Oil giants to invest more than $58bn in N. Sea exploration by 2020 (mostly in Norway) as majors set new well investment floor price at $40-barrel

Global Data North Sea capital investment forecast by explorer to 2020
Global Data North Sea capital investment forecast by explorer to 2020

EXCLUSIVE by Scottish Energy News

An average capital expenditure (cap-ex) of $19.5 billion per year is forecast to be spent on 568 North Sea oil and gas between now and and 2020, according to new data compiled by a global market research company.

Capital expenditure in the North Sea’s traditional oil projects will add up to $35.5 billion over the three-year period, while heavy oil fields will require $5.1 billion over the same period.

Investments into gas projects in North Sea would total $17.9bn in upstream capital expenditure by 2020.

Shallow water projects will be responsible for almost all ( over 90 percent) of $58.5 billion of upstream capital expenditure in North Sea, or $53.6 billion, by 2020.

Deepwater projects will require $4.9 billion in capital expenditure over the period, according to Globa Data.

It forecasts that Norway’s state oil corporation Statoil will lead North Sea in capital expenditure, investing $9.8 billion into the region’s upstream projects by 2020.

Petoro and BP will follow with $3.5 billion and $3.3 billion respectively invested into North Sea’ projects by 2020.

Johan Sverdrup, a planned conventional oil field in the Northern North Sea Basin, will lead capital investment with $8 billion to be spent between 2018 and 2020. Statoil is the operator for the field. Mariner, another planned oil field in the Northern North Sea Basin, follows with a capex of $2.6 billion. Statoil (U.K.) Ltd is the operator of the field.

Tyra, a gas producing field in Central Graben Basin, will follow next with a capex of $2 billion. Maersk  is its operator.

All three of these fields are in shallow water – which are much cheaper to develop than deep-sea wells.

GlobalData reports the average full cycle capital expenditure per barrel of oil equivalent (capex/boe) for North Sea projects at $12.82. Shallow water projects have the lowest full cycle capex/boe at $12.76, followed by deepwater developments with $15.73.

For example, last month Royal Dutch Shell made a final investment decision to redevelop its Penguins oil and gas field in the UK North Sea, including the construction of a floating production, storage vessel – the first new manned installation for Shell in the northern North Sea in almost 30 years.

The Penguins field is in 500 feet of water, approximately 150 miles north east of the Shetland Islands. Discovered in 1974, the field was first developed in 2002 and is a joint venture between Shell (operator) and Exxon Mobil.

The redevelopment is an attractive opportunity with a competitive go-forward break-even price below $40 per barrel. The FPSO is expected to have a peak production (100%) of circa 45,000 boe/d.

Andy Brown, Shell’s North Sea director, said: “Penguins demonstrates how we are unlocking development opportunities, with lower costs.”

The Penguins field currently processes oil and gas using four existing drill centres tied back to the Brent Charlie platform. The redevelopment of the field, required when Brent Charlie ceases production will see an additional eight wells drilled, which will be tied back to the new FPSO vessel

Meanwhile, Oil Majors have set an average internal benchmark price of $40-barrel for crude oil – if they can’t make a profit at this price, they won’t invest.

Explorers such as Exxon, Shell and BP set the $40-barrel cost-ceiling for new projects in order to withstand market volatility susceptible to global geo-political pressures and an uncertain outlook clouded by the rise of battery-powered vehicles (BPVs).

Shell is one of several Oil Majors to invest in BPV (battery-powered vehicle) infrastructure.
Shell is one of several Oil Majors to recently invest in BPV (battery-powered vehicle) electricity-charging infrastructure.

See also:

Oil-rich Arab economies face existential threat from rise of battery-powered vehicles (BPVs)



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15 Feb 2018

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