Global project sanctioning is set for a 75% decline from 2019 levels, with the Covid-19 epidemic impacting on E&P spending much more than was expected at the beginning of the crisis.
Global project sanctioning is set for a 75% decline from 2019 levels, with the Covid-19 epidemic impacting on E&P spending much more than was expected at the beginning of the crisis.
Industry analyst Rystad Energy estimates total sanctioning value will end up at around $47 billion, an amount that would be even lower if not for recent developments in Norway and Russia.
Of total global sanctioning value in 2020, some $27 billion is expected to be for offshore projects, with the remaining $20 billion for onshore. In 2019, the total sanctioning value reached $197 billion, with $109 billion going to offshore projects and $88 billion to onshore projects.
So far this year, the projects that have been committed are worth a combined $29 billion, with $16 billion going to offshore and the remaining going to onshore. Rystad Energy’s forecast is based on a scenario in which Brent averages around $40 per barrel this year, not far from its current market price.
‘At the beginning of this year, the project commitments forecast for 2020 were expected to be comparable to 2019, but the industry downturn thanks to Covid-19 has caused commitments to fall sharply. Going forward, Rystad Energy estimates that sanctioning will not pick up again and recover to 2019 levels anytime soon,’ said Karan Satwani, energy service analyst at Rystad Energy.
On a positive note, Gazprom has awarded contracts for phase one of its Kamennomysskoye-More project and Gazprom and RusGazDobycha have taken a final investment decision on the Semakovskoye field development in onshore Russia.
Meanwhile, the tax relief package announced by the Norwegian government last month has helped oil and gas operators improve project economics in Norway. Spurred by the programme, Aker BP commenced development activities on its Hod redevelopment project.
Equinor also signed the letter of intent last month for both the Breidablikk and Askeladd West projects off the coast of Norway.
Lastly, Llog Exploration has taken a final investment decision for the Taggart deepwater development in the US Gulf of Mexico.
