As we settle into the New Year and begin to think about the challenges and opportunities that 2017 will bring, it’s natural for those of us in the Oil & Gas industry to look ahead at the major projects that will keep the global demand for energy satisfied.
The Oil & Gas industry has had a turbulent time in recent years due to dramatic fluctuations in supply and demand and the attendant price shock. According to a recent analysis by Barclays Investment Bank, capital expenditure (Capex) for the industry is set to drop from a record $220 billion in 2013 to around $140 billion in 2017.
Following this drop however, comes a modest recovery. Even today we are seeing the cuts in capital expenditure decelerating and new projects being scheduled. According to the same analysis by Barclays the world’s seven biggest Oil & Gas companies are set to increase their overall production levels by around 9 percent between 2015 and 2018.
With this analysis in mind, we’ve taken a look at 5 major Oil & Gas projects that will have a big impact upon the industry in 2017.
In compiling this list we’ve taken into consideration those projects that represent both sizable expenditure by the oil majors (in the billions of dollars) and big contributions to the global daily production and supply of oil and gas.
1. Tengiz Field Expansion
- Location: Kazakhstan
- Cost: $36.8 billlion (estimated)
By far the most expensive project on this list, Tengizchevroil’s Tengiz Field Expansion will have a major impact upon global oil supply.
Part of the firm’s Future Growth Project, the Tengiz Field Expansion is scheduled to begin in 2017. The project seeks to exploit what is the world’s sixth largest oil field, with approximately 25 billion barrels originally in place at the site.
Following completion of the expansion project Tengizchevroil is hoping to be able to increase production by about 260,000 barrels per day.
2. Turkish Stream
- Location: Russia to Turkey
- Cost: $15 billion (estimated)
Following years of disagreement and political wrangling Turkey and Russia have agreed to proceed with the ambitious Turkish Stream pipeline.
Set to be primarily developed by Gazprom (with input from Turkey’s BOTAS) the pipeline will stretch an amazing 909 kilometres beneath the Black Sea and a further 177 miles overland. Once fully operational it is expected to deliver 63 billion cubic metres of natural gas annually from Russia, via Turkey, to Europe.
3. Prelude LNG Facility
- Location: Western Australia
- Cost: $10-$12 billion (estimated)
The largest floating off-shore production facility ever built, the Prelude LNG Facility has been developed to exploit the Browse Basin; a large area of undeveloped natural gas resources off the coast of Western Australia.
Shell, the company behind the project, aims to harvest at least 5.3 million tonnes of liquid and condensate gas annually via the facility. However, this undertaking comes at a massive cost with the final bill for the project estimated at a staggering $12billion at the top end.
With first gas production scheduled to take place in 2017 Shell’s Prelude LNG Facility is certainly ‘one to watch’ given the central role it will play in Australia’s burgeoning LNG industry.
4. Clair Ridge second phase reaches completion
- Location: North Sea
- Cost: $4.5 billion
Despite the doom and gloom that has been associated with the North Sea in recent years, there remain glimmers of positivity. One such glimmer being the completion of the second phase of the Clair Ridge project.
The Clair Ridge field, located 75kms to the west of the Shetland Islands, is being developed by BP to access over 640 million barrels of recoverable resources. With this ‘second phase’ BP are aiming to bump up production capacity from the field to around 100,000 barrels per day upon completion.
At a cost of $4.5 billion this project will come into effect in 2017 and should see Clair Ridge producing up until 2050.
5. Leviathan Gas Field
- Location: Israel (Mediterranean Sea)
- Cost: $4 billion (estimated)
Discovered in 2010 Israel’s Leviathan Field is suitably named as it contains substantial reserves of both oil and gas. Initial indications from a US Geological Survey point to the field containing 1.7 billion barrels of oil and 3.4 trillion cubic metres of natural gas.
Although production began in 2016, it is really expected to take off in 2017 (through to 2019) as Noble Energy- which holds a 40% stake in the field- ramps up production.
Other major projects
These projects are only a small selection of the major new Oil & Gas projects that are on the horizon. Others to look forward to include:
- The development of Statoil's Johan Sverdrup oilfield off the coast of Norway.
- Eni's Zohr gas development off the Egyptian coast.
- Total's three mammoth projects: 1. the Libra offshore field in Brazil, 2. the Uganda onshore project and 3. their Papua New Guinea LNG project.
It’s clear that 2017 is shaping up to be a year in which the Oil & Gas industry regains confidence and begins to consolidate and grow after the price shocks of the recent past.
As Analyst Lydia Rainforth states, “2017 is the sweet spot for integrated companies. It took two to three years to adjust to the drop in oil prices, and a lot of the efficiencies introduced in recent years will roll into 2017, when projects kick-in and free cash flow will improve.”
In short; oil operators that have chased efficiencies as well as production are best placed to prosper with the introduction of major new projects in 2017 and beyond.
What are your views?
Do you agree with our selection of the major Oil & Gas projects to watch in 2017? As stated earlier, we’ve selected what we feel are those projects that represent a major investment by oil operators and which also will make a big contribution to global daily production rates. Have your say in the comments below.
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