Energy projects that need oil prices above US$60 per barrel in order to break even risk being uncommercial going forward, according to the Norwegian energy research firm Rystad Energy
However, massive investments in exploration and sanctioning are still needed to meet growing global demand.
Rystad Energy forecasts that the global inventory of already discovered oil fields with a breakeven oil price of below US$60 Brent is sufficient to meet demand growth and offset declines from maturing fields until around 2027. From that point on, however, additional volumes from not yet discovered fields will be needed in order to meet total liquids demand.
Audun Martinsen, head of oilfield services research at Rystad Energy, said, “This means that although we need to discover additional resources, only fields with breakeven prices below US$60 Brent are likely to be commercial through 2030 and likely towards 2040.
“If the global E&P industry were to fail to discover sufficient resources at such breakeven prices, global demand would need to be satisfied by utilising otherwise uncommercial fields, or transition more quickly to a different power mix”
In 2019, oil and gas projects representing some US$200bn of investment were sanctioned. In 2020 Rystad Energy forecasts as much as US$225bn worth of projects will be sanctioned, driven primarily by gas projects and with US$50bn coming from onshore LNG facilities. Offshore project sanctioning is likely to surpass US$100bn in 2020.
“With Brent oil prices at US$60 per barrel, E&P operators are able to sanction oil and gas projects worth about US$200 billion per year, driving a lot of interesting contract awards and elevating optimism among oilfield service providers,” Martinsen observed.
While most offshore projects sanctioned this year have breakeven prices below US$40 per barrel, we foresee breakeven risk for the period 2020 through 2023. During this four-year period, offshore projects worth US$25illion, or almost seven per cent of the total, have a breakeven price above US$60 per barrel.
