Rystad Energy has estimated total sanctioning to bounce back to around US$100bn in 2021, primarily supported by offshore projects, whose value is forecasted at US$64bn for the year
Although lagging onshore projects are projected to only account for US$36bn in 2021, they will see a steep rise in 2022 to around US$100bn, topping the expected US$95bn worth of offshore commitments that year.
“In this update, we have revised up our 2020 offshore sanctioning total from US$26bn to US$34bn. This was driven by the Mero-3 sanctioning in Brazil, which is estimated to cost US$2.5bn to first oil. MISC has a letter of intent in place with Petrobras for the charter of the FPSO. The contractor will sub-contract the vessel construction work to Chinese yards, with China Merchants Heavy Industry (CMHI) leading the race to build both the hull and topsides. Siemens will deliver the power generation modules, while Aker Solutions is performing front-end engineering and design (FEED) and engineering work on the FPSO topsides,” stated Rystad Energy.
Rystad Energy expects commitments worth US$3.6bn related to the Payara development off Guyana in 2020. SBM Offshore is operating under an advanced commitment on the FPSO with ExxonMobil and its partners and the contractor has started procurement activities in collaboration with Chinese and Singaporean yards. The Chinese yard Shanghai Waigaoqiao Shipbuilding (SWS) is responsible for supplying the hull for the FPSO and the topsides will be built by Dyna-Mac and Keppel. It is now only a matter of when the FID takes place, and we expect it to happen soon.
Before the oil price crash, Shell had awarded a major contract to Sembcorp Marine for construction of the topsides and hull of a Floating Production Unit (FPU) for the Whale project in the US Gulf of Mexico. Now uncertain economic conditions have forced Shell to defer FID for the project to 2021. Whale has a breakeven of more than US$40 per barrel. As the second wave of COVID-19 surges through Europe, America and South Asia, it is uncertain whether the new development will start anytime soon, as the social distance norms and quarantine requirements will not only hamper the pace of development but could also lead to cost overruns.
When it comes to recent developments, Gazprom Neft has started development activities on its Chayandinskoye oil-rim development in Russia. The well construction program is under way and the expansion of the existing central processing facility at the main field is likely to start soon. The onshore development is estimated to cost around US$1.3bn and the field is expected to come on line by 2022.
Recently, the Norwegian Ministry of Petroleum and Energy approved the plan for development and operation (PDO) of the Balder Future project. The partners, Vaar Energi and Mime Petroleum, submitted a revised PDO in December last year and selected their preferred contractors in 2019. The US$2bn development plan includes an upgrade of the Jotun floating production, storage, and offloading (FPSO) vessel which will operate between the Balder and Ringhorne fields. The FPSO is being upgraded by Worley, while Baker Hughes and Ocean Installer are responsible for supplying the subsea facilities.
Lastly, China Offshore Oil Engineering Co. (COOEC) confirmed the start of development activities on CNOOC’s Luda 6-2 oilfield off China in its second-quarter results. The Luda 6-2 development will entail a central processing platform and is estimated to cost nearly US$170mn in greenfield commitments. Production is likely to start in early 2022.
