• 5 days Retail On Pace For Most Bankruptcies And Store Closures Ever In One Year: BDO
  • 10 minutes America Could Go Fully Electric Right Now
  • 7 days Majors Oil COs diversify into Renewables ? What synergies forget have with Solar Panels and Wind Tirbines ? None !
  • 36 mins Most ridiculous green proposal
  • 41 mins China Sets Its Sights On Global [EV, AI, CRISPR, Fusion, Navel Lint Collector] Dominance
  • 3 hours The Green Hydrogen Problem That No One Is Talking About
  • 14 hours Video Evidence that the CCP controls Joe Biden
  • 11 mins Rethinking election outcomes for oil.
  • 5 hours The City of Sturgis Update on the Motorcycle Rally held there, and the MSM's reporting hence
  • 3 hours P@A will cost Texas Taxpayers $117 Billion.
  • 2 days The Leslie Stahl/60 Minutes Interview with President Trump
  • 1 day Republicans Have Become the Party of Hate
  • 1 day Australia’s Commodities Heartland Set for Major Hydrogen Plant
  • 2 days WallStreet Journal editorial " . . Big Tech-Media are the propaganda arm of Democrat Party leading to one party autocratic rule. " This is the State of the Union.
  • 2 days Permian in for Prosperous and Bright Future
  • 2 days Clean Energy Is Canceling Gas Plants
  • 3 days Even Obama can't muster a crowd to support Biden.
  • 2 days Vote Biden for Higher Oil Prices

Breaking News:

Are Stock Markets About To Crash Again?

Oil Plunges To $35 As Lockdowns Return

Oil Plunges To $35 As Lockdowns Return

Oil prices extended their 5-percent…

China Believes Natural Gas Demand Will Soar

China Believes Natural Gas Demand Will Soar

China’s largest natural gas supplier…

Nick Cunningham

Nick Cunningham

Nick Cunningham is an independent journalist, covering oil and gas, energy and environmental policy, and international politics. He is based in Portland, Oregon. 

More Info

Premium Content

OPEC Moves Another Crucial Oil Market Metric

The OPEC agreement is starting to move the needle on one stubborn metric that had remained depressed since the market downturn began more than three years ago: investment in new upstream projects.

Saudi oil minister Khalid al-Falih said this week that the Saudi-Russia oil alliance will last for “decades and generations,” noting that more work is needed to stabilize the market and “preserve our long-term interests.” A few days earlier, he stressed the importance of close coordination beyond 2018.

One of the principle justifications for continuing close coordination for an extended period of time was that spending on new large-scale, long-term oil projects remains subdued, which al-Falih argues is the result of a lack of confidence in the “long-term prospects of the market.”

But there’s some evidence that the OPEC agreement, which was originally signed in late 2016, is starting to bear fruit on that front. The long list of projects that were sidelined since 2014 is beginning to see some movement. Rystad Energy says that 18 projects that were delayed years ago finally received the greenlight in 2017. That’s a sharp increase from just two delayed projects that were given final investment decisions in 2015, and five in 2016.

Rystad has tracked the projects since 2014, when more and more companies shelved projects because of falling oil prices. A total of 25 upstream projects were delayed but have now received FIDs. These projects are expected to cost a combined $87 billion and yield 16 billion barrels of oil equivalent (boe). It should be pointed out that the Tengiz expansion in Kazakhstan accounts for more than a third of that spending total. Related: Saudis Unmoved By Oil Price Surge

The backlog of delayed projects grew from 39 in mid-2015 to a peak of 111 in early 2017. After more projects were given the go-ahead last year, that total declined to 104 as of this month.

“With 18 delayed projects finally lifting off in 2017, this means projects were still entering the tracker during 2017,” said Readul Islam, research analyst at Rystad Energy. “The industry has put in a lot of spadework to advance these delayed projects. However, with over 100 projects still in our tracker as we enter 2018, the hard work must continue to maintain 2017’s momentum.”

One of the notable projects that moved forward in 2017 was the next phase of the Libra field off the coast of Rio de Janeiro. Petrobras, Total and their partners approved the FID for a floating production storage and offloading (FPSO) unit for the Libra project, which will result in 150,000 bpd of new production across 17 wells. Related: The Biggest Year Yet For U.S. Shale

While FIDs have ticked up, they still remain a fraction of their rate from years past. Total upstream spending is expected to drop to $510 billion this year, down by more than 40 percent from a peak of $900 billion in 2014, according to Rystad Energy. That translated into a record-low volume of new oil discoveries. Last year, new discoveries reached only about 7 billion boe, the lowest total in decades. The oil industry only discovered an average of 580 million boe per month in 2017, down from several billion boe of new discoveries per month back in 2012. All told, the industry discovered just 11 percent of what it produced in 2017, a worrying development that could spell trouble in the years ahead.

But that’s a problem for another day. OPEC and Russia are still trying to get a handle on a market that has struggled with several years of excess supply. They have succeeded in draining inventories down close to the five-year average, and the recent price run to $70 per barrel for Brent is a testament to their efforts. The next hurdle will be the wave of new shale supply expected to come online this year and next, a threat that no doubt informs Khalid al-Falih’s desire for a cooperative arrangement with Russia that spans “decades and generations.”

By Nick Cunningham of Oilprice.com

More Top Reads From Oilprice.com:


Download The Free Oilprice App Today

Back to homepage





Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News