As Brent oil price continues to rise, a researcher at consultancy group Wood Mackenzie says the upstream industry is set to generate a windfall and this presents a golden opportunity to reposition for a very different future.
In previous upcycles the pattern has tended to be the same – higher revenues and cashflow lead to rising upstream spend. But the energy transition has upset the outlook for oil and gas producers, changing the rules of the game for not only international oil companies (IOCs), but also national operators and host governments. Crucial decisions will be required on capital allocation, the pace of decarbonisation and future energy policy.
“At current Brent prices the upstream industry will generate a wall of cash,” WoodMac’s research director Kavita Jadhav said. “We estimate the 42 largest IOCs will generate a windfall of over US$1 trillion if prices keep tracking above a US$50/bbl industry planning price. But how to invest this bounty? US$80/bbl oil gives companies options, and a chance to do it all – return cash to shareholders, maintain oil and gas investment, and accelerate investment in low carbon opportunities.”
WoodMac research director, Andrew Harwood, said the world may not be short of resources but what it needs is advantaged barrels – low cost, low carbon oil and gas that can be rapidly commercialised.
Guyana’s low breakeven prices, high quality crude and favourable investment climate have made it a preferred destination for deepwater exploration and production, and this is continuing unabated, led by U.S oil major ExxonMobil and its co-venturers Hess and CNOOC.
“The Stabroek Block is a massive world class resource that keeps getting bigger and better,” John Hess, CEO of Hess Corporation has said. “Guyana is an extraordinary oil investment opportunity that is uniquely advantaged by its scale, reservoir quality, cost advantages, rapid cash paybacks and strong financial returns…”
Norway-based energy research and business intelligence company Rystad Energy estimates that Guyana will rake in over $300 billion in revenue from its vast discovered resources at the Stabroek Block with an oil price in the range of US$80 per barrel.
Exploration offshore Guyana has intensified this year as ExxonMobil probes new wells and further investigate existing discoveries where additional hydrocarbon resources could potentially be found. In announcing its most recent discovery last week, the oil major increased its resource estimate for the Stabroek Block to 10 billion barrels of oil equivalent.