could prove around 75% of the 15-20 Bboe the consultants expect from new discoveries.
Main priorities will be deepwater plays with productive reservoirs, including Brazil, Guyana, Suriname, Namibia and South Africa, with deepwater probably supplying half of all new volumes.
According to McKay, “Gas will account for around half of the discovered resources…With a focus on lead times and carbon, explorers will favor piped gas over liquefied natural gas, for emissions as well as payback purposes.”