The offshore industry has turned a corner and can reach a potential project commitment total of US$123bn in 2019, surpassing commitments in 2014 of US$78bn
The overall offshore project sanction in 2019 has surpassed the US$ 50bn mark, according to energy research and consultancy firm Rystad Energy. This is driven by the recently announced US$18bn worth of project commitments associated with the Marjan and Berri expansion projects from Saudi Aramco.
Marjan Expansion alone has been the largest field to be sanctioned globally since 2014.
Rystad stated that the Hail and Ghasha Sour Gas projects, Lula’s Oeste FPSO in Brazil and the feed gas systems to develop the Atum and Golfinho assets on the Area 1 LNG project are also expected to be sanctioned later this year.
Matthew Fitzsimmons, vice-president of oilfield service research at Rystad Energy, said, “With offshore free cash flows at nearly record highs, E&P’s are betting big on new projects. Offshore project sanctioning in 2019 looks ready to reach heights not seen since the US$100 bbl of oil.”
A total of 74 offshore projects were sanctioned in 2014, but after oil prices dropped, operators thought twice about sanctioning new work leading to a bottom-out of sanctions in 2016.
The analyst warned that 15 per cent of the potential US$123bn to be committed for offshore projects has a breakeven price over US$60 per bbl.
While that number has decreased to 13 per cent since the time of publishing, it still means that US$16bn worth of projects are at high risk of not receiving funding at the time of their sanctioning decisions this year, the firm added.
