Wednesday, December 7, 2022

Operator spend in oil and gas sector to surpass US$400 billion this year – WoodMac

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Consultancy group Wood Mackenzie says the oil and gas sector will continue to rebound this year, with operator spend expected to surpass US$400 billion and higher prices driving another year of record cash flow. Global supply chain disruption, labour costs and increasing commodity prices will drive up overall costs for operators between 4-10%, depending on the sector.

“Operators will maintain focus on capital discipline, efficiency, and cost control,” WoodMac said. “Despite this, we expect operator spend will increase by 9% year-on-year, exceeding US$400 billion in 2022.”

Nevertheless, at 40%, the consultancy group said the global reinvestment rate – capital investment divided by pre-dividend post-tax operating cash flow – will remain near record lows.

“More than 40 of the 50-plus projects over 50 million boe and ready for sanction [in 2022] will progress,” WoodMack said. “Project economics are robust — greenfield IRRs average over 18%, with average breakevens below US$40/boe at a 10% discount rate.”

Major projects to be sanctioned this year include ExxonMobil’s giant Yellowtail development offshore Guyana targeting around 250,000 barrels of oil per day, the largest resource base to date in the South American country.

The US$9 billion development is anticipated to produce an average of 1,049,316 m3 – 1,192,404 m3 (6,600,000 -7,500,000 barrels) of crude oil per month.

The initial production is expected to begin by 2025/2026, with operations continuing for at least 20 years. The project is expected to employ up to 540 persons during development well drilling, approximately 600 persons at the peak of the installation stage, and 100 to 140 persons during production operations.

SBM Offshore has been awarded contracts to perform Front End Engineering and Design (FEED) for the Yellowtail Floating Production, Storage and Offloading vessel (FPSO). The vessel will be the largest producing unit ever to be built by the Dutch company.

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