Upstream Upturn? | Russell T. Rudy Energy LLC
“Rigzone” reports that international consulting firm, Wood Mackenzie (WoodMac), predicts a recovery for upstream oil and gas capital projects this year. So far 15 initiatives, totaling about 8 billion barrels of potential oil equivalent (boe) reserves are moving forward. Last year only saw 12 projects totaling 8.8 billion boe approved. Consequently, the industry is on track to sanction 25 new projects this year, according to WoodMac.
Admittedly, most of these are “brownfield” developments related to existing production. In fact 11 of this year’s initiatives involve field extensions, satellite developments, or subsea tiebacks. Typically they involve less capital per barrel of potential reserves, are quicker to bring on stream, and provide faster pay-outs and better rates of return.
This year’s new projects have an average capital cost per barrel of $11 (vs. $15 in 2015) and internal rates of return of 15% (vs. 11% in 2015). Apparently, this is driven by a new sense of optimism and the ability to bring down costs.
A clear trend in this year’s activity is dominance of the major oil companies. No less than 8 of this year’s initiatives are operated by the majors. Conversely, the national oil companies have cut back on capital spending and do not appear eager to change course any time soon.
Angus Rodger with WoodMac concludes that “The second half of 2017 could see another 11 billion boe reserves hit FID (final investment decision), and again we expect strong activity from the Majors. However, it is also important to note that last month ExxonMobil sanctioned the first phase of development on the 1.5 billion boe 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.”
To read the article in its entirety, please go to http://www.worldoil.com/news/2017/7/17/global-upstream-fids-on-track-to-double-in-2017-wood-mac-says .
Russell T. Rudy Energy, LLC buys oil, gas and mineral interests nationwide. Please call (800-880-0940), or write (info@rudyenergy.com ) to let us know if you agree, disagree or would just like to comment on this, or any of our posts.
