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100 new offshore projects predicted to be sanctioned this year

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If the analysis of Rystad Energy is correct, the remainder of 2018 could be exceedingly fruitful for the offshore oil and gas industry with upwards of 100 projects expected to be sanctioned.

With a collective value of $100 billion worth of capital investment, each of these projects hold an individual value of around $1 billion. This is compared to only 60 projects that were sanctioned in 2017 and 40 in 2016. Of particular note, is the fact that average projected capex for offshore projects approved in 2013 was $1.8 billion- indicating that offshore E&P operators are becoming more and more cost efficient at bringing projects to online.
Upwards on 100 offshore projects are set to be sanctioned in the remainder of this year
According to Rystad Energy, the prices charged by offshore suppliers have fallen more than onshore, and it depicts an average reduction of close to 30% in 2018 compared to 2014. The main driver for this is the large drop in day rates by offshore drilling contractors, which is down 50-70%. EPCI costs for surface platforms and subsea infrastructure are down by 20-30%.
According to Audun Martinsen, VP of Oilfield Service Research at Rystad Energy, “The offshore suppliers have created their own comeback. Their constant search for cost reductions and streamlining of operations has enabled them to cut offshore project costs by almost 50% compared to the heights of the last cycle.”

“Not only are the suppliers charging less for their services, they have also improved the efficiencies of their operations, thus shortening lead times from project sanctioning to first oil. As an example, the time required to drill and complete a well has fallen by 30% in the North Sea, the Gulf of Mexico and Brazil over the past four years.”

According to the analysis the 100 projects expected to be sanctioned are geographically widespread with around 30 project approvals to come through in Asia, including Pegaga in Malaysia and D6 in India, another 30 in Europe, including Neptune Deep in Romania and the already sanctioned Penguins redevelopment in UK. 20 projects are expected to get the green light offshore Africa including Zinia 2, and 20 projects in the Americas including major schemes such as Vito and Mero 2.

Martinsen points out that ‘the average breakeven price for deep-water developments currently stands at about $45 per barrel, and for shallow water it is close to $30 per barrel. Meanwhile payback times have fallen by three years for deep-water projects and by 1.5 years for shallow water schemes since 2014’.

All of which should be good news for the oil and gas job market. Speaking of which, if you’re looking for your next job in the oil and gas industry, explore Fircroft’s hundreds of vacancies now.
Tags: Oil & Gas
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