Wood Mackenzie: ‘Bigger Projects Are Coming’

The industry will see a return to bigger project sanctions, Angus Rodger, Wood Mackenzie’s research director for Asia Pacific upstream oil and gas, has stated.

“We cannot just have lots and lots of small projects forever. It will not sustain the industry,” Mr Rodger said.

“Bigger projects are coming, that is inevitable…We see a lot of big LNG projects out there which are competing to be sanctioned in 2019,” he added.

These include multi-billion-barrel developments such as Mozambique LNG, Canada LNG, and expansions in Qatar and Papua New Guinea, according to Wood Mackenzie.

As previously forecasted by the research and consultancy group, 2017 saw a significant recovery in upstream final investment decisions, with the number of project sanctions more than doubling compared to 2016.

However, Wood Mackenzie highlighted that projects that did get the greenlight last year were notably smaller.

“The average capital expenditure to develop ‘major’ projects (commercial reserves over 50 million barrels of oil equivalent) sanctioned in 2017 fell to only US$2.7 billion, the lowest in a decade,” Wood Mackenzie said.

“To put this into context, the average project capex for those sanctioned over the last decade was US$5.5 billion,” the statement continued.

Wood Mackenzie expects around 30 major project FIDs this year, a similar total to 2017. These projects are, however, anticipated to be on the smaller side.

“We should continue to see operators favouring a ‘leaner and meaner’ path in 2018,” Jessica Brewer, a principal analyst at Wood Mackenzie, said.

The first quarter of 2018 ended with six projects already sanctioned, all from Wood Mackenzie’s original list of 30, including fields in the UK, Norway, Israel, the Netherlands, Malaysia and China.

Source: Rigzone