Equinor has decided to exit two Mexican deep-water blocks as part of the Norwegian oil major's strategy to focus remaining upstream investments on assets offering rapid and robust returns.
While Equinor will continue to invest heavily in selected offshore projects in locations such as Brazil and Canada, a growing focus on pursuing decarbonisation targets has led the company to begin excluding some oil and gas investment from its portfolio, executive vice-president for E&P International Al Cook told the company's Capital Markets Day event this week.
Projects that will still win investment backing will be restricted to offshore projects where Equinor can use its expertise and experience as operator, Cook said.
Categories of investment from which Equinor will retreat include operated onshore assets with unconventional production, non-operated offshore areas and also offshore areas defined by Equinor as at a very early stage along the path to production.
In the case of Mexico, the two blocks located in the Salina Sureste basin were acquired in Mexico’s Round 1.4 bid round in an equal equity split with BP and Total — the latter now called TotalEnergies.
Block 3, where Equinor holds a 33% operating interest, has water depths ranging from 900 to 2500 metres.
Block 1, where BP is the operator, has water depths ranging from 200 to 3100 metres.
Exploration commitments include a single well on each block, not yet drilled.
Cook said Equinor will also look to offload its exploration assets in Nicaragua and Australia, in addition to the Louisiana Austin Chalk play in the US and Terra Nova in Canada.
"In 2017 we were in 30 countries. This week we have announced plans to reduce to this to 15. Of the the 15, Equinor will be operator or joint operator in only seven,” Cooks said.
Equinor will also look to exit the Aguila Mara Noreste and Baja del Toro Este blocks in Argentina’s Vaca Muerta shale play.
However Cook qualified the onshore sell-off by stating that Equinor will continue to partner with the "best local companies" as a non-operator in circumstances where there are gains to be made from economies of scale and from Equinor's ability to contribute.
Cook gave Southwestern Energy in the US and YPF in Argentina as examples of continuing onshore partnerships, promising “to support operations where we can add value or reduce carbon, especially in the sub-surface".
Ticking the boxes
Offshore projects such as Bacalhau in Brazil and Bay du Nord in Canada were highlighted as offering internal returns of around 20%, breakevens of around $35 per barrel of Brent crude and carbon per barrel at about half the current global average.
Bacalhau was described as offering a four-year project payback horizon from first oil, based on an oil price of $60 per barrel.
In the Gulf of Mexico, Cook also described the Vito and North Platte developments and Monument and Blacktree discoveries as areas meriting continued investment, including a planned appraisal at Monument.
"Everything we do will focus on operations, projects and exploration where can create the highest value for the least carbon," Cook said.
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