Global upstream capital expenditure could reach $380 billion in 2021, but 20% of that investment is at high risk because it relates to assets with a breakeven price upwards of $55 per barrel, according to Norwegian consultant Rystad Energy.
Operators have earmarked 60% of the total for producing assets, as operators perform maintenance to wells and facilities — some of which was deferred from this year — with 25% to be spent on projects under development and 15% on exploration and discoveries.
Twenty four major oil and gas projects, including nine liquefied natural gas projects, are expected to be subject to final investment decisions in 2021.
These projects will account for about 24.1 billion barrels of oil equivalent of resources being sanctioned.
King of the crop is expected be Qatargas’ go-ahead for trains eight to 11 at Qatar LNG that together represent 12.509 billion boe.
Other key projects set for the green light include Woodside Petroleum’s Scarborough in Australia (with resources of 1.598 billion boe), the Petrobras-operated Buzios VI project off Brazil (1.078 billion boe) and Shell’s Whale development in the Gulf of Mexico (435 million boe).
Two key projects off Sarawak, East Malaysia, are also set for sanction next year — SapuraOMV Upstream’s Jerun (435 million boe) and the Shell-operated Timi sweet gas development (105 million boe).
In contrast, 12 major conventional projects, each with resources upwards of 100 million boe have been sanctioned so far this year — two of which are onshore — with total resources of about 8.08 billion boe, Rystad noted.
Project FIDs in 2020 have hit the lowest level since the 1950s, with combined investments of some $125 billion — a stark contrast to last year when 46 projects of the same scale were sanctioned.
“E&P players are in no hurry to bump up investment budgets and are settling into a slow recovery mode,” said Olga Savenkova, upstream research analyst at Rystad at a recent company webinar.
ExxonMobil’s upstream investment guidance points to a 45% spending reduction in 2021 against last year, while BP next year is set to reduce its spend by 44% over 2019’s level.
Other industry heavyweights with significantly lower upstream budgets include Occidental (down 56%), Chevron (down 32%), Total (down 28%) and Eni (down 29%), according to Rystad.
In contrast, Norway’s Equinor is seen as investing just as much in exploration and production in 2021 as last year after a downturn in 2020.
Future E&P investment is expected to depend on the prevailing oil price; with Rystad predicting $356 billion in 2021 at $40 per barrel up to a potential high of $435 billion were the crude price to recover to $80 per barrel.
For the following year, upstream investment is pegged at between $380 billion and $501 billion, with 2023’s spending put at between $417 billion and $601 billion.