While climate change pledges from governments across the world will put some degree of pressure on the oil and gas industry, the upstream sector will still rebound come 2022 says global energy research and consultancy group, Wood Mackenzie. More specifically, WoodMac said it is the low carbon, deepwater projects like those in Guyana that will reign supreme.
In fact, WoodMac forecasts that more than 40 projects with over 50 million boe will be sanctioned in 2022 but with a laser-sharp focus remaining on advantaged barrels.
Expounding in its latest analysis, the consultancy group said, “Deepwater plays with highly productive reservoirs will be prioritized, including giant prospects in Brazil, Guyana, Suriname, Namibia and South Africa.” It went further to note that deepwater is likely to account for half of all new volumes.
In addition to this, WoodMac said gas is forecast to account for around half of the discovered resources. With a focus on lead times and carbon, it said explorers will favour piped gas over liquefied natural gas, for emissions as well as payback purposes.
In its Global Upstream Outlook for 2022, Wood Mackenzie was keen to point out however that it is imperative the upstream industry begins crafting a response to the implications of the climate change pledges made at the recently held COP26 while adding that governments must set a course for the industry to follow.
“The upstream sector is going into 2022 facing ‘peak uncertainty’ – with record cash flows but increasing scrutiny. At a Brent price of around US$70/bbl, oil and gas cash flows will be at near-record levels,” said Fraser McKay, Vice President for Upstream Research. “At US$80/bbl, it would soar towards US$1 trillion (on a post-tax, post-capex, pre-financing and dividends basis). Despite this, for many stakeholders and even some chief executives, the sector’s risks outweigh its upsides. This tension will define 2022.”
Overall, the analyst said investment will go up, but capital discipline will prevail.