Posted by OilVoice Press - OilVoice
Recent project approval activity suggests that 2018 could see 200 projects approved by year-end. The 45 offshore projects that have been approved year-to-date are already more than the amount approved in 2016. In addition to beating 2016's activity, 2018's offshore project sanctioning is on track to eclipse 2017's sanctioning levels by 50%. Collectively, $127 billion of offshore and onshore projects could be approved by year-end.
2018 looks to have $34 billion of onshore projects approved. Despite a steady stream of onshore projects being sanctioned during 2018, the size of these projects varies significantly. This has caused a mere $3.0 billion increase in onshore commitments from May through September. In addition, the fourth quarter will see $15.1 billion of onshore projects approved.
Subsea tie backs have been favored the most by operators in 2018. Collectively, nearly $26 billion in subsea tie back projects have been approved, with an additional $7 billion forecasted by year-end. This will give subsea contractors a potential $7.4 billion in greenfield contract opportunities over the next few years. ExxonMobil's Neptun Deep project is poised to approve a subsea tie back to the Domino field in Romania in late-2018. The development will give $1.5 billion in new contract opportunities to service companies, including over $420 million in EPCI contracts. The project aims to start-up in early-2022.
The rest of the year will see more fixed facilities and floater projects approved than subsea tie backs. The soon-to-be-sanctioned Marjan Expansion project in Saudi Arabia will be the largest fixed facility project up for sanctioning. If approved, it will look to award contracts in excess of $4.6 billion over the next several years. These will allow Saudi Aramco to construct and install over 20,000 tonnes of topsides for their steel platform. The facility is anticipated to be complete and started-up in 2022.
Recent cost reduction efforts have moved a few significant projects in South America below the $60 per barrel breakeven threshold. However, there are still $14 billion to-be-sanctioned offshore and onshore projects globally for 2018 require breakeven prices above $60 per barrel. Total's Lake Albert project in Uganda will look to develop their Jobi-Rii asset for over $2.4 billion. However, the project will require a breakeven oil price above $60 per barrel. If approved, this onshore development would target a 2022 start-up.
While there is a risk that some projects could be deferred until project teams achieve more favorable economics, the high level of sanctioning activity are very encouraging for the oilfield services industry. This is especially true for offshore projects, as their approvals look poised to reach their best heights since 2013.
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