Project Sanctioning Rebounds in 2022: Rystad EnergyBy Peter Appleby | Tue, 09/22/2020 - 18:27
A new report published by Rystad Energy has set the recovery of global oil and gas project planning for 2022, as delayed plans cause a rebound effect to push levels above those seen in 2019.
“The COVID-19 pandemic has devastated global oil and gas project sanctioning this year and will cause total committed spending to drop to around US$53 billion from 2019’s US$190 billion,” Rystad Energy projects. “Postponed plans will, however, cause the total worth of final investment decisions (FIDs) to double next year and exceed pre-pandemic levels already from 2022.”
The company forecasts that in 2022, offshore to-go projects will hit a value of US$95 billion in 2019, a little below the US$101 billion of sanctioned projects in 2019 but far higher than Rystad’s prediction for 2020 of US$34 billion.
On the onshore side, the increase in the value of sanctioned projects will jump considerably in 2022. The US$19 billion of projects to be sanctioned this year will grow to US$36 billion in 2021 and hit US$100 billion in 2022. In 2019, the value of onshore projects was US$89 billion in total, Rystad reports.
The report also points out that its previous onshore sanctioning total for 2020 was revised up from an original value of US$26 billion to US$34 billion after commitments made in Brazil and Guyana will trigger activity in FPSO construction.
Operators were forced to defer drilling commitments this year following the COVID-19 pandemic and subsequent oil demand destruction. Among those were CNOOC’s deferral in Canada’s Flemish Pass Basin and Shell’s FID postponement for US GOM and North Sea developments.
In Mexico, a notable example was Murphy Oil, which deferred its drilling campaign on Block 5 in the Salina Basin. In an interview with Mexico Business News in June, Murphy’s Vice President of Global Exploration Gregory F. Hebertson explained that drilling planned for 2020 following the Cholula discovery would most likely “commence in 4Q21, subject to Murphy’s other global activities.”
“(The company’s 2020 campaign) included an appraisal well to the Cholula discovery and up to two more exploration wells on the block,” Hebertson told MBN. “Given the prices in the market and our subsequent need to reduce our CAPEX, we decided to defer the program.”
“At the moment, Murphy is still determining what 2021 will look like in terms of capital budget but we are very encouraged by the results some of our peers have announced near our block, as it confirms the high prospectivity of Block 5 and gives us more enthusiasm to get back and drill again,” the Vice President also noted.
Read the full interview here.
Aside from private interests, PEMEX will also be pushing the development of its priority fields: the focus of the NOC’s exploration plans. Though in May this year these developments remained well behind schedule, PEMEX has just received government financial backing once more through a 4 percent increase in budget. The company will have MX$544.6 billion (US$25.4 billion) to spend.
PEMEX Director Octavio Romero also announced in March that the priority field developments would be reduced by 25 percent, from 20 fields to 15. This should help the NOC to focus on meeting its targets on the smaller number of fields and pushing on for greater investment toward 2022.