COVID-19 May Impact More Than Half of all Oil and Gas Projects Being Sanctioned
A combination of weaker oil and gas demand, and lower oil prices brought on by COVID-19 may lead exploration and production (E&P) companies to reduce project sanctioning by $131 billion, or 68% year-on-year, according to an analysis by Rystad Energy.
The company’s pre-coronavirus forecast had total onshore and offshore projects representing about $190 billion of investments that would be sanctioned this year, which was below the 2019 estimate of $192 billion. If the price of Brent crude averages around $30/bbl in 2020, total project sanctioning estimates are down to $61 billion, with $30 billion of the overall expenditure tied to onshore projects and $31 billion to offshore.
At a $40/bbl average, which Rystad says is getting more distant by the day, total sanctioning would still be down year-on-year at $82 billion, a 57% decline. Project sanctioning schedules are expected to face delays of several months, even for those with breakeven requirements of less than $40/bbl.
In North America, Rystad said multibillion dollar oil projects like LLOG-operated Shenandoah Phase 1 and the Shell-operated Whale development, could face short-term delays in the offshore sector due to low oil prices, while other offshore projects like ExxonMobil’s Greater Liza development off Guyana, which encompasses the Payara and Pacora discoveries, are expected to be sanctioned.
Onshore sector operators are expected to wait for the situation to stabilize before committing to new projects.
Decommissioning Work To See Increased Spending; North Sea Region To Lead the Way
Even before the global pandemic impacted markets, decommissioning work in the North Sea region was expected to increase. One research group estimates global decommissioning projects could reach $24 million by 2024.
UPDATE: Total Faces $12 Billion Shortfall as it Continues $20 Billion Mozambique LNG Project
Construction on Mozambique LNG stopped in April due to COVID-19, but Total continues work on the project even amid a $12 Billion shortfall. Financing for the Mozambique LNG project follows engineering contracts awarded by Total in the past few months.
India Looking To Store Oil in the US Petroleum Reserve
India may be the second country to lease space in the US SPR. Capacity at the SPR has been building for the past 5 weeks.
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20 May 2020
20 May 2020