Emmanuel Addeh in Abuja
Wood Mackenzie, a leading global provider of data and analytics solutions for the renewables, energy and natural resources sectors, has projected that oil majors and other national oil companies could sanction $125 billion in upstream oil and gas projects this year.
These investments, it said will be for up to 30 projects, holding an estimated 14 billion barrels of oil equivalent (boe) of resources, noting in its latest analysis of upstream oil and gas projects that these are expected to reach Final Investment Decisions (FIDs) in 2024.
It explained that more projects will likely take FIDs this year, compared to last year’s 22 sanctioned upstream developments as several projects slated for 2023 approval were delayed.
But for Nigeria, it’s still unclear what number of upstream projects will progress to FID stages as divestment by oil majors in the country which have decided to move from onshore to deepwater continue to experience regulatory delays.
Shell, ExxonMobil, Total Energies and Eni are in the process of offloading some of their onshore assets as pressure to reduce emissions as well as insecurity which add to their cost of production increase.
However, the report stated that National Oil Companies (NOCs) in the Middle East will control the most projects, while the international oil companies will prioritise advantaged deepwater resources.
It added that most advantaged deepwater projects continue to deliver in terms of economic returns and low emission intensity, and will be the focus of FIDs for the multinationals.
According to Woodmac, most payback periods are less than eight years from FID, as operators focus on rapid execution, lower unproductive capital, and higher returns.
It said that although this year has been off to a slow start, but FID activity is expected to pick up as the year progresses.
Abu Dhabi National Oil Company (ADNOC), it said, will be the Middle East’s leader in expansion plans in terms of reserve volumes, with its offshore expansion plan.
Aside NOCs, oil majors are also set to approve large multi-billion upstream developments.
Out of the expected $125 billion capital expenditure on this year’s projects, it noted that TotalEnergies will be the operator of two of the top five largest projects by capital expenditure.
Wood Mackenzie estimates that the French supermajor looks to reach FID on projects that would have a combined capex of nearly $30 billion, with US supermajor ExxonMobil also set to sanction its sixth floating production storage and offloading (FPSO) project.
“Up to 30 upstream projects larger than 50 million of barrels of oil equivalent (boe) could reach FID in 2024, an increase from 22 in 2023…project activity will increase this year, with a total of $125 billion in investment and the potential for 14 boe up for sanction.
“With many projects delayed or postponed, we expect operators to commit to more projects in 2024 than last year,” said Ross McGavin, principal analyst at Wood Mackenzie.
“National Oil Companies (NOCs) in the Middle East will control the most projects, but the Majors will be busy as well, particularly as they prioritise advantaged deepwater resources,” he added.
It stated that as the number of projects rises in 2024, project break-even are projected to fall, with an associated bounce back in returns which dipped in 2023.
“The class of 2024 projects require an average of $47/bbl to generate a 15 per cent Internal Rate of Return (IRR), slightly below the class of 2023’s $49/bbl.
“The weighted average IRR for the class of 2024 is 23 per cent, helped by a higher liquids weighting of 57 per cent in 2024, compared to 2023’s 46 per cent and the five-year average of 51 per cent,” the firm added.
With a significant emphasis on deepwater projects and advantaged barrels, the average emissions intensity for the FID class of 2024, it said, is 13.6 kgCO2e/boe, well below the global upstream average of 21 kgCO2e/boe.
“New projects are a lever to meet emission reduction goals, especially those focused on deepwater projects that continue to deliver on low emissions intensity and economic returns,” the consultancy firm added.
