During the first half of the year 15 projects were sanctioned, covering around 8 Bboe of reserves, mostly in brownfield projects. This is close to the total for all of last year.
Angus Rodger, research director, Asia-Pacific upstream, said: “These are positive signs that the upstream industry is continuing on the road to recovery and that the more competitive conventional projects are 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. 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. For example, on average, project capex is down to $11/boe vs $15/boe in 2015, with IRRs [Internal Rate of Return] at 15% in 2017 vs 11% in 2015.”
Majors operate eight of the 15 projects sanctioned so far, and of the 35 mid-to-large projects sanctioned since the start of 2015, 19 have also been major-operated.
This equates to just under 14 Bboe of commercial reserves sanctioned.
Wood Mackenzie estimates these projects would make up 1.6 MMboe/d of net new production to the majors by 2024, or around 6% of their total output.
National oil companies have eased back on new project investments since 2015, operating less than 1 Bboe of the total 22 Bboe sanctioned commercial reserves.
Wood Mackenzie suggests they should be looking for investment opportunities as many face significant production declines post-2020.
“The second half of 2017 could see another 11 Bboe of reserves hit FID, and again we expect strong activity from the majors,” Rodger added.
“However, it is also important to note that last monthExxonMobil sanctioned the first phase of development on the 1.5-Bboe Liza oil field. This goes to show that it is not just about short-cycle investments; the best greenfield opportunities are also moving forward to commercialization.”