Offshore projects in danger of sanction if oil rallies to $60 per barrel-Rystad

SEVERAL OFF SHORE PROJECTS might be on hold in 2019 as global upstream spending could be sanctioned, if Brent crude oil prices recover to $60 per barrel and further cost reduction efforts are successful on current non-economic projects up, according to Norwegian research group Rystad Energy.

Prior to the recent fall of oil prices below $60 per barrel in mid-December, global upstream players were expected to take final investment decisions (FIDs) on $123 billion worth of new offshore projects in 2019, Rystad said.

Although offshore costs have come down considerably since the price slump of 2014, Rystad said further cost reductions will be needed for all the potential global offshore projects to be economically attractive.

With its current Brent forecast for this year at $65 per barrel, Rystad said in a statement that “with a rebound to $60 per barrel Brent, 2019’s offshore project sanctioning has the potential to reach its highest level of activity since 2013.”

More than 100 new offshore projects are aiming for 2019 sanctions and that an expected $210 billion will be spent on offshore oilfield services globally next year, as offshore contracts are expected to start growing again this year, it highlighted in the statement.

“The Middle East will have the most shallow water projects up for commitment decisions during the year. Moving into deeper waters, South America will surely take the global stage. The continent looks to review the largest deepwater plays during 2019,” Rystad added.

Fifteen percent of the potential $123 billion to be committed in 2019 have breakeven prices over $60 per barrel, according to Rystad, which it revealed that of those, the vast majority are for new fixed and floating facilities.

“For 2019 to reach its full offshore sanctioning potential, further cost reduction efforts on these projects are needed,” Rystad stated.

Last month, it said the outlook for offshore oilfield service contractors is “strong”, while estimating more than 100 new projects are aiming for sanction this year.

Oil and gas operators gave the green light to some 90 offshore projects in 2018, Rystad estimates.