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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.
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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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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.