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Why Goldman Sachs Thinks Oil Should Be Trading Higher

Why Goldman Sachs Thinks Oil Should Be Trading Higher

Oil prices have fallen somewhat…

What’s Behind The Drop In Renewable Spending?

What’s Behind The Drop In Renewable Spending?

Renewable spending is dwindling across…

$110 Billion In Oil And Gas Projects Revived As Prices Rise

Energy Infrastructure

Higher oil prices, lower offshore development costs, and improved gas demand outlook have made the oil and gas industry more confident in approving investment in new projects whose total worth has exceeded US$110 billion since the beginning of 2017, research and consulting firm Rystad Energy said in a new analysis this week.

After oil and gas projects worth just US$50 billion were approved in 2016, the industry “has vastly accelerated the pace of approving investments for new projects over the past 18 months,” Rystad Energy said.

“Deepwater projects on either side of the Atlantic Ocean – from Norway to the US and from Angola to Brazil – are leading the charge towards new approvals. Higher oil prices, an improved outlook for gas demand and lower offshore development costs are driving this rebound in the industry,” Rystad Energy senior research analyst Readul Islam noted.

Over the past 18 months, a total of 17 deepwater projects have been approved. Of those approvals, as many as 16 projects were in the queue for final investment decision, but were placed on hold during the oil price crash.

“These same projects can now pass operators’ investment criteria down to $30 per barrel,” Rystad said, noting that the halved breakeven prices were achieved through a combination of standardized and leaner designs and significantly lower service prices.

While many oil and gas projects—both offshore and onshore—have been revitalized over the past 18 months, new investment approvals have lagged in liquefied natural gas (LNG) and oil sands projects.

In LNG, the Coral FLNG in Mozambique was approved in 2017 and Cheniere’s LNG liquefaction Train 3 project at Corpus Christi, Texas, in May 2018. In oil sands, only the Christina Lake Phase G in Alberta was approved, in 2017.

Related: Hefty Inventory Draw Boosts Oil Prices

Rystad Energy doesn’t see any of the nine oil sands projects that were intentionally delayed during 2014-2016 progressing in this decade.

“The oil sands price outlook has stagnated due to a variety of market access issues,” Islam said.

In LNG, prices are generally trailing oil prices by a few months, so pricing is expected to improve and lead to more than half of the nine delayed LNG projects to be sanctioned by the end of the decade.

“In an increasingly carbon-conscious world, LNG and oil sands projects occupy opposite ends of the desirability spectrum, and Rystad Energy expects more than half of the nine LNG projects originally delayed to gain approval before the end of this decade,” Islam said.

Last month, Rystad Energy said that the current tailwind in the oil market is likely to propel 100 new offshore projects to be sanctioned in 2018.

By Tsvetana Paraskova for Oilprice.com

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  • Ronald C Wagner on July 13 2018 said:
    No, LNG is not at the "opposite end of the carbon desirability spectrum". It is very desirable, especially in relation to other carbon options but also competitive with other renewables. Yes natural gas is renewable. It is created constantly by decaying plants and animals.
  • Dennis oneill on June 29 2018 said:
    Joe is right. These knuckleheads basically say they have found oil then use our money to pay for thier "theories". Sadly they win either way because we give them the money to invest. Then when they start going belly up we give them bail out money. In the mean time the big oil folks talk about limited supply and greater damand. Thereby raising the price. Corporate welfare in its basic form if you ask me
  • Joseph Rice on June 28 2018 said:
    Guys, rising oil prices aren't good for 99.999999% of the people....Think about the assininty of the commodities market as it pertains to oil.... 87% of futures contracts are not even real oil contracts......Its nothing more than gambling attics using oil as liquidity to place bets which 99.99% of the rest of us get to cover with artificially inflated oil prices... I cannot think of anything more ridiculous or absurd than allowing a commodity dictating the stability of the economy being controlled by banks and gamblers who have absolutely no business in the oil markets but to bet and artificially raise prices...This crap was not allowed before the year 2000. ....If there was ever a case of trickle up economics, there you have it...
  • Eric M Staib on June 28 2018 said:
    ...But I thought we were a dead industry and solar killed us?

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