question is whether the industry is
actually spending enough.”
Projects approved in 2017 were
double the number in 2016 as costs
came down, oil prices rose and corporate
finances improved, the analysts said.
However, average capital expenditure
in 2017 dropped to $2.7 billion – the
lowest in a decade – as operators
focused on smaller projects and
expansions of producing fields, the
The average breakeven cost is
expected to fall by 15 percent to $44
per barrel of oil equivalent, with the most
competitive projects in shallow waters
off Norway, Britain and Mexico.
“We should continue to see operators
favoring a leaner and meaner path in
2018. Investors and operators want
to see faster cycle times and quicker
returns,” said Jessica Brewer, a principal
analyst at WoodMac.
That notion was supported by a
Reuters analysis this week, which
showed big drillers stuck close to
existing infrastructure in their bids for
U.S. Gulf drilling leases.
Gas and LNG projects are likely to
take a bigger slice of overall investment,
Oil firms plan leaner
About 30 upstream oil and gas
projects are expected to be approved
around the world this year, similar to
2017, as operators stay focused on less
capital-intensive projects with quicker
returns, according to Wood Mackenzie
Six of the 30 projects WoodMac
expects this year have already been
sanctioned, the consultancy said in an
annual review of the upstream industry.
As well as projects in Britain, Norway,
Israel and the Netherlands, the six include
China’s first wholly owned and operated
deep-water gas project, Lingshui, and the
$1 billion Pegaga gas project in Malaysia.
Oil and gas investment plunged more
than 40 percent between 2014 and
2016, according to the International
Energy Agency (IEA), as crude oil prices
slumped from above $100 per barrel.
That led many in the industry to argue
new supplies will be scarce in the 2020s,
triggering price spikes.
“Operators have found ways to
grow in tough business conditions,”
WoodMac research director
Angus Rodger said in a statement
accompanying the report. “The big
TOU G H : adjective
(of a substance or object) strong enough to withstand
adverse conditions or rough handling. Strong and durable;
not easily broken or cut. Capable of great endurance;
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